Short selling draft laws and ASIC interim rules released

The Minister for Superannuation and Corporate Law, Senator Sherry, has released  draft legislation on the disclosure of covered short sale transactions. Senator Sherry said the Corporations Amendment (Short Selling) Bill has been released in preparation for the possible future removal of the current halt on most types of covered short selling put in place by regulators from 22 September 2008.

Senator Sherry said the draft legislation addresses ambiguity around covered short selling and requires the disclosure of transactions where a seller has entered into a securities lending arrangement to cover a sale.

In particular, covered short sales would have to be disclosed by sellers to a financial services licensee who in turn would be required to disclose the position to the market operator.

Submissions are due by 21 October 2008 and can be sent to: Manager, Market Integrity Unit, Corporations and Financial Services Division, The Treasury, Langton Crescent, Parkes ACT 2600 – or email [email protected].

ASIC has also advised that it has reviewed the operation of the market since its announcements and had opportunity to consult with ASX and industry. ASIC has now issued an advisory which summarises its position regarding the prohibition of naked and covered short selling including permitted exceptions which are in line with overseas developments.

ASIC states that where covered short selling is permitted, the short selling transaction needs to be disclosed in accordance with ASIC Class Order [CO 08/751].

ASIC also notes that the exemptions may change. Accordingly, ASIC will monitor the market to ensure there is no misuse of the exemptions.

Source: Minister for Superannuation and Corporate Law media release No 057, 23 September 2008 ASIC advisory AD 08-22, 23 September 2008