U.K. Investment Management/Hedge Funds Alert
September 2008
Authors:
Danny Asher Brower
+44.(0)20.7360.8120
danny.brower@klgates.com
Philip Morgan
+44.(0)20.7360.8123
philip.morgan@klgates.com
Manjinder Cacacie
+44.(0)20.7360.8345
manjinder.cacacie@klgates.com
K&L Gates comprises approximately
1,700 lawyers in 28 offices located in
North America, Europe and Asia, and
represents capital markets participants,
entrepreneurs, growth and middle
market companies, leading FORTUNE
100 and FTSE 100 global corporations
and public sector entities. For more
information, visit www.klgates.com.
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The FSA Bans Short Selling in
Financial Stocks
The FSA has banned short selling in 32 (originally 29) leading financial stocks (http://www.
fsa.gov.uk/pubs/handbook/list_instrument200850.pdf) with effect from 00:01 on 19 September
2008 until 16 January 2009. The new rules will be subject to monthly reviews in the light of
ongoing market conditions. The effect of this ban is that investors will not be allowed to take
new short positions or add to existing ones. These rules exempt only market makers. A market
maker is an entity ordinarily dealing as principal in equities, options or derivatives (whether
OTC or exchange-traded) to fulfil orders received from clients, to respond to a client’s requests
to trade or to hedge positions arising out of those dealings.
In addition, on Friday, the German financial regulator, The Federal Financial Supervisory
Authority (BaFin) temporarily prohibited short sales (transactions resulting in a short position)
on stocks of eleven companies until 30 December 2008. The list of the concerned companies
can be found by clicking here.
The FSA will require from Tuesday 23 September daily disclosure of all net short positions in
excess of 0.25 per cent of the ordinary share capital of the relevant companies held at market
close on the previous working day. Disclosure of such positions held at close on Friday 19
September will also be required on Tuesday 23 September.
Attached to this alert you will find:
(i) The FSA’s FAQs Sheet;
(ii) Short Selling (No.2) Instrument 2008 (by which the Code of Market Conduct has been
amended to give effect to the new rules); and
(iii) Form TR4 for disclosure of short positions.
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