Canadian Securities Course (CSC) Practice Exam · Question
Which of the following regulatory requirements applies to a Canadian dealer member facilitating a short sale for a client?
Under CIRO rules (formerly IIROC), dealer members must ensure they can locate and earmark or borrow the securities required for a short sale before the order is
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Question: Which of the following regulatory requirements applies to a Canadian dealer member facilitating a short sale for a client?
Answer options:
- The client must deposit 100% of the sale proceeds as collateral. ✅ The dealer must ensure there are sufficient securities available for borrowing before executing the short sale.
- Short sales are prohibited for retail investors under CIRO rules.
- The client must hold the shares for at least 30 days before initiating a short sale.
Correct answer: The dealer must ensure there are sufficient securities available for borrowing before executing the short sale.
Explanation: Under CIRO rules (formerly IIROC), dealer members must ensure they can locate and earmark or borrow the securities required for a short sale before the order is executed, to prevent 'naked' short selling.
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