ASIC tightens up short-selling rules

The Australian Securities and Investments Commission (ASIC) has placed an indefinite ban on naked short-selling and imposed stringent new disclosure laws for investors holding short positions.
By None

The Australian Securities and Investments Commission (ASIC) has placed an indefinite ban on naked short-selling and imposed stringent new disclosure laws for investors holding short positions.

ASIC’s initial short-selling restrictions were extended on 21 October for an additional 30 days, as market conditions remained difficult. Following the regulator’s latest announcement, short-selling for non-financial stocks in Australia is to be reintroduced on 19 November, though the ban on shorting financial stocks will remain until 27 January 2009. Naked short-selling, shorting a security without borrowing the required assets beforehand, will not be permitted for any stocks.

Under the new rules, brokers are required to report each day’s short sales – including exempt covered short sales in financial securities – to the Australian Stock Exchange (ASX) by 09.00 the following day. The ASX will then collate the information and release figures for each security.

According to a statement on ASIC’s website, the new disclosure laws are in place to ensure “a covered short-seller has a presently exercisable and unconditional right to vest the securities in the buyer”.

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