DOES CANADA HAVE AN APPROPRIATE REGULATORY FRAMEWORK FOR SHORT SELLING?
On December 8, 2022, Joint CSA and IIROC - Staff Notice 23-329, Short Selling in Canada found here: provides an overview of the existing regulatory landscape for short selling, along with commentary on the prevalence of settlement failure, how long transactions take to settle, and the relationship between settlement failure and short selling/short positions:
“Short sellers, particularly activist short sellers who publicly announce that they have a short position in a security, may provide new information about issuers that can assist in ensuring the price of their securities is more reflective of their underlying value …
However, short selling is not without controversy and some stakeholders hold negative perceptions about short selling or certain aspects of short selling activities. A common theme of concerns expressed is that issuers perceive the Canadian regulatory regime as lax compared to other jurisdictions, especially the U.S., which makes it easier to conduct an activist campaign that unfairly targets Canadian issuers.”
A series of questions are posed to assess the stringency of regulatory requirements. Comments are due March 8, 2023.