On December 3, the Canadian Securities Administrators (CSA) published Consultation Paper 25-403 Activist Short Selling “to facilitate discussion” about this activity in Canada. As described by the CSA, activist short selling involves an individual or entity that takes a short position in a security and then publicly shares information that is expected to negatively impact a company’s stock price. If the value of the security declines, the short seller realizes a profit. The consultation paper summarizes stakeholder concerns about activist short selling, outlines the Canadian and international regulatory frameworks for this activity and sets out CSA Staff’s findings regarding the nature and extent of this activity in Canada. Included in the CSA’s findings is that across all 116 Canadian short seller campaigns it looked at between 2010 and September 2020, approximately 40 per cent involved allegations of some type of fraud at the issuer, the most common being a stock promotion scheme. The comments period ends on March 3, 2021.

December 11, 2020