Jeffrey Plotkin Quoted in Agenda Regarding NASDAQ’s Petition to the SEC for a Short Position Disclosure Rule

February 25, 2016

Partner Jeffrey Plotkin was quoted by Agenda, a Financial Times publication, in the article "Exchanges Prod SEC to Bring Short Sellers Into the Sunlight" published on February 16, 2016.

On December 7, 2015, Nasdaq petitioned the SEC to institute a rule that would require short sellers to promptly disclose their identities and sizes of short positions, once their short positions exceeded a minimal threshold. Nasdaq noted that the current lack of short sale transparency was "untenable in light of the fact that in recent years, investors with short positions, or derivative equivalents, have taken a more activist role in corporate policy and governance."

In the article, Mr. Plotkin was critical of Nasdaq’s argument in the petition, and the NYSE’s argument in a related petition filed on October 7, 2015, that short sale transparency was beneficial to the markets because it would allow issuers to engage in a dialogue with short sellers:

"Short sellers who are not activists … have no interest in speaking to the company or having the company talk to them to persuade them otherwise. What they want is for the market to come around and agree with their position over time. The only dialogue presumably to be had with a public company [from their point of view] is to persuade them to make corrective disclosures consistent with the thesis of the short seller," says Jeffrey Plotkin, a partner at law firm Finn Dixon & Herling.

Activist short sellers also have little or no interest in having a discussion with the company, Plotkin says.

"The ones who go public do so not to engage in dialogue with the company, but to publicize their investment thesis, lend their imprimatur to short interest in the stock and catalyze downward price momentum on the company’s stock," he says.

They want the market price of the stock to change consistent with their thesis, not meet with the company’s board to try to persuade them to change tack, he adds.

Mr. Plotkin also was critical of Nasdaq’s petition because the requested rule would create a disparity between the disclosure requirements for long sales and short sales:

Under the Nasdaq petition, Plotkin says, "certain folks not currently required to disclose long positions would now be required to disclose short positions, which makes no sense at all."