Naked short selling is the offense of selling a security short without first borrowing the shares or confirming that they can be borrowed, skipping the step that ordinary short selling requires. When the seller fails to deliver the shares within the required settlement period, the trade is left open as a failure to deliver until the position is eventually covered or settled by the broker. United States regulators adopted Regulation SHO in 2005 to require broker-dealers to have a reasonable belief that a security can be borrowed before executing a short sale, out of concern that the practice can be used to artificially depress a company's stock price and impair its ability to raise capital.
Facts
Elements of OffenseShort-selling an asset without first borrowing it or ensuring it can be borrowed 1 Jurisdiction VariationUnited States: abusive naked short selling was banned by the SEC, but the practice is not per se illegal under certain technical circumstances such as bona fide market making 1 Classification
Offense GradeSerious or Indictable Offense 1 Connections
Has Offense Grade
Entity-backed identity for the offense-grade enum value this offense already carries, resolved to a crime concept by an explicit value-to-entity map (phase 3 bucket conversion, docs\design_entity_backed_browse_buckets_20260928.md). The offense-grade fact itself stays on the offense unchanged.
In the Other Atlases
Sources
1. Naked short selling (Wikipedia)
Lead section, paragraph 1
the practice of short-selling a tradable asset without first borrowing the asset from another party or ensuring that it can be borrowed
Lead section, paragraph 4
naked shorting itself remains not per se illegal under certain technical circumstances, such as bona fide market making activities
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