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10-86AD ASIC releases guidance on short selling obligations
ASIC has today released regulatory guidance to assist with compliance with new legal requirements under the Corporations Act 2001 and Corporations Regulations 2001 in relation to short selling.
ASIC’s guidance is contained in a revised version of Regulatory Guide Short selling 196 (RG 196), which was first published in September 2008 as Regulatory Guide 196 Short selling: Overview of s1020B.
The revised RG 196 clarifies the legal position about what short sales are permitted, as well as specific reporting and disclosure obligations.
It contains an overview of short selling concepts and new provisions in the Corporations Act as a result of the changes to the legislation about short selling, and various relief that ASIC has granted in relation to some of these provisions, in certain circumstances.
Importantly, RG 196 outlines the two types of reporting obligations (i.e. reporting of short sale transactions and of short positions), as well as an exemption from reporting short positions below a certain threshold (contained in ASIC Class Order [CO 10/135]Relief for small short positions). It also clarifies ASIC’s policy for granting relief to allow naked short selling in some circumstances. ASIC has reviewed the exemptions over time in regards to liquidity in the market.
A copy of RG 196 is available from the ASIC website at www.asic.gov.au/shortselling.
ASIC also encourages short sellers and system developers to continue to monitor ASIC Information Sheet 98 Short selling: Short position reporting (INFO 98), which includes key tasks and practical information they must be aware of prior to the start date for the new reporting requirements.
In September 2008, ASIC took emergency action to temporarily ban short selling in Australia, including naked short sales and covered short sales. The ban on covered short selling of non-financial securities was lifted on 19 November 2008. The ban on covered short selling of financial securities was lifted on 25 May 2009.
The Federal Government introduced new legislative requirements to regulate the use of short selling in Australia in December 2008 and December 2009, under the Corporations Amendment (Short selling) Act 2008 and the Corporations Amendment Regulations 2009 (No. 8). These requirements include a ban on naked short selling, subject to some minor exceptions, and the imposition of specific reporting obligations in relation to covered short sales. The legislation that commenced in December 2008 also clarified the scope of ASIC’s powers in relation to the short selling provisions in the Corporations Act.