Canada is a short selling haven Paul D. Davis, Charlotte Conlin, Shahen A. Mirakian, Leila Rafi, Sandra Zhao published a research article on McMillan (a leading business law firm) about short selling in Canada. Some of its conclusions:
- Based on our research, it is clear that IIROC’s largely non-interventionist approach and its focus on maintaining liquidity have made Canadian companies attractive targets for short campaigns.
- The number of short campaigns in Canada is utterly disproportionate to the size of our capital markets when compared to the United States, the European Union and Australia.
- As a result of inherent weaknesses in the Canadian short sale regulatory regime, short sellers may well be attracted to the Canadian capital markets.
- When compared to other regulatory regimes, the lack of transparency and the limited enforcement activity by IIROC raise significant issues related to investor confidence and market integrity.
- Canada is a Haven for Short Campaigners.
- The lack of any meaningful penalties for abusive short selling is likely a draw for short campaigners engaging in illegal short selling. There have been no significant regulatory prosecutions of short sellers conducting short and distort campaigns and few enforcement proceedings where short sellers were penalized for naked short selling.