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Letter Summary:
The Ontario Securities Commission (OSC) is seeking public comment on proposed amendments to OSC Rule 48‑501 and related changes to the Companion Policy (48‑501CP).
The Proposed Amendments would prohibit investors who made short sales of a security in the five business days prior to the pricing of a prospectus offering or private placement from purchasing securities in that same offering, even if:
- They were unaware of the offering,
- The offering did not represent a material fact or change,
- Or the short sale had no effect on the market price.
Exemptions may apply in certain cases.
Overview of the Council’s Comments
The CAC responded to the OSC’s consultation on proposed amendments to Rule 48-501 regarding trading during distributions. The letter emphasized a data-driven, targeted approach that aligned with SEC Rule 105 while being tailored to Canadian market practices (e.g., bought deals and issuer concentration).
- The CAC supported the OSC’s targeted, evidence-based amendments to Rule 48-501, aligned with SEC Rule 105 and calibrated to Canadian financing practices (e.g., bought deals).
- The letter affirmed short selling’s role in liquidity/price formation while backing a focused restriction to curb offering-related arbitrage, with a five-day window and sensible exemptions (including ATMs and NI 45-106 s.2.42).
- It encouraged ongoing monitoring and better data/transparency in securities lending to support surveillance and future policy development.
The CAC viewed the proposals as a well-calibrated response that addressed identified conduct, aligned with established U.S. rules, and preserved legitimate trading activity.