Investment Management Alert
June 2009
Authors:
Neil Nick Robson
neil.robson@klgates.com
+44.(0)20.7360.8130
Philip J. Morgan
philip.morgan@klgates.com
+44.(0)20.7360.8123
K&L Gates is a global law firm with
lawyers in 33 offices located in North
America, Europe, Asia and the Middle
East, and represents numerous GLOBAL
500, FORTUNE 100, and FTSE 100
corporations, in addition to growth and
middle market companies,
entrepreneurs, capital market
participants and public sector entities.
For more information, visit
www.klgates.com.
FSA Proposes to Extend Short Selling
Disclosure Regime
Summary
The Financial Services Authority ("FSA") announced yesterday (1 June 2009) in its
consultation paper entitled "Extension of the short selling disclosure obligation"
(CP09/15) (link: http://www.fsa.gov.uk/pubs/cp/cp09_01.pdf) that it is proposing to
extend the short selling disclosure regime (restricted to significant net short positions
in the stocks of UK financial sector companies) beyond its current expiration date of
30 June 2009. No new expiry date is proposed, but the FSA stated that it does not
intend that the regime will become permanent.
Background
The FSA's proposal follows a series of measures brought into force by financial
regulators around the globe. On 18 September 2008 the FSA introduced an
emergency prohibition on the active creation or increase of net short positions in UK
financial sector companies (the "Ban") and required disclosure to the market of
significant short positions in those stocks (the "Disclosure Requirements"), which
requires disclosure to be made if a net short position exceeds 0.25% of a company’s
issued shared capital or increases by 0.1% bands above that (i.e., with further
disclosure where net short positions reach 0.35%., 0.45% etc).
Following a short consultation in January 2009, the FSA allowed the Ban to expire
but extended the Disclosure Requirements until 30 June 2009. In February 2009, the
FSA published proposals for the longer-term regulation of short selling, focusing on
a public disclosure regime covering all UK stocks. The FSA has stated that it expects
to publish the responses to its proposals in a feedback statement between July and
September this year.
FSA Rationale for Extending the Disclosure Regime
The FSA's press release states that extending the current Disclosure Requirements
will continue to help reduce the potential for abusive behaviour and disorderly
markets. While the FSA does not propose to set an expiry date for extension to the
Disclosure Requirements, the FSA has stated that it does not intend them to apply
permanently in their current form. The FSA's aspiration is that they would either be
superseded in due course by broader permanent disclosure measures (which may
include a short selling regime for all UK stocks) or be revoked.
Sally Dewar, Managing Director of Wholesale and Markets at the FSA, said:
"Keeping the disclosure requirements will continue to enhance transparency and
limit the potential for market abuse, while details of a long term regime for short
selling are being drawn up. We remain committed to achieving an international
consensus that is as wide as possible on our broader short selling regime."
Investment Management Alert
Timing
The consultation period on the FSA proposals closes
on Friday 12 June 2009. The FSA has explained that
this very brief consultation period is designed to
enable any new measures to be put in place before
the current regime expires on 30 June 2009.
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This publication is for informational purposes and does not contain or convey legal advice. The information herein should not be used or relied upon
in regard to any particular facts or circumstances without first consulting a lawyer.
June 2009
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