FSA to be sued over short-selling ban

It was reported on Sunday that the Financial Services Authority (FSA) faces legal action from a group of top hedge funds over the ban on short-selling financial shares in put in place on Thursday. Although the funds involved have not been named, it’s been said that the hedge funds are looking for compensation for losses they suffered as a result of the ban. However, when the FSA was asked about the pending legal action they said they knew nothing about it.

A spokesperson for the FSA said “We’re not aware of any legal challenge. We’re clear that the new code provisions are both valid and necessary.” The FSA have banned short-selling until January 16 2009, the ban stops investors short-selling shares in over 30 financial companies, including UK’s biggest insurers and banks.

Short-selling has been blamed for the decline in stock price of leading financial institutions, as it allows investors to sell borrowed shares in the expectation that their price will fall, allowing them to buy them back at a cheaper price.

Read the full story in reuters