By Rachelle Younglai
WASHINGTON (Reuters) - The U.S. Securities and Exchange Commission aims to issue a proposal in April to restore the so-called uptick rule and will look at other ways to address short-selling in the stock market, SEC Chairwoman Mary Schapiro said on Wednesday.
The uptick rule, adopted after the 1929 stock market crash, allowed short sales only when the last sale price was higher than the previous price. It was abolished by the SEC in 2007.
"We are going to ask some questions about other alternatives. There are going to be some other ideas that we will float," Schapiro told reporters after testifying about SEC budget needs at a House Appropriations subcommittee hearing. She declined to elaborate.
Short selling, a legitimate investment strategy praised for preventing stocks from becoming overvalued, has been blamed by some corporate executives and lawmakers for the dramatic downturn in financial services stocks.
Sen. Charles Schumer, a New York Democrat, said he welcomed the SEC's actions to tighten market oversight.
"The SEC is moving in the right direction by taking steps to restore the uptick rule," Schumer said in a statement, adding that the agency should also crack down on credit default swaps. "The SEC should seek to regulate these derivatives. If Chairwoman Schapiro finds she needs new authority from Congress to do so, I hope she will let us know."
MORE FUNDING NEEDED
At the hearing, Schapiro said the SEC needed more funding to add staff to police U.S. markets.
The SEC has been criticized harshly for lapses in oversight, including its failure to uncover Bernard Madoff's alleged $50 billion fraud earlier.
Schapiro said a boost in funding to $943 million for fiscal 2009 was helpful, but was not enough for the SEC to avoid cuts in its operations.
To bridge that gap, Schapiro said she submitted a request to the House appropriations subcommittee to use $17 million in the SEC's unspent funds. "The use of these prior-year funds in 2009 would make a very big difference in allowing our important work of rebuilding investor confidence in the markets to continue unimpeded," she said.
Fiscal 2009 ends on September 30.
"I do not believe it would be wise for the SEC to retrench during such perilous times in our markets for investors," said Schapiro, who took over as SEC chief in late January.
New York Democratic Rep. Jose Serrano said his appropriations subcommittee stood ready to assist the SEC and asked Schapiro to advise the panel if additional resources were needed.
The Obama administration is seeking to increase the SEC's budget by 9 percent to $1.026 billion for fiscal 2010.
Schapiro also said she may ask Congress to expand whistleblower laws to encourage the public to come forward with tips and complaints. Currently, the SEC cannot pay whistleblowers for tips but does have the authority to award a bounty to someone who provides information leading to the recovery of a civil penalty from an insider trader.
The SEC is also focused on improving the credit rating agency industry, which is dominated by Moody's Corp
(Reporting by Rachelle Younglai; additional reporting by Karey Wutkowski and John Poirier, editing by Matthew Lewis)
