FCA Fines ARCM £873,118 for Violating Short Selling Disclosure Rules

British financial regulator, the FCA has announced a £873,118 fine on ARCM for not disclosing to them and the public its net short position in Premier Oil Plc built.

October 14, 2020 | AtoZ Markets – U.K. regulator, the Financial Conduct Authority (FCA) has fined Asia Research and Capital Management Ltd (ARCM) £873,118 over transparency failures. The Short Selling Regulation 2012 (SSR) sets out thresholds for when a firm is required to notify the FCA and disclose to the public details of net short positions held.

Commenting on the matter, the Executive Director of Enforcement and Market Oversight, Mark Steward said:

“Failure to report disclosable short positions undermines the integrity and efficiency of financial markets. ARCM repeatedly breached reporting rules and failed to provide important information to us and to the market. This fine reflects the seriousness of these breaches.”

FCA fined ARCM over transparency failures

According to the FCA, ARCM failed to make 155 notifications to them. ARCM also failed to make 153 disclosures to the public of its net short position in Premier Oil from 24 February 2017 to 5 July 2019. By 5 July 2019, however, ARCM had built a net short position equivalent to 16.85% of the issued share capital in Premier Oil.

ARCM held the net short position for a further 106 trading days before being notifying the FCA and disclosing it to the public.

ARCM agreed to resolve this matter and qualified for a 30% discount under the FCA’s executive settlement procedures. Were it not for this discount, the FCA would have imposed a financial penalty of £1,247,312 on ARCM.

This is the first time the FCA has taken enforcement action for a breach of the SSR.

European regulators ban short selling

Following the outbreak of the COVID-19, regulators in France, Italy and Belgium banned short selling in some stocks, aiming to curtail the plunge in equity markets.

France’s top regulator, the AMF, halted such trades in 92 stocks, while Italy’s CONSOB blocked the transactions in shares of 20 companies. Belgium’s FSMA has also imposed a similar restriction. French Finance Minister Bruno Le Maire said he would like to see that rule extended Europe-wide.

However, the U.K.’s watchdog has not commented on a possible short selling ban in Britain. Nevertheless, the Dutch regulator AFM said it continues to closely monitor developments in the financial markets.

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