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SEC Short Sales Update

A Special Note on the SEC’s Emergency Order Regarding Short Sales in Certain Securities

On July 15, 2008, the Securities and Exchange Commission (SEC) issued an emergency order which, effective as of July 21, 2008, prohibits short sales in certain securities unless the seller has first borrowed or arranged to borrow the subject security (i.e., a “pre-borrow”) for delivery on settlement date of the trade.

The SEC order requires a short seller of any of the securities whose tickers are listed below to either borrow, arrange to borrow or otherwise have the subject security in inventory. The SEC has indicated that executing broker-dealers may rely upon a borrow or arrangement to borrow obtained by a client (e.g., the client’s prime broker) and that such borrow or arrangement to borrow may be documented in a manner similar to how short sale locates are recorded today (which, generally, is done through populating the “locate” field on the applicable sales system or order ticket).

What this means for you
Please note that compliance with the terms of the order is primarily the responsibility of the short seller. Accordingly, in connection with any short sale in the subject names routed to RBC Capital Markets, LLC for execution, and for which you, as short seller, wish to identify the source of your borrow, you agree that your entry of information into the locate field on the applicable sales system or order ticket constitutes a representation that you actually borrowed or arranged to borrow the subject shares in compliance with the provision of the SEC order and RBC Capital Markets Corporation may reasonably rely upon that representation.

A full copy of the order is available through the following link: (opens pdf file). The list of securities subject to the order (as specified by ticker symbol) is included below:

Company Ticker Symbol(s)
BNP Paribas Securities Corp. BNPQF or BNPQY
Bank of America Corporation BAC
Barclays PLC BCS
Citigroup Inc. C
Credit Suisse Group CS
Daiwa Securities Group Inc. DSECY
Deutsche Bank Group AG DB
Allianz SE AZ
Goldman Sachs Group Inc GS
Royal Bank ADS RBS
J. P. Morgan Chase & Co. JPM
Lehman Brothers Holdings Inc. LEH
Merrill Lynch & Co., Inc. MER
Mizuho Financial Group, Inc. MFG
Morgan Stanley MS
Freddie Mac FRE
Fannie Mae FNM

Please contact your RBC Capital Markets, LLC if you have any questions regarding this matter.