Canadian Securities Administrators Requests Comments On Activist Short Selling

On December 3, 2020, the Canadian Securities Administrators (CSA) published consultation paper 25-403 - Activist Short Selling, to facilitate a discussion of concerns relating to activist short selling and the potential impact on capital markets in Canada. The term "activist short selling" refers to when an individual or entity takes a short position in a security and then publically shares information that is likely to have a negative impact on the price of such security in an effort to realize a profit.

In 2019, the CSA formed a committee that analysed activist short selling campaigns targeting Canadian issuers and reviewed relevant academic literature. The empirical analysis was limited to activist short selling campaigns identified by a third-party data provider, Activist Insight (AI), which focused on tracking activist short sellers on both the long and short side. It is noted that AI's database only tracks campaigns by prominent activist short sellers.