Extension of the Prohibition of Short Sales of Financial Sector Issuers

On October 3, 2008, the Ontario Securities Commission (“OSC”) issued an order (“Extension Order”) extending until 11:59 p.m. on October 8, 2008 the prohibition on the short sale of certain financial issuers listed on the Toronto Stock Exchange (“TSX”) that are inter-listed with exchanges in the United States (“Financial Sector Issuers”).1 On September 22, 2008, the OSC issued an amended and restated order (“Restated Temporary Order”) that amended the order of the OSC dated September 19, 2008 (“Original Temporary Order”). The Extension Order, Restated Temporary Order and Original Temporary Order were issued by the OSC as a precautionary measure to prevent regulatory arbitrage with respect to short selling in Ontario of the Financial Sector Issuers as a result of initiatives by the Securities and Exchange Commission (“SEC”) and to promote fair and orderly markets in Ontario for trading in the securities of the Financial Sector Issuers. The SEC issued an amended order on October 1, 2008 that will expire at the same time as the Extension Order.

Guidance on the Handling of Short Sales

The Extension Order has deleted Aberdeen Asia-Pacific Income Investment Company Ltd. from the list of Financial Sector Issuers. The Extension Order also clarified the ambit of certain exemptions from the prohibition related to a short sale conducted by:

• a registered dealer acting as principal to facilitate with a client or counterparty a securities transaction with a value of $200,000 or more or a derivatives transaction with notional value of $200,000 or more; and
• a writer of a call option that effects a short sale in a common equity security of a Financial Sector Issuer as a result of assignment following exercise by the holder of the call.

On September 23, 2008, the Investment Industry Regulatory Organization of Canada issued IIROC Notice 08-0101 – Rules Notice – Guidance Note – UMIR – Restated Reminder Respecting Obligations in the Conduct of Short Sales. Except for the modifications and clarifications made by the Extension Order as described above, the guidance provided in IIROC Notice 08-0101 remains applicable. The guidance provided in IIROC Notice 08-0101 under the heading “General Obligations in the Handling of Short Sales” will remain applicable after the expiry of the Extension Order.

• 1The text of the Extension Order is available on the website of the OSC at http://www.osc.gov.on.ca/Enforcement/Proceedings/RAD/rad_20081003_cert-fin-sect-issuers.pdf
  The text of the Restated Temporary Order is available on the website of the OSC at http://www.osc.gov.on.ca/Enforcement/Proceedings/RAD/rad_20080922_amend_cert-fin-sect-issuers.pdf.
  The text of the Original Temporary Order is available on the website of the OSC at http://www.osc.gov.on.ca/Enforcement/Proceedings/RAD/rad_20080919_cert-fin-sect-issuers.pdf.