Columbia Management changes lending practices

Columbia Management, a Boston-based investment unit of Bank of America Corp., said today said that its Columbia funds will stop lending their equity and corporate debt securities, citing market volatility and new government restrictions on short-selling.

In a short sale, an investor borrows shares of a security and sells them in a bet that the security's price will fall before the borrowed shares need to be repaid. The lending of these shares has generated revenue for funds at Columbia and elsewhere.

But some investors and securities specialists argue that certain types of short sales have contributed to the volatile markets this week, and the Securities and Exchange Commission has introduced an increasing number of restrictions on them recently, including an outright ban this morning on the short-selling of the stocks in 799 financial companies.

Columbia's chief investment officer Colin Moore said in a statement that that it is in its shareholders best interests not to lend the securities "given the downward pressure that some borrowers of the securities are placing on the market.''

Although the move will reduce revenue, "we believe that this practice has the potential to be more detrimental than helpful'' in the current environment, Moore said in the statement.

Columbia said it will continue to lend government and Treasury securities. Bank of America has its headquarters is in Charlotte, N.C.
(By Ross Kerber, Globe staff)