Release Date: 14th October 2020
To access the original FCA document, click here.
Summary
The Financial Conduct Authority (FCA) has fined Asia Research and Capital Management Ltd (ARCM) £873,118 for breaches of the short selling disclosure rules. ARCM failed to notify the FCA and disclose to the public its net short position in Premier Oil Plc between February 2017 and July 2019.
Under the Short Selling Regulation 2012 (SSR), firms must notify the FCA and disclose to the public their net short positions when certain thresholds are met. ARCM did not comply with these requirements, failing to make 155 notifications to the FCA and 153 public disclosures about its position in Premier Oil. By July 5, 2019, ARCM’s net short position reached 16.85% of Premier Oil’s issued share capital, held for an additional 106 trading days before any disclosure was made.
Mark Steward, Executive Director of Enforcement and Market Oversight at the FCA, highlighted the seriousness of these breaches, stating that failure to report disclosable short positions undermines the integrity and efficiency of financial markets. He emphasised that ARCM’s repeated violations and failure to provide critical information warranted this substantial penalty.
ARCM agreed to resolve the matter early, qualifying for a 30% discount under the FCA’s executive settlement procedures. Without this discount, the financial penalty would have been £1,247,312.
This case marks the first time the FCA has taken enforcement action for a breach of the SSR, underscoring the importance of transparency in maintaining market integrity.
Key Takeaways:
- Adhere to Disclosure Requirements: Ensure timely notifications to the FCA and public disclosures for net short positions as mandated by the Short Selling Regulation 2012.
- Maintain Market Integrity: Transparency is crucial for the integrity and efficiency of financial markets.
- Compliance is Critical: Firms must comply with all regulatory requirements to avoid substantial penalties.
- Early Resolution Benefits: Settling early with the FCA can result in significant discounts on financial penalties.
In conclusion, the FCA’s action against ARCM underscores the critical importance of adhering to short selling disclosure rules. Firms must prioritise transparency and compliance to maintain market integrity and avoid severe financial penalties.
Back to the Dear CEO letter archives.