Firms short-selling UK-quoted companies will no longer have to reveal their identities in the latest deregulation drive by the UK’s financial watchdog.
The Financial Conduct Authority (FCA) is expected to suspend disclosures of the companies that hold a short position in listed businesses, instead only publishing the total short positions in each firm, according to the Financial Times.
The shift would represent a departure from EU rules that require all short positions above 0.5 per cent of a listed firm’s share capital to be publicly disclosed, moving the UK closer to rules used in the US.
The threshold for privately informing the regulator about a short position is also expected to be raised from 0.1 per cent of a firm’s share capital to 0.2 per cent.
Short sellers helped by pro-growth approach
The move is the latest sign of watchdogs finding ways to ease the regulatory burden imposed on businesses after Chancellor Rachel Reeves urged regulators to adopt a pro-growth approach.
It is hoped the change will bolster the UK’s appeal as a global financial centre by reducing the number of ‘copycat’ shorts that often hit stocks when a major fund discloses a short position.
But some have warned the move opens a door to hedge funds to increase covert short-selling activity in ways which could destabilise equity markets.
Tom Matthews, Partner and Head of White & Case’s EMEA Activism practice, said: “The rule change will no longer require mandatory public disclosure of short positions, but (as in the US) it will not preclude voluntary public disclosure.
“We will therefore continue to see short selling “bear attacks” by specialist short selling hedge funds, who publish negative reports on a company in parallel with placing short bets on its stock.”
In April, the FCA said as many as 140 pages would be removed from the lengthy handbook, as it opened a consultation on scrapping data collection requirements.
Chancellor Rachel Reeves wrote to the City regulator in November, asking it to encourage more risk-taking and prove it supported economic growth.
The FCA said around 16,000 firms would benefit from proposed rule changes in data gathering, which include the scrapping of some update requests on stock lending and complaints.
The Financial Policy Committee at the Bank of England said in April that it was looking for ways to simplify regulatory interventions and improve productivity, The roll-out of artificial intelligence across the financial system was seen as having the “potential to bring productivity gains”.