UPDATE 1-UK's FSA extends short-selling rules

* Extends regime beyond original 30 June expiry date

* Sees short-selling rules for all stocks in future (Writes through, adds detail)

LONDON, June 1 (Reuters) - Rules obliging investors to disclose short selling of banking and insurance shares will be extended beyond their planned expiry date of June 30, Britain's Financial Services Authority said on Monday.

The watchdog said the rules, under which investors must reveal all net short positions in financial firms equivalent to 0.25 percent of the company's equity, would continue to apply until a new long-term arrangement governing short-selling is in place.

"Keeping the disclosure requirements will continue to enhance transparency and limit the potential for market abuse, while details of a long-term regime for short selling are being drawn up," Sally Dewar, the FSA's managing director of wholesale markets, said in a statement.

Short-sellers borrow shares from long-term investors and sell them in the anticipation that their price will fall, allowing them to make a profit by buying the stock back more cheaply.

The FSA imposed an outright ban on short-selling financial shares during the global banking crisis last September, responding to fears the practice was exacerbating confidence-sapping falls in shares of major financial institutions. [ID:nLI88643]

The blanket prohibition was replaced by the current disclosure regime in January.

The FSA is planning to publish the results of a consultation with the financial services industry on options for a long-term short-selling regime in the summer.

The regulator said on Monday the current arrangements would probably be replaced by a broader regime covering all stocks. (Reporting by Myles Neligan; Editing by David Holmes)