New investment rules aimed at better transparency and security to go ahead, finance minister confirms

News - Banking

Written by Ray Clancy

Friday, 19 March 2010 09:09

Germany is to introduce a number of new laws and regulations affecting the investment industry aimed at streamlining financial market practices.

Finance minister Wolfgang Scheuble is preparing a draft law that would provide new security to investors and he hopes to present his draft for debate next month and the government is hoping to approve it sometime this summer, the finance ministry said in a statement.

The law would create new requirements for financial trading and sanctions that could be levied in cases of market abuse, the statement said. In particular it is aimed at short selling, that is betting against a stock. Under the plans unsecured short selling would be forbidden and clear regulations would be established for covered short selling.

In addition, public property funds would face new minimum holding periods as well as liquidity requirements. A spokesman said the aim is to regulate ‘gray market financial products, to increase transparency and to expand consumer protection to financial products that are currently unregulated.

Scheuble said that private investors need better information and risks from speculative trading need to be reduced and confirmed that more details will be announced in April.

It is regarded as part of a wider European Union clampdown on market practices that are believed to have contributed to the economic downturn and which could threaten financial stability again.

Financial watchdog Bafin will require investors and speculators to notify it when placing big bets that a financial stock will fall and said it would publish those bets in anonymous form if they exceeded a certain threshold.

EU securities regulators want to roll out a single regime across the entire bloc requiring disclosure of net short positions in shares, after temporary short selling bans were introduced in late 2008 as banks and insurers came under pressure in the financial crisis.

Bafin said its rules were based on recommendations by the Committee of European Securities Regulators (CESR) unveiled earlier this week.