The Ontario Securities Commission (OSC has opened a frontal assault on short selling that shadows equity raises, writes The Deep Dive. Draft amendments released would bar any investor who shorted a stock within five trading days of a deal’s pricing from buying that same security in the offering.
The rule mirrors the US regulation and is designed to stop what the regulator calls “pricing pressure” created when hedge funds short first and buy later at a discount.
The draft offers three carve outs: at-the-market distributions, bona fide conversions of convertible securities, and full position buy-ins completed no later than the day before pricing. Crucially, the ban applies even if the short seller had no knowledge of the deal or no impact on the price.
The OSC is expected to move quickly after the consultation closes in September and few doubt the rule will become law, according to The Deep Dive.