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<p>The FCA seeks to ensure that regulated firms provide adequate levels of disclosure
to investors that invest in financial products, as well as the orderly functioning
of these types of investment products.</p><p> </p><p>As part of this, the FCA sets
requirements for managers of authorised funds carrying out stock lending, including
obligations that they make clear in the fund’s prospectus (the document provided to
those considering investing in a fund) if the stocks in the fund they invest in may
be lent on to others. However, the FCA does not require fund managers to then seek
the permission of fund investors before lending their stock in each individual case.
Under FCA rules, managers of authorised funds can only lend the stocks in these funds
for the account of and for the benefit of the fund and in the interests of unitholders.
The manager must be satisfied that any stock lending is appropriate for generating
additional income for the fund at an acceptable degree of risk.</p><p> </p><p>More
broadly, the FCA is responsible for enforcing the Short Selling Regulation (SSR),
which regulates short selling practices while safeguarding companies and the financial
system. It imposes a disclosure regime on those who have reportable net short positions
to the Financial Conduct Authority (FCA) and to the public and provides the FCA with
powers to suspend short selling or limit transactions when there are significant reductions
in the price of certain instruments from the previous day’s closing price. Additionally,
the Treasury and FCA both have powers under the Regulation to address adverse events
that pose a serious threat to market confidence or financial stability.</p>
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