(Mar. 13, 2009) On March 5, 2009, the Australian Securities and Investments Commission (ASIC) extended through May 2009 a ban on covered short selling of financial securities. The ASIC had announced on January 21, 2009, that the ban would be effective only until March 6. The main features of the ban are:
- covered short selling of financial securities is banned;
- covered short selling of non-financial securities remains permitted;
- the daily reporting of gross short sales will continue, as will the publication to the market of aggregate short sales the day after trading; and
- naked short selling is completely banned.
The decision to extend the ban was based on the ASIC assessment of the volatility of world financial markets in which overly aggressive practices could cause a great deal of damage. The Commission will continue to monitor how the ban is implemented and whether market conditions justify its continuation. (ASIC Extends Ban on Covered Short Selling of Financial Securities, FINDLAW AUSTRALIA LEGAL NEWS, Mar. 10, 2009, available at http://www.findlaw.com.au/news/default.asp?task=read&id=32529&newstype
Some investors have been critical of the ASIC policy, claiming it forces short sellers to focus on the portion of the market not covered by the ban. Paul Fiani, managing director of Integrity Investment, stated, “[i]t's creating big distortions in the market. … So some stocks get beaten up more than they otherwise would and take the pain on behalf of the ones that are protected.” (Denny Thomas & Sonali Paul, UPDATE 3-Australia Extends Short-Selling Ban on Financials, REUTERS, Mar. 5, 2009, available at http://www.reuters.com/article/rbssFinancialServicesAndRealEstateNews/idUSSYD2