22 September 2008
SHORT SELLING OF COMMONWEALTH GOVERNMENT SECURITIES
The AOFM has been advised by the Australian Securities and Investments Commission (ASIC) that the prohibition of covered short selling announced by ASIC on 21 September 2008 (in ASIC Class Order CO 08/752) does not apply to the short selling of Commonwealth Government securities.
ASIC has provided the following detailed information:
The securities affected by the Class Order are defined in s 761A of the Corporations Act 2001 (the Act). While this includes "a debenture of a body", a government is not a body in the relevant sense (viz as defined in s 9 of the Act). The legislative note under s 1010A(2) of the Act confirms that debentures, stocks or bonds issued or proposed to be issued by a government are not securities. It says that "[t]hese financial products are not securities within the meaning of section 761A.". In the instances where the Act applies in relation to these products, express words are used in addition to a reference to securities: see for example Act, ss 764A(1)(a) and (j); and s 1020B (definition of section 1020B products, paragraphs (a) and (c)). ASIC Class Order [CO 08/752] does not do so.