On February 5, the European Securities and Markets Authority (ESMA) updated its set of Questions and Answers (Q&As) on the implementation of Regulation (EU) 236/2012 (the Short Selling Regulation). The aim of the Q&As is to promote common supervisory approaches and practices in the application of the Short Selling Regulation by regulators across the European Union. The last version of the Q&As was published in January 2013.

In updated Q&A 10.6, ESMA’s answer has been expanded to explain that rights to subscribe for new shares cannot be used to cover a short sale, if, at the time of entering into the short sale, there is uncertainty as to whether the new shares subscribed for will be available for settlement in due time. The answer also provides examples of when this would be the case.

A copy of ESMA’s updated Q&As is available here.