The Australian Securities and Investments Commission (ASIC) has published information aimed at promoting market integrity in the face of activist short selling activities.
Activist short selling involved a person taking a short position in a financial product and then publicly, or via an agent, disseminating information that might negatively impact the price of that product.
As a result, ASIC had issued an information sheet which:
- Described the impact of activist short selling on markets;
- Provided an overview of the Australian regulatory framework relevant to these campaigns;
- Recommended better practices for activist short sellers and authors of short reports, market operators, target entities and market participants; and
- Listed some of the actions that ASIC may take in response to these campaigns.
It suggested short sellers released reports outside of normal trading hours, drew on reliable information and avoided emotive language. Target entities should request a temporary trading halt to provide time to digest and respond the information.
ASIC commissioner, Cathie Armour, said: “Investors expect to transact in a fair and informed market. When activist short sellers provide accurate and meaningful new information, they can have a positive impact on price formation and market integrity as they may counterbalance excessive market optimism.
“However, activist short sellers can also unfairly distort the price of a target entity’s securities, which is harmful to the integrity of our markets”.