General Securities Sales Supervisor (Series10) Practice Exam

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Which types of securities does Regulation SHO apply to?

I NYSE listed issues only
II NASDAQ listed issues only
III OTCBB listed issues only
D All equity securities

The correct answer is: D All equity securities

Regulation SHO applies to all equity securities, which includes securities traded on national exchanges like the NYSE and NASDAQ, as well as those traded in the over-the-counter markets. This regulation was established to address concerns regarding short selling and to promote fair and orderly markets by imposing requirements on the short-selling of securities. Regulation SHO sets forth specific provisions such as the "locate requirement," which mandates that before a short sale can be executed, the seller must have a reasonable basis for believing that the security can be borrowed. This is crucial for preventing potential abuses in short selling and ensuring that sellers are not taking undue risks in their transactions. By encompassing all equity securities, Regulation SHO ensures comprehensive oversight across various markets, thereby enhancing market integrity and investor protection.