The City's regulator has threatened to impose unlimited fines on investors that breach its new rules on betting against UK bank shares amid a flurry of late disclosures by hedge funds.

The warning came yesterday as Gordon Brown promised new permanent rules to curb short-selling once the Financial Services Authority (FSA) ban expires in January. The Prime Minister said: “We'll be reviewing over the next four months and I think you will find new rules for the future.”

Such a move could further threaten the hedge funds industry, which has grown explosively in London. The FSA last week introduced measures to tackle short selling of UK bank shares, fearing falling prices would undermine the financial system.

It ruled that any short position greater than 0.25 per cent of a market value of any 34 named financial stocks must be disclosed by 3.30pm on Tuesday this week. A number of other companies have since approached the regulator asking to be included on the list.

Several late disclosures by hedge funds were made yesterday, fuelling concerns that some funds, for technical or strategic reasons, are struggling to unveil their positions. Sources close to hedge funds said they were surprised that more revelations about short positions had not emerged.

They suggested that the complexity of investment bets made it hard to establish the exact size of the short holding.

However, Andrew Shrimpton, the FSA's former head of hedge fund regulation and now with Kinetic, a consultancy, said there was no reason for the FSA or hedge funds to struggle. “They had the fire drill three months ago,” he said, referring to a temporary ban on short-selling during a rights issue imposed when HBOS was struggling with a £4 billion cash-call.

Mr Shrimpton praised the FSA for its handling of the new rules. “I think this time they have been clearer about the purpose of the ban, it is clearly linked to financial stability,” he said.

Among the timely disclosures under the FSA rules yesterday was one from Eton Park, the London hedge fund set up by former Goldman Sachs banker Eric Mindich, of its £292 million short position in HSBC, one of 34 financial institutions protected by the regulator.

Tiger Global, run by Chase Coleman, said three of its funds had a short position worth 4.88 per cent of Alliance & Leicester, which has been taken over by Banco Santander of Spain.

Fresh disclosures yesterday, some in breach of the FSA deadline, underscored how negative hedge fund managers are about UK banks.

John Paulson's Paulson & Co in New York, which disclosed on time, has sold more than £1 billion of borrowed UK bank shares in the hope of making a profit from repurchasing them more cheaply later.

Short-selling is legal and there is no suggestion of wrongdoing.

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive