FSA proposes to extend short selling disclosure regime
05 January 2009
The Financial Services Authority (FSA) is today proposing to extend its temporary disclosure regime for significant net short positions in the stocks of UK financial sector companies until 30 June 2009. Continuing to require disclosure will reduce the potential for abusive behaviour and disorderly markets. The FSA is not proposing to renew its ban on short selling of these stocks but is prepared to reintroduce the ban without consultation if necessary.
Under the proposals issued today, the FSA will extend the disclosure regime until 30 June 2009. The FSA is proposing to make one change to the regime. Currently a disclosure must be made if a net short position exceeds 0.25% of a relevant firm’s issued shared capital, with further disclosures required if there are any changes in the position. Under the FSA’s proposals further disclosures would only be required at 0.1% bands (e.g. as a net short position reached 0.35%, 0.45% and so on). The scope of the disclosure obligations continues to apply only to stocks in UK financial sector companies.
In addition, the FSA proposes that the ban on the short selling of stocks in UK financial sector companies will expire on 16 January.
Sally Dewar, managing director of wholesale and institutional markets at the FSA, said:
“We believe that these proposals are the right measures for maintaining orderly markets. Continuing the disclosure obligations as we propose will reduce the potential for abusive behaviour and disorderly markets.
“In addition, we will not hesitate to reinstate the ban if necessary”.
This consultation will close on 9 January to enable the new measures to be in place at the expiry of the existing ones on 16 January.
The FSA intends to publish a separate consultation paper within a month setting out its proposals for the longer-term short selling regime.
Notes for editors
- Full consultation paper CP09/1.
- On 22 October 2008, the FSA published its 30 day review of the FSA’s short selling measures. More details can be found here.
- The existing measures and the list of firms covered by the provisions can both be found on the FSA website.
- The FSA regulates the financial services industry and has four objectives under the Financial Services and Markets Act 2000: maintaining market confidence; promoting public understanding of the financial system; securing the appropriate degree of protection for consumers; and fighting financial crime.
- The FSA aims to promote efficient, orderly and fair markets, help retail consumers achieve a fair deal and improve its business capability and effectiveness.