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The UK government has drafted new Short Selling Regulations to replace the previous EU-based regulatory framework following Brexit.

What will change under the new regime?

According to James Smethurst and Christopher Bernard, partners at global law firm Freshfields, the key points are as follows:

1. Regulatory Changes:

• The FCA will now have expanded powers to regulate short selling as a "designated activity" • Firms won't need full FCA authorisation for short selling, though those conducting regulated activities will • The regulatory approach shifts from direct restrictions to giving the FCA more flexible rulemaking powers

2. Major Modifications:

• The FCA will now publish anonymized, aggregated net short positions instead of requiring individual firm disclosures • Restrictions on uncovered short selling of sovereign debt and credit default swaps will be removed • The FCA will have more discretion in determining which shares are subject to regulations and exemptions

3. Enforcement and Supervision:

• The FCA retains powers to intervene in exceptional circumstances • It can request information, prohibit short sales, or impose conditions • New regulations extend the FCA's supervision and enforcement powers • The FCA can now publicly censure or impose financial penalties for rule breaches

The long view

While the Short ......................

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