Commentary on Sections and Schedules Short selling New section 131B: short selling rules
115.Subsection (1) provides that the FSA may make rules banning short selling in relation to certain financial instruments by prohibiting persons from engaging in this practice. These rules would apply to all persons, whether authorised by the FSA or not. These powers would not enable the FSA to ban a single firm from short selling a particular financial instrument while permitting other firms to do so.
116.Subsection (2) provides that the FSA may make rules requiring the disclosure of information relating to short selling in relation to specified financial instruments. This disclosure regime would apply to all persons, whether authorised by the FSA or not, who have engaged in short selling.
117.Subsection (3) sets out some of the provisions that may be included by the FSA in rules establishing a disclosure regime for short selling, in particular, when disclosures are to be made and the way in which disclosures are to be made.
118.Subsection (4) ensures that the FSA is able to obtain information about short selling which has taken place before the rules are made where the person concerned still has a short position when the rules are made. This will occur, for example, when the short seller (S) has sold financial instruments which S did not own, and has not at the time the rules are made purchased the instruments concerned in order to deliver them to the buyer or return them to the lender (if the sale was settled with borrowed instruments), and so closed out the short position or otherwise reduced their short position to a level below the disclosure threshold specified by the FSA.
119.Subsection (5) ensures that, where there is any doubt, what is meant by “a short position being open” will be determined in accordance with the FSA’s short selling rules.
120.Subsection (6) makes it clear that rules under this section may apply in relation to short selling taking place wholly outside the UK by persons outside the UK, but only in relation to financial instruments admitted to trading on markets in the UK. FSA rules may also apply to short selling:
	by any person in the UK (including persons temporarily in the UK), or
	through an intermediary present in the UK, or
	in relation to shares admitted to trading in the UK (even if dual or multi-listed elsewhere in the world).
121.Subsection (7) allows the short selling rules described in this Part to be targeted at a particular form of financial instrument issued by a specified company.
122.Subsection (8) provides that rules made under section 131B are referred to as “short selling rules”.
123.Subsection (9) requires the FSA to take account of any international agreement on short selling measures when it makes any rules in relation to short selling.