Australia's corporate watchdog has asked activist short sellers to pull their heads in and only publish short reports outside of normal trading hours in order to protect the integrity of financial markets.
The Australian Securities and Investment Commission's (ASIC) position on the behaviour of activist short sellers was published today in a report entitled Activist Short Selling Campaigns in Australia.
The practice of activist short selling involves a person taking a short position in a financial product and then publicly disseminating information directly or through an agent that might negatively impact the price of the product.
These reports might call into question or directly criticise and entity's finances, management, public disclosures or future prospects.
Recent high-profile examples include Viceroy Research's unsuccessful short of Tyro Payments (ASX: TYR) amid the company's three-week long EFTPOS outage, Blue Orca's report on SEEK's (ASX: SEK) Chinese business, and VGI's attack on Corporate Travel Management (ASX: CTD).
According to ASIC's report, activist short sellers, target entities, market operators and market participants should look to the new information sheet and apply the 'best practices'.
These include, for activist short sellers, releasing short reports outside normal trading hours; drawing on reliable information and avoiding overly emotive language.
ASIC also says target entities should seek a temporary trading halt to provide time to digest and comprehensively respond to the claims of activist short sellers.
"Investors expect to transact in a fair and informed market," ASIC commissioner Cathie Armour said.
"When activist short sellers provide accurate and meaningful new information, they can have a positive impact on price formation and market integrity as they may counterbalance excessive market optimism.
"However, activist short sellers can also unfairly distort the price of a target entity's securities, which is harmful to the integrity of our markets."
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