Financial Accounting Ch1- Article: Ontario Securities Commission Bans Short-selling in Financial Stocks

It was said last Friday September 19 that the Ontario Securities Commission had decided to temporarily ban on short selling certain stocks. This temporary ban had already been put into place by many other international authorities, like Britain and the US. This ban will begin now, until October 3rd. To those who do not know what short selling stock is, it is when an investor sells a stock, which he does not own, in hopes that it will drop in value, so that he/ she can purchase it for a cheaper price.The reason for this ban is to help smoothen the inconsistency in financial markets.

Link: http://www.canada.com/vancouversun/news/business/story.html?id=04a9ec8e-247d-4487-aabd-6ab5ade194cf

Now just because short selling is temporarily banned, it does not mean the sale and purchases of stock is not allowed: this goes for both publicly traded corporations and privately held corporations. With this in mind, financial statements and stock increases/ decreases may not be relevant to investors who run the risk of short selling. Many changes may occur from now until October 3rd, but these changes will most likely not be timely enough to help short sellers make financial decisions. After this ban, the representational faithfulness of all the international corporations will be accurate and dependable; of course, this fact does not affect private corporations as much, since financial information is not publicly presented on the newspaper.

This ban seems to be a good temporary staballizer for financial markets, but it might be pointless when it comes to a long term look at the financial markets. According to the article, there were already 800 stocks that had to be banned in the Toronto and New York stocks alone. If this rate continues after October 3rd, there may have to be a permanent ban for certain stocks. However, for many shareholders, this is a good time to take a detailed look at how well your corporation is doing; this could mean big purchases, or big sales of stocks internationally. After this ban, it will be interesting to see which corporations improve, and which ones worsen.