FSA proposes to end short selling ban but extend short selling disclosure regime

The Financial Services Authority (FSA) has today proposed to extend its temporary disclosure regime for significant net short positions in the stocks of UK financial sector companies until 30 June 2009.  The FSA claims that continuing to require disclosure will reduce the potential for abusive behaviour and disorderly markets.  However the FSA is not proposing to renew its ban on short selling of these stocks but has stated it 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.

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 full consultation paper CP09/1 can be found on the FSA website.

The FSA intends to publish a separate consultation paper within a month, setting out its proposals for the longer-term short selling regime.

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05 January 2009

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