We reported last year on the SEC's and FSA's bans on short selling in financial companies (see the post by clicking here). The FSA has now published a consultation paper reviewing the short selling measures that it implemented last year, which are due to expire on 16 January 2009. Those measures required disclosure to the market of significant (greater than 0.25% of the issued share capital) short positions in UK financial sector companies and banned the creation of, or increase of existing, short positions in those companies.
The consultation paper proposes:
- to extend the short selling disclosure obligation to 30 June 2009, which it believes will "minimise the potential for market abuse and disorderly markets"
- to make a change to the disclosure obligation so that, once disclosed, additional disclosures are only required if the short position changes significantly (that is if any 0.1% threshold over 0.25% is crossed - ie 0.35%, 0.45% etc) whether through an increase or a decrease
- to allow the ban on short selling of stocks to expire on 16 January 2009. This will be kept under review and the FSA states that it is prepared to reintroduce the ban if warranted (without consultation if necessary).
The existing rules expire on 16 January 2009 and so the consultation period is very short - comments must be received by 9 January 2009.
The FSA intends to publish a further consultation paper within a month which will set out longer term proposals for the short selling regime.
The consultation paper, including a copy of the proposed rules as amended, can be found by clicking here.