parliament calls for short selling shake up...

Source: www.theaustralian.news.com.au/business

MPs call for short selling shake-up
Nicola Berkovic | June 24, 2008

A FEDERAL parliamentary committee last night called for a major shake-up of the disclosure rules for short selling, which has this year helped to bring property giants Centro and MFS, childcare company ABC Learning and financial services group Allco Finance to their knees.

The parliamentary report tabled last night also recommended sweeping changes to annual reporting requirements, proxy voting, access to share registers and the expansion of tracing provisions to include derivative instruments.

Shareholder-directors would also be barred from voting on their own remuneration packages.

Short selling, which occurs when a trader sells shares it does not yet own with the intention of buying them more cheaply later, has been the subject of growing concern in recent weeks with the collapse in the share price of Babcock & Brown, which believes it has been unfairly targeted by hedge funds.

Parliamentary Joint Committee on Corporations & Financial Services chairman Bernie Ripoll said the committee was not against short selling, but believed better transparency and disclosure was needed.

The Queensland Labor MP said the committee was “open” as to how that would occur.

“We certainly had discussions around it, but what we're saying is the Government should look at this more closely, and that disclosure is what's important here,” Mr Ripoll said. “We're not saying that short selling is always a problem.”

The committee urged the Government to require institutional investors to disclose their stock lending practices to members.

In February, the ASX released a statement saying that where a company director had significant exposure to margin loans, the arrangement might be of material significance and subject to the market disclosure requirements.

The committee urged the Government to provide greater clarity in this area.

It said that “leaving an assessment of the materiality of a director's margin loan arrangements to the company” was not sufficient.

“The Government's corporate governance green paper should clarify this important disclosure issue,” the report said.

The committee has also called for an overhaul of company reporting requirements, saying that companies should no longer be forced to produce a concise financial year company report.

Instead, companies should be able to choose whether or not to produce a short, tailored report for shareholders.

Other key recommendations included abolishing the 100-member rule for calling general meetings and restriction of public access to share registers, with the exception of “proper purposes”, to address privacy concerns and limit predatory share purchase offers.

Other changes would improve the take-up of electronic proxy voting.


Ends.

Cheers, Pie :)