ASIC Short Position Reporting (SPR)
27th August 2021
On 1 June this year, the Australian Securities & Investment Commission (ASIC) released an Information Sheet that analysts had been expecting as part of the corporate regulator’s new push to regulate activist short selling.
Activist short selling is seen by many as a malady in the market. This practice involves some parties taking a short position in a product and then using dubious information (packaged as ‘research reports’) to hit the price of the product and gain advantage. These misleading ‘short reports’ are often deployed in the media and social media.
ASIC allows short selling because of there is evidence that the practice moderates market volatility. However, activist short selling has acquired the reputation of being unethical, and ASIC has decided to curtail this practice.
ASIC wants that activist short sellers, target entities, market operators, and market participants should apply the practices contained in the new document (Information Sheet 255 Activist short selling campaigns in Australia). Activist short sellers need to release short reports outside normal trading hours, and they need to use reliable information. Sensational and/or ambiguous language gets ASIC’s deep frown treatment as well. When short sellers release such reports, the target entities need to seek a temporary trading halt for the market to consider the claims. There are reiterations of obligations to report questionable short selling practices.
Reaction to ASIC’s document (Information Sheet 255 Activist short selling campaigns in Australia) has been somewhat mixed.
Paul Rickard, who was the founding Managing Director and CEO of CommSec, pointed out in the influential Switzer Daily that, despite ASIC’s good intentions, there are significant challenges in implementing INFO 255. For example, what compelling incentive does an activist short seller have to check facts with the target company? And what can be done about ‘research reports’ that are prepared and published overseas, beyond the easy reach of Australian regulators?
UNSW Professor of Economics Richard Holden has been sharper with his criticism. Writing in The Conversation, Prof Holden stated that while ASIC is well within its rights to try and police activist short sellers, the risk is that ‘these “better practices” are likely to lead to less efficient markets.’ The new guidelines may end up favouring companies that indulge in entirely lawful but still suspicious accounting and information disclosure practice.
Whatever impact ASIC’s new INFO 255 guidelines end up having, the fact remains that short sellers have an obligation to report their short positions in certain financial products to ASIC.
The cloud-based MyTreasur-e short position reporting module provides for single or multiple clients to report their short sell equity positions to the Australian Securities & Investments Commission (ASIC) in a simple and secure manner, using a web browser or file import including automated secure file exchange.
At MyTreasur-e, we keenly track regulatory, technological, and global financial trends that can impact our customers. Our passion for anticipating and managing risk in all its forms is what accounts for our customers’ satisfaction with our advanced yet easy-to-use products.