IIROC Aug 17, 2022 Notice - I have a client who subscribed to purchase shares of a secondary financing, but the financing has not yet closed. Can I rely on the client’s commitment to purchase shares off the financing as “reasonable expectation” to settle a short sale despite the closing date of the financing occurring after the settlement date of the short sale trade?
No. Prior to the entry of a short sale order, a Participant must have a “reasonable expectation” that sufficient shares will be available to settle any resulting trade on settlement date. Because the financing will not have closed when the short sale trade is scheduled to settle, those shares will not be available on settlement date of the short sale trade.