FSA chief's war on short-selling

CITY regulator the Financial Services Authority is to force traders and hedge funds who indulge in short selling to come clean about their activities.

FSA chairman Sir Howard Davies is to demand 'greater disclosure' amid fears that speculative trading has worsened the global shares slump. He stopped short of banning the practice or imposing a tax on it. The FSA will put forward its proposals in the autumn.

Short selling, or off-loading shares one does not own, is a controversial technique used to make money in falling markets. One way is for a dealer to borrow shares and then sell them, in the hope that they can be bought back later at a lower price, before returning them to their owner.

The issue has become more pressing since the collapse in markets which has wiped £96bn off the value of UK pension funds, according to government figures. Many in the City believe that rampant bear raiders have helped to exaggerate falls in markets and individual shares.

Mobile phone group mmO2 has complained about aggressive undisclosed activity by short sellers.

There has also been controversy-at British Land, where hostile investor Laxey Partners tried to loosen the grip of boss John Ritblat on the company by using votes on borrowed shares.

Legal & General boss David Prosser wrote to the FSA earlier this month asking it to investigate. He said: 'Short selling by hedge funds can go against the interests of long-term investors.'

L&G's half-year profits were flat at £365m compared with £369m last time. Dividends rose 2.5% to 1.67p. The shares rose 2.75p to 106.5p.

Prosser added: 'I think we are near the bottom of the bear market. There is good value out there.'