Data Discrepancies Cast Doubt on FCA’s New Short Selling Disclosure Regime

The UK Financial Conduct Authority (FCA) has come under scrutiny after apparent inaccuracies were identified in the first disclosures published under its new short selling transparency regime. The discrepancies, which include inconsistent reporting, missing positions, and the inclusion of outdated short positions, have prompted concerns about the reliability of information being made available to investors and the wider market.

The new reporting framework marks a significant shift in the UK’s approach to short selling disclosures. Under the revised rules, the FCA no longer identifies individual hedge funds or investors holding significant short positions in listed companies. Instead, it publishes the aggregate short interest in each company, with disclosures being made when total short positions exceed 0.2% of a company’s issued share capital. Previously, individual short positions exceeding 0.5% were publicly disclosed along with the identity of the investor.

However, an analysis conducted by financial data provider Breakout Point, and subsequently reviewed and confirmed by the Financial Times, identified several apparent errors in the regulator’s initial disclosures. Among the discrepancies were short positions in Softcat, a FTSE 250 technology company, which appeared in the FCA’s report on Monday but disappeared from the following day’s report without any explanation or corresponding entry in the historical record of closed positions.

The analysis also found inconsistencies relating to the reported dates and sizes of short positions in several companies, including student accommodation provider Unite, with revised information appearing in subsequent reports without any indication that earlier disclosures had been corrected. According to a person familiar with the matter, one amendment resulted from a duplicated short position being removed from the dataset.

Additional concerns arose after the FCA’s reports appeared to omit certain positions that had remained active under the previous disclosure regime, including positions linked to Saba Capital and Lombard Odier Asset Management. At the same time, the regulator’s new disclosures included certain short positions dating back more than five years, including a position in Critical Mineral Resources first disclosed in 2021, despite the company’s share price having fallen substantially since then. Such positions would ordinarily be expected to have been closed following significant price declines.

Commenting on the findings, Chris Brennan, a partner at Dentons, noted that information submitted to the FCA plays a vital role in market oversight and detecting misconduct, adding that market participants reasonably expect publicly available regulatory data to be accurate. Ivan Cosovic, founder of Breakout Point, similarly observed that while minor issues during the early implementation of a new reporting regime may be understandable, silent corrections to official market records should not become routine.

Responding to the concerns, the FCA stated that it had reviewed the examples highlighted by Breakout Point and concluded that there was “no need for any revisions” to the published data at this stage. The regulator emphasised that it routinely monitors reported positions, engages with reporting firms where necessary to verify information, and will continue assessing the operation of the new regime to determine whether further changes are required.

The episode highlights the practical challenges associated with implementing a new market disclosure framework and underscores the importance of accurate regulatory reporting in maintaining market confidence, transparency, and effective regulatory oversight.