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FSA Clarifies Short Sale Prohibition and Disclosure Requirements

On Tuesday 23 September, the United Kingdom (“UK”) Financial Services Authority (“FSA”) amended the provisions it introduced on Thursday 18 September to the Code of Market Conduct prohibiting short selling in UK financial sector stocks and imposing daily disclosure requirements with respect to short positions in such stocks (the “Short Sale Provisions”). Contemporaneous with this amendment, the FSA updated its Frequently Asked Questions (“FAQs”) to address questions and feedback it has received since the introduction of the Short Sale Provisions. By the amendment and the FAQs, the FSA has clarified the Short Sale Provisions with respect to (i) the definition of a ‘market maker’ exempt from the Short Sale Provisions; (ii) aggregation of positions across multiple trading desks of a single entity and across multiple investment funds managed by a single manager; (iii) short exposure to indices, baskets and exchange traded funds (“ETFs”); (iv) delta hedging with derivatives; and (v) transfer of short positions.

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