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Treasury releases exposure draft of the Corporations Amendment (Short Selling) Bill 2008
The Treasury has released an exposure draft of the Corporations Amendment (Short Selling) Bill 2008.
The Bill proposes additional requirements relating to the disclosure of covered short sale transactions on Australian financial markets which are not currently caught by the disclosure obligations under section 1020B(5) of the Corporations Act 2001.
Section 1020B generally prohibits the sale of a section 1020B product (securities, managed investment products and certain other financial products) unless a person has a ‘presently exercisable and unconditional right’ to vest the product at the time of sale.
The prohibition is subject to a number of exemptions under subsection 1020B(4), which permits short selling in a defined range of circumstances. Under certain exemptions, a person who short sells must also disclose to a financial services licensee, when making the request, that the sale is a short sale.
The Bill will replace ASIC’s interim reporting requirements for covered short sales (see ASIC Class Order 08/751). See our What’s New article 'ASIC bans short selling' as to the requirements of this class order.
Unlike ASIC’s interim arrangements, the disclosure regime under Bill is designed as a permanent addition to the law.
It proposes the insertion of two new provisions (s1020BA and s1020BB) in the Corporations Act which require sellers of section 1020B products to advise their executing Australian Financial Services (AFS) licensee when the sale is a covered short sale. In turn, the AFS licensee must report the disclosed covered short sales to the relevant market operator. The Bill also requires AFS licensees to report principal covered short sales to the relevant market operator.
It applies to sales made on a licensed market (such as the ASX) and sales that occur through on or off market crossings.
The disclosure requirement applies whether the seller is inside or outside Australia.
Regulations will set the mechanics of disclosure from sellers to AFS licensees and AFS licensees to the market operator, including when and how disclosure occurs. The Government has not indicated when draft Regulations will be released.
It will be an offence under the Bill if sellers and AFS licensees do not provide particulars of the sale of section 1020B products, at the time and in the manner required by the regulations.
It will be an offence if a seller or broker does not disclose details of a covered short sale at the time and in the manner required.
It is anticipated the Bill will be brought before Parliament by the end of the current session. Until the legislation comes into effect, ASIC’s class order CO 08/751 will continue to apply.
The Treasury has invited submissions by 21 October 2008.
Further information
Contact your Certainty consultant at (02) 8246 8560 or enquiries@certaintycompliance.com.au
The Treasury website: www.treasury.gov.au
Links: Exposure Draft - Corporations Amendment (Short Selling) Bill 2008
Commentary for Exposure Draft of the Corporations Amendment (Short Selling) Bill 2008