Back in what now seem to be the long-ago days of 2003 through 2007, when the economy seemed to be healthy and stocks were expected to rise as a matter of course, so-called naked short-selling was a subject of great interest to more than a few companies and politicians. The Securities and Exchange Commission responded with a new rule that was supposed to curb the practice.
This week the S.E.C. settled a case against a former options market maker for violating those rules in 2006 and 2007. The trader, Gary S. Bell, will pay $2.1 million to settle the allegations. Most of that is in the form of disgorging illegal profits, which shows, if nothing else, that finding a way around the rule was profitable.
To economists, restrictions on short-selling often seem to be foolish and costly impediments to efficient markets. To companies, and their executives, any short-selling — whether legal or not — can seem pernicious. That is particularly true when market stresses are at their greatest. It can become an article of faith that short-sellers are spreading false rumors aimed at destroying a company.