Kym Sheehan

The 2008 Emergency Regulation of Short Selling in the United Kingdom, United States, and Australia

Publisher Summary This chapter examines the emergency responses to short selling undertaken by the Australian Securities Investments Commission (ASIC), the Financial Services Authority UK (FSA), and the SEC during 2008, when governments around the world initiated emergency regulatory action to ban short selling. The “temporary ban” period was from around mid-September to late October 2008, representing the period when a ban on short selling financial institution securities was imposed in the United Kingdom and Australia, although the Securities and Exchange Commission (SEC) banned naked short selling in certain financial institution securities as early as mid-July 2008. While both the FSA and the SEC justified the ban on short selling in financial securities by reference to the need to ensure the stability of the financial or banking system and not the securities markets, the rules as made were securities market rules, and not financial institution or banking system rules. From a regulatory perspective, the objectives of securities regulation were invoked to undertake far-reaching and urgent rule making without resorting to the usual rule-making processes. And of the three regulators, only the SEC had specific “emergency powers” that could be invoked.