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Mallesons Stephen Jaques
Who does this affect?

Anyone who short sells securities, managed investment products and certain other products.

What do you need to do?

Consider the impact of the extension of the ASIC ban on covered short selling of financial stocks.

Authors
Damien Richard  
Partner

Katie Ryder  
Solicitor

Wilson Antoon  
Solicitor
Jim Boynton  
Partner
T +61 2 9296 2086
Damien Richard  
Partner
T +61 2 9296 2296

Sydney
Scott Farrell  
David Friedlander  
Martin James  
Mark McFarlane  

Melbourne
John Malon  
Ian Paterson  

Perth
Nigel Hunt  

Brisbane
Berkeley Cox  

Canberra
Stephen Jaggers  

Hong Kong
Richard Mazzochi  (馬紹基)

London
Rowan Russell  

ASIC extends ban on covered short selling of financial stocks - 5 March 2009

Today the Australian Securities and Investments Commission (ASIC) announced that it has extended its temporary ban on covered short selling of financial stocks until 31 May 2009, although it will keep the ban under review.

Short selling ban extended

The temporary ban on covered short selling took effect on 22 September 2008 and was lifted for non-financial stocks on 19 November 2008. The temporary ban on covered short selling of financial stocks had originally been expected to be lifted on 27 January 2009, however ASIC extended the ban to 6 March 2009 following increased volatility in overseas markets.

Today ASIC has further extended the temporary ban to 31 May 2009. Financial stocks for this purpose are the constituents of the S&P/ASX 200 Financials index, plus the shares issued by five other specified companies.

The exceptions to the temporary ban on covered short selling of financial stocks continue unaffected.

The temporary disclosure and reporting regime for “long sales”, “short sales”, “exempt covered short sales” and “naked ETO [exchange traded option] short sales” also continues. It is expected that a permanent disclosure and reporting regime will be introduced within the next 12 months, however much of the detail is still unknown as it will be contained in regulations which have not yet been released.

Products that mimic short selling

In a recent address Senator Sherry, the Minister for Superannuation and Corporate Law, warned that the Australian Government is aware of a range of “short selling-like instruments” which seek to replicate the economics of effecting traditional short sales. Senator Sherry warned that both the Government and ASIC are watching these developments closely and highlighted as a key corporate law issue the identification of gaps in the regulation of short selling and immediately taking appropriate action. Click here to read Senator Sherry’s address.

ASIC’s announcement today echoes Senator Sherry’s warning. ASIC has also warned that it expects strict compliance with the permanent legislative ban on naked short selling.

Click here for ASIC's announcement and here for our summary of the new short selling regime.

Click here to listen to a boardroomradio.com interview with Mallesons Partner Mark McFarlane on the topic.

This publication is only a general outline. It is not legal advice. You should seek professional advice before taking any action based on its contents.