Save Canadian Mining (SCM) is pleased to submit these comments to the CSA for review.

While SCM will issue specific responses to the request for comment on short selling, we will also be submitting an opening statement. Our objective in this is to make it clear that as a volunteer organization, funded by members with no permanent staff, it is difficult for us to provide datasets to support some of our positions.

This does not make our assertions any less true. If anything it highlights the need for new research that is not provided by IIROC or the CSA, but which could be obtained from them by credible third party research organizations skilled in this collection. This research group should be guided in equal parts by the official regulatory bodies and industry, along with community representatives. In this way we could, as a group, present a transparent view of the shorting world that is not currently available.

Our view at Save Canadian Mining is that our capital markets have two core functions – around which everything else must revolve and support.

1. The Capital markets exist to provide investors of all stripes equal and fair access to avariety of accurately portrayed investment opportunities.
2. The Capital markets exist to provide Companies of all stripes equal and fair access to communicate their investment opportunities to a variety of investors.

All other actions, activities, or regulations should be looked at in the context of how they improve either or both of those market functions. We believe these core functions have suffered in a desire to make exchanges profitable – or to allow hedge funds and investment banks to thrive at the expense of the investors and companies capital markets are meant to serve.

Save Canadian Mining was built on a desire to make capital markets fair to investors and issuers. We don’t believe they are fair now. The longer this process is allowed to go on – the more discouraged investors and companies get.

I will provide you with one example to illustrate the problem. I will request via our Save Canadian Mining Platform that other examples be submitted by issuers, and we will publish these credible reports as they come to our attention.

Attached, on six consecutive days of trading in February, are downtick closes in Power Nickel stock. I am the CEO of Power Nickel. The stock was closed 6 days in a row by the same broker at 15:59:59. Five of the six were a downtick. There have been many similar closes in our stock by the same broker both before and after this date all at this time.

I have complained to IIROC and they have listened to me and are investigating. I am not particularly hopeful they will act. They have informed me that while I did not have access to the data – in their view it was a different investor each time. I commented if they felt this was an uncoordinated action, and randomly six non coordinated investors all decided at 15:59:59 to sell our stock; that I had a bridge to sell them in Brooklyn.

How is it even possible that one Company could close trading on the same stock six days in a row and probably over half the time overall? I am unaware of any way I could somehow trade with my broker and close the stock up six days in a row. If I did, I’m confident I would have a call from IIROC no doubt fining me and shutting me down. Not that it’s even possible for a normal investor to get the last trade six days in a row!

I have given you one live example. We will deliver more as we intend to publish this to our Save Canadian Mining audience, and to ask our members to tell us their stories both as issuers and investors. There is no way this is normal behavior. Do I think you can prove collusion among the six investors? No. These short sellers are pack animals and literally the smartest guys in the room. They are smarter than me for sure, and smarter than the regulators. They make huge profits and can of course hire the best to figure out how to legally and, I suspect, illegally beat the system.

They have compromised your systems. The downtick trading is one thing – spoofing volume on sell orders and wash trading is another. Again, I don’t have the staff, expertise or time as a Junior Miner to prove that to you. But if you listen to Power Nickel as a Company and our investors, and the many companies like Power Nickels out there and their investors – you will hear these same complaints over and over.

The very requirements for proof via data we have no means to collect is all part of the gamesmanship of the short industry. They know how regulatory bodies work: slowly and deliberately with data. They know IIROC has the data. But as I have said, in my meetings with IIROC and in our submission to the Ontario taskforce – the data that is collected is not asking the right questions and obscures the true issues.

The Wall Street Bets storylines has raised this issue in the USA, and very clearly has evidenced massive naked short selling and the creation of counterfeit shares. It is happening here in Canada. It’s happening to Power Nickel and many, many more companies. Our research shows that the TSXV metals and Mining index would almost have to triple to get back to normal vis a vis its traditional relationship with commodity prices. This destruction in value means our investors – whether individual or institutional – are not making fair returns. It means companies are not growing as Capital access is reduced and capital cost increased. It means we employ fewer people. For mining that means fewer first nations in our workforce, as we are among the highest employers of first nations staff. I could go on, but surely the point is made or there would be no further benefit from belaboring it.

We ask for the following.

1. We want the CSA to fund an independent research group review of short selling. We want equal representation from knowledgeable individual investors, mutual and pension funds, companies small medium and large and the CSA. We would have IIROC provide the selected research firm untethered access to the data and collection processes so that we can truly have a transparent look at the system and how it functions.
2. In connection with #1 above – we request a formal review of the so-called Tick Test regulations. As noted in our submission it is long past the time to measure how positive or negative removing this safeguard has been.
3. The Ontario TaskForce made several suggestions with respect to trade settlement. At a minimum these should be made law. Digital IOU’s are not DRS’s. We need to settle trades on a timely basis and understand the true short positions on stocks. The current processes do not accurately reflect reality.

We know your jobs are not easy. We also believe you are trying to do your best. We also recognize that change is difficult for you. But for the good of the capital markets you need to listen to the investors and issuers who are harmed by the current short selling dynamic. The system has some flaws. The shorts and their ecosystem have figured out how to play you – and they sure as hell have figured out how to play issuers and individual traders. We need to focus on why capital markets were created and get back to first principles.

Our Responses To Questions Raised In Joint CSA and IIROC Staff Notice 23-329 – Short Selling in Canada

1. We believe that the existing regulatory regime around pre-borrowing in certain circumstances should be strengthened. Specifically, we believe that “pre-borrow” requirements similar to those in the U.S. should be implemented in Canada. This would require broker-dealers to have pre-borrowed or made reasonable efforts to locate securities before executing a short sale. We believe that this requirement would help prevent abusive naked short selling and reduce the risk of market manipulation.
2. The costs and benefits of implementing such requirements should be carefully considered. While there may be some costs associated with implementing and enforcing these requirements, such as increased compliance costs for broker-dealers, we believe that the benefits of preventing market manipulation and protecting investors and companies outweigh these costs. Moreover, data from the U.S. suggests that pre-borrowing requirements can be effective in reducing the incidence of failed trades and naked short selling.
3. The current definition of a failed trade does not appropriately describe a failed trade. We believe that a failed trade should be defined as any short sale that fails to deliver securities within a reasonable timeframe. This definition should take into account the various strategies, including overlapping trades, employed by predatory short sellers to circumvent locate rules and delay final settlement of naked short trades.
4. We believe that a timeline shorter than ten days following the expected settlement date
   should be considered. In my view, a shorter timeline, such as five days, would be more
   appropriate. This would help prevent market manipulation and ensure that investors are not
   harmed by excessive delays in the settlement process. Data from the U.S. suggests that shorter settlement periods can be effective in reducing the incidence of failed trades.
5. Additional public transparency requirements of short selling activities or short positions should
   be considered. Specifically, we believe that short sellers should be required to publicly disclose
   their short positions on a regular basis. This would increase transparency in the market and help prevent market manipulation. Data from other jurisdictions suggests that public disclosure requirements can be effective in reducing the incidence of predatory short selling.
6. Additional reporting requirements regarding short selling activities should also be considered. Specifically, we believe that broker-dealers should be required to report their short selling activities to the securities regulatory authorities on a regular basis. This would help regulators monitor short selling activities and detect any potential market manipulation. Data from other jurisdictions suggests that reporting requirements can be effective in reducing the incidence of failed trades and predatory short selling.
7. Given IIROC’s study of failed trades, we believe that specific reporting, transparency or other requirements should be considered for junior issuers. These companies are particularly vulnerable to market manipulation and predatory short selling, and therefore require additional protection. Specific reporting requirements, such as more frequent public disclosure of short positions, would be appropriate in our view.
8. Mandatory close-out or buy-in requirements similar to those in the U.S. and the European Union would be beneficial for the Canadian capital markets. While there may be some costs associated with implementing these requirements, such as increased compliance costs for broker-dealers, we believe that the benefits of reducing the incidence of predatory short selling and protecting investors and companies outweigh these costs.

God Bless

Terry Lynch
Founder Save Canadian Mining

Click Here For IIROC Short Response