Regulator fines ARCM for breaches of short-selling rules
The City regulator has handed its first fine for breaches of short-selling rules to activist hedge fund Asia Research and Capital Management.
The Financial Conduct Authority (FCA) today announced it had fined ACRM £873,118 over failing to publicly disclose its net short position in Premier Oil built between February 2017 and July 2019.
Short selling regulations set out thresholds for when a firm is required to notify the regulator and disclose the public details of net short positions held.
The watchdog said that ARCM’s actions had been particularly serious given its failures to comply “were multiple, and occurred over a long period of time”.
The failure to notify the regulator arose from ARCM’s belief that the regulations did not apply to derivatives, according to a source familiar with the firm.
The regulations apply to any transferable security such as shares. It also states that a short position includes a transaction related to a share, which would include derivatives such as equity swaps and contracts for difference.
In total from February 2017 to July 2019 ARCM failed to make 153 notifications ot the FCA in relation to its net short position in Premier Oil. By 5 July 2019, the firm had built a net short position equivalent to 16.85 per cent of the issued share capital in Premier Oil.
Mark Steward, the FCA’s executive director of enforcement and market oversight, said this position was held back for a further 106 trading days before being notified to the FCA and disclosed to the public.
“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”, Steward added.
ARCM declined to comment.