Increased scrutiny for short-sellers

Market regulators are clamping down on short-selling activities, reminding hedge funds that they have legal obligations to disclose their activities in this area. The Australian Securities Exchange and the Australian Securities and Investments Commission have also extended the disclosure requirements to cover brokers after public concern about the lack of transparency in short-selling. “Where a broker has reason to believe that a client is placing an order for …[any type of] short sale, ASX expects that the broker will make appropriate enquiries of the client to ascertain the nature of that sale in order to satisfy the broker's obligations to provide its daily net short-sale position to ASX,” a statement said. ABC Learning director Eddy Groves said last week that the sharp drop in his share price was due to short-selling and false rumours that the company had breached loan requirements. ASIC warned that individuals can face jail terms of up to five years and fines of up to $220,000 if found guilty of spreading false or misleading rumours.

Source: Sydney Morning Herald