Greek regulator fines hedge funds over short selling issue

ATHENS/LONDON (Reuters) - Greece’s capital markets regulator has fined more than a dozen hedge funds in the past few months for potentially breaching European rules on short selling stocks without borrowing them first, an official from the regulator said on Friday.

The hedge funds include Tosca Master Fund, Hadron Alpha Select Fund, and Verrazzano European Long Short, according to a statement on the website of Greece’s Hellenic Capital Market Commission.

Tosca, Hadron and Verrazzano declined to comment.

The fines range between 10,000 euros ($11,304) and 40,000 euros and are related to trades in Greek banks such as Eurobank Ergasias, Alpha Bank and National Bank of Greece, the regulator’s statement said.

Short selling is used by hedge funds to profit from falling share prices. It usually involves selling borrowed shares and buying them back at a lower price and pocketing the difference.

But sometimes shares are sold short without being borrowed first, known as naked short selling.

European rules were introduced in 2012 imposing certain restrictions on short selling and requiring certain disclosures from hedge funds on short positions.

Some hedge funds have not received notifications of the fines directly from the regulator and have sought clarification form the Greek authorities.

The Alternative Investment Management Association has also been approached by several hedge funds to look into potential inconsistency in interpretation of the European short-selling regulation by the Greek regulator, a spokesman said for the Association said, adding that the hedge fund trade body was not going to be involved in individual cases.

Some hedge funds have also approached the European Securities and Markets Authority (ESMA).

“They have raised an issue with us but we have not received any former complaint,” a spokesman for ESMA said. The ESMA spokesman said the sanctioning of market participants for any breaches of EU rules was not in ESMA’s remit.

The Financial Times initially reported the dispute over the fines.

Reporting by Nishant Kumar in LONDON and Deepa Babington in ATHENS. Editing by Jane Merriman