PMAC responded to the Ontario Securities Commission consultation regarding short selling in connection with prospectus offerings and private placements. We strongly believe that there is a risk that over-regulation of short selling activity could have negative consequences for market efficiency, because such restrictions can impede price discovery and curtail legitimate investing activity. In addition, short sale restrictions can be cumbersome and operationally difficult to implement for market participants, particularly when there is a patchwork of different rules and regulations enacted across jurisdictions. We do not see how the Proposed Amendments to the short selling regime could be implemented in Ontario alone.
PMAC’s key recommendations are as follows:
- Do not make any immediate changes to the regulatory framework with respect to the short selling regime – clarify the guidance rather than enacting new rules if there is a concern that material non-public information is being misused in the context of short selling in connection with prospectus offerings and private placements;
- Confirm that affiliated investment funds (including pooled funds) or portfolio management strategies would qualify as separate accounts under the Rule 48-501 exemptions or otherwise be excluded, if the rule is enacted;
- Harmonize requirements across Canada; and,
- Continue to conduct research and consult with stakeholders to determine whether changes to the short selling regime are necessary, and to identify any unintended consequences of such changes.
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