FSA lifts short-selling ban but disclosure rules stay

UK regulator ends its ban on short selling but keeps disclosure rules on shorting positions

LONDON - The UK ban on short selling for 34 companies will expire on January 16, according to the UK Financial Services Authority (FSA). The regulator will extend its rules forcing short sellers to disclose their positions until June 30.

The ban against short selling - investors aiming to profit by selling shares lent for a fee in the hope of subsequently buying them back cheaper - was introduced in September after the collapse of Lehman Brothers and a dive in share prices on a number of UK banks, most notably HBOS.

"We will not hesitate to reinstate the ban if necessary," says Sally Dewar, managing director of wholesale and institutional markets at the FSA. "We believe these proposals are the right measures for maintaining orderly markets."

The FSA has resisted political pressure to extend the ban, including comments by chairman of the Treasury select committee John McFall and Liberal Democrat Treasury spokesman Vince Cable. However, the Association of British Insurers (ABI), whose members represent around 15% of the UK stock market, welcomed the FSA's decision to extend the short-selling disclosure regime.

The regulator plans to publish a consultation paper within the next month, outlining its proposals for a long-term short-selling regime.