Some lawyers may have missed out on increased work resulting from the Australian Securities and Investments Commission's (ASIC) continued ban on short-selling financial securities. But not to worry: the new disclosure regime under the Corporations Amendment (Short Selling) Act 2008 is likely to bring more opportunities for firms.

Exact details concerning the new disclosure regime's date of commencement, or its timing and manner of disclosure, remain unclear. However, Gadens partner Andrew Lind believes that once the new disclosure regime is finalised, sellers, brokers and the ASX may need advice on practices and procedures. "Work that could come out of it would include advice on the regime itself, and helping brokers modify their practices and policies," he said.
 
At the moment there is a prohibition of naked short-selling (sale of securities that one does not have rights to) and non-disclosure of covered short-selling of financial securities (in other words the sale of financial securities that are borrowed by a seller). In the event of a covered short-sale, sellers will be required to advise brokers, who will report the sale to the Australian Securities Exchange (ASX), which is then required to publicly disclose the information.

Mallesons Stephen Jaques is one of the firms that has managed to secure a slice of advisory work on the ban. "The ban and exemptions that developed after the ban did result in a lot of advisory work for us. We gave urgent advice to banks, hedge funds and brokers, about the impact of the ban and how to comply. Before the ban, short-selling was not a hot legal topic but now it is," said partner Mark McFarlane.

There have been reports that some industry participants may try to find ways to avoid the ban, and achieve an economic outcome that is equivalent to a short-sale. McFarlane believes this may bring regulatory 'scrutiny'. If such cases were numerous then ASIC could review how market participants reacted to the ban and consider a legislative response. "There would be further work required if the government were to take action. It would involve reviewing regulatory elements from the perspective of clients," said McFarlane.

The possibility remains that ASIC may not renew the ban, but McFarlane still thinks there will be demand for legal advice. "We've been working on it for six months and we expect it to continue. The covered short-selling ban might disappear at the end of May but that will depend on market volatility and ASIC's concern for financial stocks," he said.