Even the best of legal amendments can go awry if they are based on knee-jerk reactions. Such is the case with Hong Kong's latest rules on reportable short selling activities. From July 3, offenders under the new regime will face a maximum fine of $50,000 and one year's imprisonment.
The requirement for financial institutions and investors to report short selling orders where the securities concerned are borrowed or on loan was first mooted in the summer of 1998. Hong Kong's financial regulators felt at the time the territory was besieged by hedge traders determined to destroy the local currency's peg to the US dollar through heavy selling in local markets.
A 30-point program...
