On 6 February 2009, the FSA published a discussion paper on short selling which includes a proposal to extend the current disclosure obligation in relation to net short positions in stocks in UK financial sector companies to cover all UK incorporated issuers regardless of sector.
If adopted, the FSA's proposals would involve the following amendments to the existing disclosure regime, intended to enhance the transparency of short selling:
- the extension of the current disclosure obligation in relation to net short positions to apply to equities and related instruments of all UK incorporated issuers, not merely those on the FSA list of UK incorporated banks and insurers; and
- a change to the threshold at which the disclosure obligation kicks in from 0.25% to 0.5% of the relevant company's issued capital, except in rights issue situations where the 0.25% threshold would continue to apply. Disclosure bands would continue to apply at every 0.1% above the relevant threshold.
The existing disclosure regime is contained in the FSA's Code of Market Conduct (MAR), and is expressed to continue until 30 June 2009. The discussion paper indicates that the FSA sees a case and need for new statutory powers to underpin its proposed longer term disclosure requirement, which would require continuing obligations in relation to a much wider range of securities and for purposes extending beyond the control of potentially abusive behaviour. The FSA states that any such solution would be influenced by the on-going international discourse on this issue and that it is contributing to the IOSCO and CESR working groups on short selling.
The deadline for comments on the discussion paper is 8 May 2009.
View FSA Discussion Paper 09/1 on Short Selling (74 page pdf).