Hedge Funds Seek to Ease Short Seller Rule on Public Offerings

A hedge fund trade group is asking the Securities and Exchange Commission to scale back short seller regulations that it says impede public offerings, arguing the approach has kept firms needlessly on the sidelines of some stock sales.

The Managed Funds Association said the markets regulator should tweak rules that prohibit hedge funds and other investors from buying shares in public offerings they recently sold short.

While the rule is meant to prevent manipulative short selling to push down offering prices, the agency has in recent years “taken a draconian approach” to enforcing it by blocking fund managers from ...