AIMA Questions FSA's Short Selling Disclosure Regime

by Robin Pilgrim, LawAndTax-News.com, London

19 June 2008

The Alternative Investment Management Association (AIMA) has expressed its disappointment with the new provisions in the Financial Services Authority’s Code of Market Conduct regarding short-selling, and believes that the FSA has set an "awkward precedent".

While AIMA stated that it supports all appropriate measures that prevent market abuse and offer consumer protection, it revealed that the industry is surprised that this measure has been introduced without any prior consultation.

"AIMA believes there is insufficient information to allow proper consideration and implementation of these measures. Moreover, the provisions are due to come into effect on 20th June, giving the industry almost no time to prepare," it argued.

The FSA announced on 13th June that it had introduced a disclosure regime for significant short positions in companies undertaking rights issues. The regulator justified its decision by arguing that, in current market conditions, there is increased potential for market abuse through short selling during rights issues.

Commenting on the new measures, Andrew Baker, Deputy CEO of AIMA stated:

“The FSA has an obligation to follow a consultation process with industry when new measures of this nature are set to be introduced. This measure appears to be in response to the need to recapitalise the banking system. This seems to be a rushed measure to assist a single sector and undoubtedly sets an awkward precedent for the future."

He concluded: "We will be consulting with our membership and submitting a detailed response itemizing our concerns to the FSA.”

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