(This article appears courtesy of International Financial Law Review, sign up for a free trial on their site)
The misuse of short selling by US hedge fund managers has recently been the subject of much scrutiny. The practice involves one party borrowing shares for a small fee, selling them, repurchasing them once the price has fallen in value, returning them to the original owner and making a profit on the difference between the sell and buy price. If the shares are not in fact borrowed in the first place, this is known as naked short selling.
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