• UGI USER
  • Jan 08, 2024
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PROPER DISCLOSURES IN SHORT-SELLING

Why in the News?

  • Securities and Exchange Board of India (Sebi) reinforces stringent short-selling compliance rules for all investor classes.
  • The rules, initially introduced in 2007, are now explicitly included in Sebi’s latest short-selling master circular.
Source: Wallstreet Mojo

About Short-Selling Guidelines:

  • Clarifies the nature of short-selling, involving selling borrowed securities or those already owned.
  • Explicitly prohibits “naked short-selling,” where stocks are sold without proper borrowing arrangements.
  • Mandates upfront disclosure regarding involvement in short-selling.
  • Requires retail investors engaging in short-selling to furnish disclosures by the end of the trading day.
Short Selling

·  Definition: Short selling is a trading strategy where investors sell borrowed securities with the expectation of buying them back later at a lower price.

·  Borrowing Securities: Investors borrow stocks to sell, anticipating a decline in their value.

·  Profit from Decline: The goal is to profit from the subsequent price drop, allowing repurchase at a lower cost.

·  Risks: Involves risks, as losses can occur if the stock’s value rises.