The list of 799 “financial companies” that cannot be subject to short sales by order of the SEC is growing. The SEC has authorized major stock exchanges to identify additional companies that should be added to the list, and the NYSE and NASDAQ have added at least 299 and 71 companies, respectively.

To identify companies, the SEC provided the exchanges with 7 criteria; if at least one criteria is met, the company goes on the list. The NYSE has confirmed that a company need only certify to NYSE that it meets the criteria to be put on the list.

NYSE reports that to be on the list a company must be a bank, savings association, registered broker or dealer, or insurance company (as defined at various points in the U.S. Code). However, this has not stopped some surprising companies from being added to the list, including CVS Caremark, General Motors, and IBM, all of which are tangentially related to lending/financing or insurance but are not traditionally thought of as a “financial company.”

Some commentators are criticizing that the goal of the no-sale list is to protect banks because they are particularly susceptible to a crisis of confidence, not to protect any company that might experience a decline in stock value. The SEC has long supported short selling as an important market tool against inflated prices.

Interestingly, two financial firms, JMP Securities and Diamond Hill Investment, asked to be taken off the no-short list because their managers support short selling activities in the market.