SIE Exam Question 252: Answer and Explanation

Question: 252

Regulation SHO severely restricts short selling during the cooling offer period of a follow-on offering. Which of the below is true?

• A. shorting stock of a company undergoing a follow on offering is prohibited during the registration period.
• B. an investor cannot buy the new shares in a follow on deal if they have sold the outstanding shares of that issuer during the cooling off period.
• C. an investor may buy the new issue shares on the offering so long as any short sale has been covered at least one business day prior to the effective date.
• D. none of the above

Correct Answer: C

Explanation:

C: SHO are the first 3 letters of the word 'short.' Answer C. best describes the basics of this regulation.