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The Financial Services Authority (FSA) has announced it is to implement new rules to force short-sellers to disclose their positions in companies undertaking a rights issue.

The decision follows developments earlier this week which led to shares in HBOS – owner of Halifax and the Bank of Scotland – falling in value to a level below that at which they were offered as part of the company's right's issue.

The debacle forced HBOS to issue a statement clarifying that its trading position remained in line with expectations.

As a result of the new rules, investors will be required to disclose significant short positions of 0.25 per cent or more.

The regulations will come into force on Friday 20th June, while the FSA continues its wider investigation into capital raised by listed companies.

While the FSA views short-selling as a legitimate technique, the organisation argues that, under current market conditions, there is increased potential for market abuse through short-selling during rights issues.

"As a result, there has been severe volatility in the shares of companies conducting rights issues," the FSA seed in a statement.

"This is potentially damaging not only to the issuers in question but also to confidence in the overall fairness and quality of the UK market.

"It can be particularly prejudicial to the interests of small investors. The problem is compounded by the length of time taken to complete rights issues."

When implemented, the new rules will place an obligation to disclose positions exceeding the threshold to the market by means of a Regulatory Information Service by 3.30pm the following business day.

These provisions and, in particular, the threshold triggering a disclosure of a short position, will be kept under review and may be subject to change in the light of experience.

Furthermore, the overall effectiveness of the measure will be considered as part of the wider review, the FSA stated.