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Short Selling Bill Passes the Parliament

5 December 2008

What’s new?

The Corporations Amendment (Short Selling) Bill 2008 has passed through Parliament without amendment.

The Bill 2008 includes three key measures:

  • a legislative ban on naked short selling
  • a clarification and expansion of the Australian Securities and Investment Commission's powers, and
  • a comprehensive disclosure regime for permitted covered short selling, including placing a positive obligation on brokers to enquire of a client whether a sale is a covered short sale when a client places an order, and a direct obligation on market operators to publicly disclose short selling information they obtain from brokers

The Bill imposes 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 inserts 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 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.

The Bill will become law upon Royal Assent early in 2009.

For further information:

Certainty Compliance can help you understand and comply with the new Short Selling rules. Please contact a Consultant on (02) 9238 8091 or enquiries@certaintycompliance.com.au

Link to the Bill home page: here

Certainty Compliance > What's New

What’s new

« back

Short Selling Bill Passes the Parliament

5 December 2008

What’s new?

The Corporations Amendment (Short Selling) Bill 2008 has passed through Parliament without amendment.

The Bill 2008 includes three key measures:

  • a legislative ban on naked short selling
  • a clarification and expansion of the Australian Securities and Investment Commission's powers, and
  • a comprehensive disclosure regime for permitted covered short selling, including placing a positive obligation on brokers to enquire of a client whether a sale is a covered short sale when a client places an order, and a direct obligation on market operators to publicly disclose short selling information they obtain from brokers

The Bill imposes 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 inserts 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 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.

The Bill will become law upon Royal Assent early in 2009.

For further information:

Certainty Compliance can help you understand and comply with the new Short Selling rules. Please contact a Consultant on (02) 9238 8091 or enquiries@certaintycompliance.com.au

Link to the Bill home page: here