FSA facing legal challenge over 'short selling' ban
As we alluded to in some of our recent posts about the financial system and the proposed ban on short selling, it seems that the industry is set to fight back. While the FSA has denied knowledge of an impending legal challenge it has been revealed that a number of leading hedge fund managers are taking court action and demanding compensation for the loss of their right to 'short sell'.
While this initial ban only covers the top 30 financial stocks, until mid-January when the situation will be reviewed, it is seen by many as going against the grain of the free market principle. Exploiting strengths and weakness in the financial systems of the world has been happening for decades and short selling is a valid area of business. Only weaker companies will suffer if short selling is done within the rules, i.e. no spreading of rumours and false stories to ensure the price falls.
On reflection is seems that the government may well be using a sledge hammer to crack a walnut because of the lack of success they have had in the court rooms with regards to the prosecution of traders who spread false stories and rumours for their own ends. Expect another back down from the authorities on what may well turn out to be an unlawful ban.
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