FSA disclosure regime for short positions

Responding to the Financial Services Authority's (FSA) announcement to introduce a disclosure regime for significant short positions in companies undertaking rights issues, Guy Sears, Director of Wholesale at Investment Management Association (IMA) said: "IMA, whose firms manage 45% of the equity market, welcomes the FSA's leadership in this difficult area. Manipulating rights issues is not a game; it damages the wider economy and jeopardises mid-term recovery. Banks have been told to come clean and raise capital where needed. Rights issues should be the mechanism of choice. Shorting so as to suppress the share price below the underwritten price, knowing this will force underwriters to sell at a discount, is fuelled by an absence of transparency. If banks cannot raise capital, house-builders and other major contributors to the economy will suffer.

It will no doubt surprise many that the FSA has changed the rules at such short notice and it will cause operational headaches in the short-term; but that is a price that a few short-sellers, and not the FSA, have forced upon the market in these exceptional times."