THE CORPORATIONS LAW

CHAPTER 7 - SECURITIES

PART 7.4 - CONDUCT OF SECURITIES BUSINESS

Division 2 - Short selling of securities

SECTION 846   SHORT SELLING  

846(1)  (Prohibition on selling)  

Subject to this section and the regulations, a person shall not sell securities to a buyer unless, at the time of the sale:

(a)  the person has or, where the person is selling as agent, the person's principal has; or

(b)  the person believes on reasonable grounds that the person has, or where the person is selling as agent, the person's principal has;

a presently exercisable and unconditional right to vest the securities in the buyer.

846(2)  (Presently exercisable and unconditional right)  

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 the person or in accordance with the directions of the person has 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 is not conditional merely because the securities are charged or pledged in favour of another person to secure the repayment of money.

846(3)  (Application of subsec (1) limited)  

Subsection (1) does not apply in relation to:

(a)  a sale of securities by the holder of a dealers licence who is a member of a securities exchange and specialises in transactions relating to odd lots of securities, being a sale made by the holder as principal solely for the purpose of:

(i) accepting an offer to buy 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 a 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 buy those securities and who has a right to have those securities vested in the person 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 the person of a proper instrument of transfer in respect of the securities;

(iii) the receipt by the person 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 an associate of 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 buyer within 3 business days after the date of the transaction effecting the sale; and

(iii) if the sale is made 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 made unless the price at which the immediately preceding ordinary sale was made was higher than the next preceding different price at which an ordinary sale had been made;

and the securities exchange is informed as soon as practicable 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 in relation to which there is in force a declaration, made by the board 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 made 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 an associate, in relation to the sale, of the body corporate that issued or made available the securities.

846(4)  (Notification of short sale)  

A person who requests a holder of a dealers licence to make a sale of securities that would contravene subsection (1) but for paragraph (3)(b), (d) or (e) shall, when making the request, inform the holder of the licence that the sale is a short sale.

846(5)  (Statement of short sale)  

A person who, on a stock market of a securities exchange, makes, whether as principal or agent, a sale of securities that would contravene subsection (1) but for paragraph (3)(d) shall endorse on any document evidencing the sale that is given to the person who, whether as principal or agent, buys the securities a statement that the sale was a short sale.

846(6)  [Persons deemed to sell securities]  

For the purposes of this section, a person who:

(a)  purports to sell securities;

(b)  offers to sell securities;

(c)  holds himself, herself or itself out as entitled to sell securities; or

(d)  instructs a dealer to sell securities;

shall be deemed to sell the securities.