The Securities and Exchange Commission (SEC) will adopt a rule barring securities traders from betting against the assets they sell to investors.
The rule was initially proposed as part of the 2010 Dodd-Frank legislation aimed at reforming some of Wall Street's worst practices, and it is one of the last of the bill's proposals to be implemented.
- An earlier version of the rule was initially proposed in 2011, but it was never finalized by the SEC.
- The agency said the rule would ban traders from betting against assets for a year after selling them.
- SEC Chair Gary Gensler said the rule would make exceptions for practices like hedging for risk mitigation or market making.
- The rule now enters a 60-day public comment period.
- Goldman Sachs paid a record $550M penalty in 2010 to resolve SEC allegations that it had sold a mortgage-backed investment vehicle to investors while simultaneously betting that those assets would lose value.
- One Goldman trader was ordered to pay $825,000 to resolve a 2014 civil case brought against him by the SEC in relation to the matter.
