The Australian Securities and Investments Commission (ASIC) has today published Information Sheet 255 Activist short selling campaigns in Australia (INFO 255), considering the practice of ‘activist short selling’ in Australia.
Activist short selling involves a person taking a short position in a financial product and then publicly disseminating information directly or through an agent that might negatively impact the price of the product (short report). A short report may, for example, call into question or directly criticise an entity’s finances, management, public disclosures or future prospects.
Market participants are told to apply better practices. These include, for activist short sellers, releasing short reports outside normal trading hours; drawing on reliable information and avoiding overly emotive language. Target entities should seek a temporary trading halt to provide time to digest and comprehensively respond to the claims of activist short sellers.
ASIC also reminds market participants of their obligations to report suspicious short selling activity under the market integrity rules, and for market operators to maintain a fair, orderly and transparent market.
The Australian regulator may be examining trading activity of short sellers throughout the campaign. ASIC is particularly focused on ‘short and distort’ campaigns and campaigns that exhibit behaviours of potential insider trading.
ASIC will be looking into whether the person has conducted a financial service in Australia and holds the necessary licence. The regulator will examine the process and timing of the short report’s release and its impact on the market, and how conflicts of interest are disclosed.
