Hedgeweek Comment: Regulation all over the place
Regulators have banned short selling in order to ease the downward pressure on financial stocks, but they are still reviewing the details of this decision and amending it as and when they see fit. In this process, many puzzling decisions have been taken.
The FSA introduced its temporary ban on 19 September because it was concerned short-selling was exacerbating falls in some share prices. The list of companies that regulators are protecting from short sellers keeps growing. Initially 29 banks and insurers were included on the list, but since then this has been extended to include other financial stocks.
Prime Minister Gordon Brown says it is wrong that 'good companies' should 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.'
In the US, many questions have been raised about the SEC list too. Many financial firms that might have seemed likely members of the list, banks, fund managers and others like Credit Suisse, AllianceBernstein, Legg Mason and American Express - did not make the cut until Monday this week. BlackRock was not added until Monday evening.
Other decisions have also left experts puzzled. Both General Electric and General Motors were added Monday morning, although the companies argue that they fall under the guidelines set out by the SEC. According to Forbes, General Motors notified the regulator on Friday that it owned the National Motor Bank, a savings and loan institution that qualifies it for inclusion.
When regulations are implemented quickly, the repercussions of the decision are sometimes hard to handle. Perhaps the unemployed staff from the fallen investment banks can find temporary work at the regulators to speed things up.
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