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FCA fines Asia Research and Capital Management £873,118

Chris Hamblin, Editor, London, 19 October 2020

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The UK's Financial Conduct Authority has fined ARCM for breaking its short-selling-disclosure rules. The asset manager failed to be 'transparent' by notifying the FCA and the public of its net short position in Premier Oil Plc between February 2017 and July 2019.

The Short Selling Regulation 2012 sets out thresholds for times when a firm ought to give the regulators and the public the details of the net short positions that it holds. This is the first time that the FCA has taken action against anyone in respect of it.

Mark Steward, the executive director of enforcement at the FCA, has accused the firm of breaking the rules "repeatedly,” failing to make 155 disclosures to the FCA and 153 to the public between 24 February 2017 and 5 July 2019, ARCM failed to make 155 notifications to the FCA and 153 disclosures to the public of its net short position in Premier Oil. By 5 July 2019, ARCM had built a net short position equivalent to 16.85% of the issued share capital in Premier Oil, which was then held by ARCM for a further 106 trading days before being notified to the FCA and disclosed to the public.

ARCM is a privately-owned asset-management firm established in 2011 in Hong Kong. It manages a series of closed-end investment vehicles which invest mainly in debt and equity securities in Asia. By capitulating to the regulator early, it obtained a 30% discount on the fine, which would otherwise have been £1,247,312.

This is the first time the FCA has taken enforcement action for a breach of the SSR.

When a market participant holds a net short position in a share admitted to trading on any trading venue in the UK, it has the following obligations.

  • If the net short position is equivalent to 0.2% of an issuer’s issued share capital, it must tell the regulator.
  • For every increase of that net short position equivalent to 0.1% of an issuer’s share capital, it must make a further disclosure.
  • If the net short position is equivalent to 0.5% of the issuer’s share capital, it must be made public, through publication on a website maintained by the FCA.
  • For every increase of that net short position equivalent to 0.1% of an issuer’s share capital, it must make a further disclosure to the public through the FCA's website.

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