68Short selling

##### 68 Short selling (1) Subject to this section and the regulations, a person shall not sell securities to a purchaser unless, at the time when he sells them: (a) he has or, where he is selling as agent, his principal has; or (b) he believes on reasonable grounds that he has, or where he is selling as agent, his principal has; a presently exercisable and unconditional right to vest the securities in the purchaser. Penalty: For a first offence, $2,500 or imprisonment for 6 months, or both; for a second or subsequent offence, $10,000 or imprisonment for 2 years, or both. (2) For the purposes of subsection (1): (a) a person who, at a particular time, has a presently exercisable and unconditional right to have securities vested in him or in accordance with his directions shall be deemed to have at that time a presently exercisable and unconditional right to vest the securities in another person; and (b) a right of a person to vest securities in another person shall not be deemed not to be unconditional by reason only of the fact that the securities are charged or pledged in favour of another person to secure the repayment of money. (3) Subsection (1) does not apply in relation to: (a) a sale of securities by the holder of a dealers licence or a recognized dealer who is a member of a securities exchange and specializes in transactions relating to odd lots of securities, being a sale made by him as principal solely for the purpose of: (i) accepting an offer to purchase an odd lot of securities; or (ii) disposing of a parcel of securities that is less than one marketable parcel of securities by means of the sale of one marketable parcel of those securities; (b) a sale of securities as part of an arbitrage transaction; (c) a sale of securities by a person who before the time of sale has entered into a contract to purchase those securities and who has a right to have those securities vested in him that is conditional only upon all or any of the following: (i) payment of the consideration in respect of the purchase; (ii) the receipt by him of a proper instrument of transfer in respect of the securities; (iii) the receipt by him of the documents that are, or are documents of title to, the securities; (d) a sale of securities where: (i) the person who sold the securities is not associated with the body corporate that issued or made available the securities; (ii) arrangements are made before the time of the sale that will enable delivery of securities of the class sold to be made to the purchaser within 3 business days after the date of the transaction effecting the sale; and (iii) if the sale is effected on the stock market of a securities exchange: (A) the price per unit in respect of the sale is not below the price at which the immediately preceding ordinary sale was effected; and (B) the price per unit is above the price at which the immediately preceding ordinary sale was effected unless the price at which the immediately preceding ordinary sale was effected was higher than the next preceding different price at which an ordinary sale had been effected; and the securities exchange is immediately informed that the sale has been made short in accordance with this subparagraph; or (e) a sale of securities where: (i) the securities are included in a class of securities, being a class in relation to which there is in force a declaration, made by the committee of a securities exchange as provided by the business rules of the securities exchange, to the effect that the class is a class of securities to which this paragraph applies; (ii) the sale is effected as provided by the business rules of the securities exchange; and (iii) at the time of the sale, neither the person who sold the securities, nor any person on behalf of whom the first‑mentioned person sold the securities, was associated, in relation to the sale, with the body corporate that issued or made available the securities. (4) A person who requests a holder of a dealers licence or a recognized dealer to effect a sale of securities to which subsection (1) would apply but for paragraph (3)(b), (d) or (e) shall, at the time of making the request, inform the holder of the licence or recognized dealer that the sale is a short sale. (5) A person who, on a stock market of a securities exchange, effects, whether as principal or agent, a sale of securities to which subsection (1) would apply but for paragraph (3)(d) shall cause to be endorsed on any document evidencing the sale that is given to the person who, whether as principal or agent, purchases the securities a statement that the sale was a short sale. (6) For the purposes of this section, if a person: (a) purports to sell securities; (b) offers to sell securities; (c) holds himself out as entitled to sell securities; or (d) instructs a dealer to sell securities; he shall be deemed to sell the securities.