InterDigital Inc (IDCC)

[revlis]

Introduction
The Commission is proposing an antifraud
rule, Rule 10b–21, aimed at short
sellers, including broker-dealers acting
for their own accounts, who deceive
specified persons, such as a broker or
dealer, about their intention or ability to
deliver securities in time for settlement
and that fail to deliver securities by
settlement date. Among other things,
proposed Rule 10b–21 would target
short sellers who deceive their brokerdealers
about their source of borrowable
shares for purposes of complying with
Regulation SHO’s ‘‘locate’’
requirement.1 The proposed rule would
also apply to sellers who misrepresent
to their broker-dealers that they own the
shares being sold.
A seller misrepresenting its short sale
locate source or ownership of shares
may intend to fail to deliver securities
in time for settlement and, therefore,
engage in abusive ‘‘naked’’ short selling.
Although abusive ‘‘naked’’ short selling
is not defined in the federal securities
laws, it refers generally to selling short
without having stock available for
delivery and intentionally failing to
deliver stock within the standard threeday
settlement cycle.2