The practice of short selling is coming under increased scrutiny as shares of regional banks remain under pressure, with some calls for more regulatory oversight of the practice.
Short sellers, who borrow shares they expect to fall and hope to repay the loan for less later to pocket the difference, have profited from the banking crisis. TheyWachtell, Lipton, Rosen & Katz, a law firm that has represented large companies, such as Twitter, in mergers and against attacks from hedge funds, on Thursday called on U.S. securities regulators to restrict short sales of financial institutions.
This would allow time for regulators to act and for investors to digest information, Wachtell's co-chairman Edward D. Herlihy and partner Matthew M. Guest wrote in the letter, adding that attacks by short sellers are not related to fundamental performance and put the U.S. economy at "great risk."
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