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Protect your stock ownership rights! UK Gov considers ending DRS for household investors, putting your investment at risk.

 Letter template to His Majesty's Treasury Digitization Taskforce:

 

Dear Sir Douglas Flint,
I want to express my deep concerns regarding recent discussions around limiting individual investors' ability to hold and own shares in my / our names via direct registration.
We individual investors play a pivotal role in capital markets. Despite our smaller investment sizes compared to institutional investors, we collectively provide a significant pool of long-term, stable capital that underpins the global economy. They contribute to market liquidity, foster capital formation, and often stay invested for longer periods, offering corporations a stable source of financing.

However, we need confidence to stay engaged in capital markets. The ability to directly register and own shares in my / our names is the most critical factor in maintaining this confidence. This mechanism offers them the assurance that we become actual stakeholders, not just numbers on a broker's ledger. Direct registration is the only GUARANTEED way to ensure, that we household investors can fully exercise our essential rights as shareholders.

The absence of the direct registration option can create an environment of mistrust and suspicion. If we feel disenfranchised or doubt the integrity of the system, there could be a mass exodus from the markets. Such an eventuality would not only affect liquidity but also have a cascading impact on global capital markets. With less capital flowing into businesses and government, the pace of economic growth could slow down. We know from the GFC 2008 it took years to rebuild this lost trust and stabilize the markets.

In summary, the direct ownership of shares is not just an option but a necessity for me /us as household investors to maintain faith in capital markets. I urge you to consider the detrimental long-term effects that could result from depriving them of this right.

Full Name

 

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Ensure UK Short Selling Regulation revision receives robust democratic oversight

I would like to ask the Treasury Committee to take a keen interest in the current process of reviewing, with regard to amending, the UK regulation of Short Selling.

In response to the 2008 Global Financial Crisis, the EU proposed a raft of changes to regulate this practice. Some of these were implemented, but those addressing the massive issue of "naked shorting," were never introduced.

Short selling is the practice of borrowing other peoples' shares in order to sell them, realising money. The short seller then hopes that the share price falls, allowing the them to buy them back, to return them, at a lower price than they sold the borrowed shares for. Thus, making a profit at the expense of the actual shareholders, who they borrowed them from. Better still for the short seller, if the company can be caused to become bankrupt, the value of the borrowed shares is zero, so they get to keep all the money they sold someone else's shares for. And get this, if the company becomes bankrupt they also avoid paying any capital gains tax! Unbelievable isn't it? But it gets worse...

Another, even more harmful, tactic often used by financial institutions is "Naked" short selling. Here the short seller just "creates," rather than actually borrows, shares, that they then sell. This reduces the share price and earns them money, while at the same time exposes them to absolutely no risk. This process has obvious massively harmful effects on the companies, their employees, and wider society, while enriching unscrupulous financial institutions.

Within the last 2 weeks the EU has voted to remove many of the protective changes, introduced after 2008. One particularly important rule, obliging anyone who practices naked short selling, to buy back these synthetic shares, within 4 days of their creation, has been removed.

This decision has been taken at a time of extreme risk for financial markets (think Credit Suisse - who have been enabling these practices.)

I call on your committee to ensure that none the UK's current regulations which serve to address naked short selling are removed or diluted. Further, I suggest that new regulations, aimed at preventing illegal naked shorting, should be introduced.

I am concerned that far-reaching exceptions will be introduced for the benefit of financial institutions which practice naked short selling. At a minimum, I call on the committee to continue the current level of restrictions. 

In addition a transparent and rapid audit process, which monitors open short positions (rather than relying the financial institutions to self-report) should be introduced. 

There should also be a ban on naked short selling, without exception, unless the created shares are bought back within 4 days. This should be backed up by strict enforcement by a supervisory body, with the power, and the will, to enact sufficient punishment to deter these practices.

 

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SHORT SELLING REGULATION SSR UK

In the UK, the EU Short Selling Regulation SSR 236/2012 still applies following the country's departure from the EU, but is set to be replaced by a new regulation. The Short Selling Regulation governs the short selling of stocks listed on UK markets, and includes provisions for disclosure to the FCA and the public, a ban on uncovered short selling, and emergency powers for the FCA.

The regulation was introduced by the European Union (EU) and adopted into UK law after the UK's departure from the EU. As part of implementing the results of the FRF, the government will repeal this regulation and replace it with a regulatory system tailored to the UK markets that promotes market integrity and strengthens the competitiveness of the UK financial markets.

This call for evidence is the first step in the government's review of short selling as part of its program to repeal the applicable EU financial services regulations and replace them with a framework tailored to the UK. It seeks feedback on the current functioning of the regulation and how it could be better adapted to the UK markets.

CALL FOR EVIDENCE: DON’T SELL THE UK SHORT - Susanne Trimbath @ ko-fi.com

 

Short Selling Regulation Review - Call for Evidence

PETITION CSDR 909/2014

But now it's time to stand up against it and work together for fairness in the financial markets. We are convinced that together we can make the world a better place by advocating for more just regulations and transparency. Petition 0775/2022 has already been signed by over 12,000 supporters from around the world and calls for the enforcement of the Central Securities Depositories Regulation (CSDR) 909/2014 in the EU. This regulation aims to take measures against market manipulation and unfair practices in the financial markets. We demand a fair and transparent regulation of financial markets that protects investors and stabilizes the market. Join us in shaping a better future together.

With our petition, we demand the immediate implementation of the 2014 Central Securities Depositories Regulation, which includes a binding buy-in rule as a fundamental element of settlement discipline. The lack of effective settlement rules exposes markets and investors, especially small investors, to a highly asymmetrical and unfair risk and is a major risk factor for extreme disruptions in the stock markets. Our petition points out that delivery failures disrupt the balance of supply and demand, lead to massive price pressure, and destroy the value of corresponding investments. Naked short selling of stocks by market makers has been shown to pose an incalculable risk to the transparency and stability of stock markets. It is now up to the European Parliament, ESMA, ECB, and European Commission, to effectively protect our rights as small shareholders. We also call for an immediate halt to penalties for market participants who fail to deliver stocks, as well as margin calls and mandatory buy-ins. Transparent and fair markets based on the principle of supply and demand are the foundation of our economy.

 

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