Thursday, July 17, 2008

Hedge funds down under take swings at U.S. shorting rules

The Australian reports that funds down under are crying foul about new regulations that would curb short selling of US financial stocks.

In the article, Paul Fiani of Integrity Asset Management complains, "It seems that some financial institutions are becoming protected species, which can take on any amount of risk, reward their executives obscenely and then rely on the Government to bail them out and provide protection from short sellers."

Unfortunately, the hedge fund industry has done little to educate the media, Capitol Hill or Main Street about the true effects of shorting. Much of the media coverage gives a nod to the shorts' view, but skepticism abounds about the practice and impact of shorting. For example, the Wall Street Journal's story on Tuesday's SEC decision contained this one line of counterpoint to the general notion that shorting stocks created significant downward price pressure: "In practice, this [profiting from short positions] is extremely difficult to do with big companies whose stocks are heavily traded..." That's not much to balance the scales.

Where is any concerted response from the Managed Funds Association?

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