Mon, Nov 3, 2014

Ensuring your compliance with short position reporting

The SFC issued a reminder to all market participants in October 2014, urging them to comply with short position reporting obligations.

The regulator observed that some market participants were late in filing reports on their short positions, as required by the Securities and Futures (Short Position Reporting) Rules (the “Rules”).

It clarified that oversight or delays arising from change of personnel or overseas public holidays are not considered as reasonable excuses for the late filing. The SFC expects market participants to have appropriate procedures in place to ensure compliance with the Rules.

If a market participant outsources the short position reporting to a third-party agent, and such agent has made a late or inaccurate report, it is the market participant who remains legally responsible.

As such, market participants who wish to appoint an agent to assist with short position reporting should ensure that the agent is sufficiently competent to perform such reporting duties. The market participant should also closely monitor the agent’s performance to ensure compliance with the Rules.

The SFC expects proper care to be exercised in calculating reportable short positions. Licensed firms may face disciplinary action if they fail to take proper care to ensure the reports are accurate.

Any contravention of the Rules without reasonable excuse may also constitute a criminal offence and suggest poor internal control of a licensed corporation. Market participants are, therefore, reminded to ensure accurate and timely reporting of short positions.

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