ASIC has today published Information Sheet 255 Activist short selling campaigns in Australia (INFO 255), considering the practice of ‘activist short selling’ in Australia and outlining ASIC's expectations to promote market integrity during these campaigns.
Activist short selling involves a person taking a short position in a financial product and then publicly disseminating information directly or through an agent that might negatively impact the price of the product (short report). A short report may, for example, call into question or directly criticise an entity’s finances, management, public disclosures or future prospects.
- describes the impact of activist short selling on markets
- provides an overview of the Australian regulatory framework relevant to these campaigns
- recommends better practices for activist short sellers and authors of short reports, market operators, target entities and market participants
- lists some of the actions that ASIC may take in response to these campaigns.
ASIC Commissioner Cathie Armour said, ‘Investors expect to transact in a fair and informed market. When activist short sellers provide accurate and meaningful new information, they can have a positive impact on price formation and market integrity as they may counterbalance excessive market optimism. However, activist short sellers can also unfairly distort the price of a target entity’s securities, which is harmful to the integrity of our markets.”
To protect the integrity of Australia’s securities markets, activist short sellers, target entities, market operators and market participants should apply the better practices outlined in INFO 255.
These include, for activist short sellers, releasing short reports outside normal trading hours; drawing on reliable information and avoiding overly emotive language. Target entities should seek a temporary trading halt to provide time to digest and comprehensively respond to the claims of activist short sellers.
ASIC also reminds market participants of their obligations to report suspicious short selling activity under the market integrity rules, and for market operators to maintain a fair, orderly and transparent market.