Australian Regulators Target Short Selling Hedge Funds
The witch hunt against short sellers now officially spans the globe. Regulators Down Under are putting hedge funds on notice that the game will soon change, believing that current rules allow the spreading of false and misleading rumors.
Many hedge funds are becoming concerned that the political climate is shifting against them as politicians look for easy targets, even as they thought voluntary codes in the UK and US could head off the threat of further regulation.
“It is very convenient to say it is all the fault of the shadowy hedge funds,” said Andrew Baker, deputy chief executive of the Alternative Investment Management Association, one of several representing hedge funds.
But Australia generates the biggest worries for managers. A number of the country’s best-known companies, including ABC Learning Centres, investment group Babcock & Brown and QBE Insurance, have criticised short-sellers after inaccurate market rumours hurt their share prices. FT
Regulators in Iceland, the UK and the United States have been busy investigating trading into HBOS, Bear Stearns and Lehman Brothers, among others. They have figured out that hedgies eat what they kill. But have they been hunting in wolfpacks?
There have also been claims that hedge funds have been hunting in packs, aggressively shorting stocks with the intention of pushing prices down to trigger margin calls for investors who borrowed to buy shares – turning them into forced sellers....
The efforts of regulators will likely address transparency issues:
Kevin Rudd, prime minister, said last week that rules would be changed to improve disclosure. “The recent volatility in stock markets has been exacerbated by the lack of transparency surrounding the increasingly prevalent practice of short-selling,” he said in a visit to London.
Alternative managers attempting to describe the emotional trading of the past few months to regulators have their work cut out for them. A bear raid is a bit like pornography; you know it when you see it, and once the ball gets rolling the resulting pin action can take down everything in its path.
And unless you are in the trenches fighting these battles they are difficult to explain. Short selling is a crucial part of Wall Street’s eco-system. Lets hope this gets sorted out soon, and before regulators do any damage.
If they want to see a disaster, they can look at the recent trading in China’s marts,which largely ban the practice, to their detriment no doubt.
Australia aims regulatory fire at hedge funds
Financial Times
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