Short-selling fully investigated by the FSA

Short-selling had a four month ban imposed on it from The Financial Services Authority (FSA) last week as it was deemed un-ethical as people were exploiting the difficult economic situation the financial institutions are in.

Prime Minister Gordon Brown has said that he may bring in rules to control short-selling which is where a short-seller “borrows” shares and sell them, aiming to profit by buying the shares back later at a lower price.

Banks such as HBOS have allegedly been targeted by short-sellers, as a result HBOS shares took a dramatic fall and rival Lloyds TSB brought the troubled bank.

In an interview with BBC radio 4 Gordon Brown said it was wrong that “good companies” could be brought down by “speculative activities” in the financial markets. “We’ll be reviewing over the next four months and I think you’ll find new rules for the future.”

One of the biggest short-sellers is New York-based hedge fund manager John Paulson, has his company Paulson & Co has made bets against all of Britain’s banks that include, HBOS, Lloyds TSB, Royal Bank of Scotland and Barclays. In answer to the allegations Paulson said his main aim was to make profit for its investors if stocks were rising or falling although he did empathise with the difficulties some financial firms might be going through. It’s said that Paulson whilst betting against the American mortgage market last year made £1.6 billion ($3 billion).

Source: BBC