WIREDGOV

The Financial Services Authority (FSA) has today issued a Feedback Statement that confirms that it intends to pursue enhanced transparency of short selling through disclosure of significant short positions in all equities.  However, it will work towards agreement on future requirements at an international level rather than introducing a separate domestic regime.  In the meantime it has no plans for immediate changes to its current short selling requirements.

Currently, the FSA requires disclosure to the market of net short positions of 0.25% or more of the issued share capital of UK financial sector companies or companies carrying out a rights issue.

Alexander Justham, FSA director of markets, said:

"The consultation exercise has confirmed our support for enhanced disclosure requirements for significant short positions rather than any direct restrictions on short selling, other than on a temporary basis in exceptional market conditions.  But we remain committed to securing agreement on as wide an international basis as possible and, in particular, to achieving a harmonised regime within Europe."

The Feedback Statement details the responses that the FSA received to its proposals in the February 2009 Discussion Paper (DP) on short selling.  The DP examined the arguments for and against restrictions on short selling.  It proposed a disclosure requirement for the short selling of all stocks, not just those of financial services companies, using an initial disclosure threshold of 0.5% of issued share capital.  It also stated that the FSA’s preferred route was to achieve international agreement on policy. 

Since the DP was published the Committee of European Securities Regulators (CESR) has issued proposals for a short selling disclosure regime. CESR’s proposals for public disclosures of significant short positions are very similar to the FSA’s but also include the idea for private disclosures to regulators at 0.1%.  In today’s Feedback Statement, the FSA states that it is open to the possibility of requiring private disclosures at the lower threshold.  The FSA will continue to work with CESR to develop an agreed European disclosure policy for short selling.

Notes for editors

1. The Feedback Statement to DP09/01 Short Selling.
2. 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.
3. The FSA aims to promote efficient, orderly and fair markets, help retail consumers achieve a fair deal and improve its business capability and effectiveness.