FSA bans short selling

The Board of the Financial Services Authority (FSA) has agreed to introduce new provisions to the Code of Market Conduct to prohibit the active creation or increase of net short positions in publicly quoted financial companies from Thursday 18 September.

In addition, the FSA will require from Tuesday 23 September daily disclosure of all net short positions in excess of 0.25 per cent of the ordinary share capital of the relevant companies held at market close on the previous working day. Disclosure of such positions held at close on Friday 19 September will also be required on Tuesday 23 September.

The FSA stands ready to extend this approach to other sectors if it judges it to be necessary.

These provisions will remain in force until 16 January 2009, although they will be reviewed after 30 days. A comprehensive review of the rules on short selling will be published in January.

Hector Sants, chief executive of the FSA, said:

"While we still regard short-selling as a legitimate investment technique in normal market conditions, the current extreme circumstances have given rise to disorderly markets. As a result, we have taken this decisive action, after careful consideration, to protect the fundamental integrity and quality of markets and to guard against further instability in the financial sector."

The detailed changes to the Code of Market Conduct, and a schedule of the companies whose securities are covered by them, will be published before the market opens tomorrow (Friday 19 September).

List of UK incorporated banks and insurers in connection with SHORT SELLING (NO 2) INSTRUMENT 2008

1 ADMIRAL GROUP PLC

2 ALLIANCE & LEICESTER PLC

3 ALLIANCE TRUST PLC
4 ARBUTHNOT BANKING GROUP PLC
5 AVIVA PLC
6 BARCLAYS PLC
7 BRADFORD & BINGLEY PLC
8 BRIT INSURANCE HOLDINGS PLC
9 CHESNARA PLC
10 EUROPEAN ISLAMIC INVESTMENT BANK PL
11 FRIENDS PROVIDENT PLC
12 HBOS PLC
13 HIGHWAY INSURANCE GROUP PLC
14 HSBC HOLDINGS PLC
15 ISLAMIC BANK OF BRITAIN PLC
16 JUST RETIREMENT HOLDINGS PLC
17 LEGAL & GENERAL GROUP PLC
18 LLOYDS TSB GROUP PLC
19 LONDON SCOTTISH BANK PLC
20 NOVAE GROUP PLC
21 OLD MUTUAL PLC
22 PRUDENTIAL PLC
23 RESOLUTION PLC
24 ROYAL BANK OF SCOTLAND GROUP PLC
25 RSA INSURANCE GROUP PLC
26 ST JAMES'S PLACE PLC
27 STANDARD CHARTERED PLC
28 STANDARD LIFE PLC
29 TAWA PLC