End of short selling ban could expose trustees to legal action

Posted on Jan 19, 2009

Wedlake Bell has warned that pension trustees who enter into stock lending arrangements which make short selling possible, could be exposed to legal action for being in breach of their duty as trustees, following the end of the short selling ban on bank shares.

According to Wedlake Bell, where payment for lending shares to hedge funds does not adequately compensate for the loss a pension fund could suffer on the falling value of its assets due to short selling, the trustees may be in breach of their responsibility to manage the scheme in the best interests of members.