Last night it was reported that the FSA would act to clamp down on “short selling“; the objective obviously being to deter speculative attacks on banks such as those on HBOS that went on for some time before the merger announcement with Lloyds TSB.

Sure enough, well before markets opened this morning, the FSA had already exercised its powers under section 119 of the Financial Services and Markets Act 2000, amending its market abuse code (or to use the FSA’s own non-statutory terminology, its market conduct sourcebook) to state that in the FSA’s view, creating or increasing a short position amounts to market abuse. Market makers are exempted. Here’s the FSA instrument making the change, and here’s a list of FAQs prepared by the FSA.

This now means the FSA will be able to take action against short sellers, imposing penalties on them under section 123 of FSMA.

2008-09-19T01:35:00+00:00Tags: , , |