The Alternative Investment Management Association (AIMA), a global representative association for the hedge fund industry, has registered its concern with the Financial Services Authority (FSA) over the reasons, timing and method of its announcement of new provisions in the Code of Market Conduct Provisions on Short-Selling.
Specifically, AIMA sought a delay to the implementation of the regime to facilitate compliance, because of the significant impact of the provisions on some of its members.
The new provisions in the Code of Market Conduct, which came into effect on 20 June, require the disclosure of significant short positions in stocks admitted to trading on prescribed markets which are undertaking rights issues, according to an FSA announcement. For this purpose the FSA defines a significant short position as 0.25% of the issued shares achieved via short selling or by any instruments giving rise to an equivalent economic interest. The obligation will be to disclose positions exceeding this threshold to the market by means of a Regulatory Information Service by 3:30 p.m. the following business day, the FSA says.
AIMA queried the justification for the invocation of special powers of the Financial Services and Markets Act 2000, which enabled the FSA to take this measure without consultation. In addition, the hedge fund industry body presented to the FSA a set of queries on technical issues. Because the FSA has not delayed implementation of the regime, AIMA says it is in consultation with its members as to the options available to them to best address the FSA’s regulatory framework for short-selling. In the meantime, AIMA has asked the FSA for specific findings of any investigations that have led to the changes as well as clarification on the definitions, scope and implementation of the regime.