Timely Disclosure

Timely Disclosure

Updates and Commentary on Current Issues in Corporate Finance, Securities and Mergers and Acquisitions

Modifications récentes au Règlement 45-106 : Ce que l’industrie des fonds d’investissement doit savoir

Les Autorités canadiennes en valeurs mobilières (les ACVM) ont récemment publié les modifications définitives qu’elles entendent apporter au Règlement 45-106 sur les dispenses de prospectus et d’inscription (qui sera d’ailleurs renommé le Règlement sur les dispenses de prospectus) (le Règlement 45-106). Ces modifications concernent les dispenses de prospectus fondées sur l’investissement d’une somme minimale ainsi que sur la notion d’investisseur qualifié. Sous réserve de l’obtention des approbations ministérielles requises, les modifications entreront en vigueur le 5 mai 2015.

Modifications importantes

Pour le gestionnaire de fonds d’investissement ou le courtier, les modifications importantes sont les suivantes :

  • la dispense fondée sur l’investissement d’une somme minimale ne sera plus disponible pour les personnes physiques;
  • la définition d’investisseur qualifié sera modifiée afin de :
    • permettre aux comptes gérés sous mandat discrétionnaire ontariens d’acquérir des titres de fonds d’investissement sous le régime de la dispense pour placement auprès d’investisseurs qualifiés, tel que permis dans les autres territoires membres des ACVM;
    • ajouter les fiducies créées par des investisseurs qualifiés pour les membres de leur famille à titre d’investisseur qualifié;
    • ajouter l’exigence de remettre une déclaration de reconnaissance de risque rédigée en langage clair (l’Annexe 45-106A9) aux investisseurs qualifiés qui sont des personnes physiques.

De plus, en modifiant l’Instruction générale au Règlement 45-106 sur les dispenses de prospectus et d’inscription (l’IG 45-106), les ACVM fournissent des indications additionnelles sur les pratiques servant à vérifier si les souscripteurs respectent les conditions de certaines dispenses de l’obligation de prospectus.

Dispense fondée sur l’investissement d’une somme minimale

Le seuil de 150 000 $ de la dispense de prospectus pour investissement d’une somme minimale n’est pas modifié. Par ailleurs, cette dispense ne sera plus disponible pour les personnes physiques puisque les ACVM sont d’avis que ce seuil n’est pas un bon indicateur des connaissances des investisseurs individuels ou de leur capacité à assumer les pertes financières. Continue Reading

Recent amendments to NI 45-106 : What the Fund Management Industry Needs to Know

The Canadian Securities Administrators (CSA) recently published final amendments to National Instrument 45-106 Prospectus and Registration Exemptions (to be renamed Prospectus Exemptions) (NI 45-106) relating to the accredited investor and minimum amount investment prospectus exemptions. Subject to Ministerial approval, the amendments will come into force on May 5, 2015.

Key Changes

From a fund manager/dealer’s perspective, the key changes are as follows:

  • The minimum amount exemption (MA Exemption) is no longer available to individuals;
  • The accredited investor exemption (AI Exemption) is amended to :
    • in Ontario, allow fully managed accounts to purchase investment fund securities as an accredited investor, as is already permitted in other Canadian jurisdictions;
    • add trusts established by accredited investors for their family members as a category of accredited investor;
    • add a requirement to obtain a new “plain language” risk acknowledgement form (Form 45‑106F9) from “individual” accredited investors;

In addition, the CSA provides additional guidance relating to practices for verifying if purchasers meet the conditions for relying on a prospectus exemption in amendments to Companion Policy 45‑106CP Prospectus and Registration Exemptions (to be renamed Prospectus Exemptions) (CP 45‑106).

MA Exemption

The $150,000 threshold of the MA Exemption has not been changed. However, the MA Exemption will no longer be available to individual investors, as the CSA does not believe the threshold to be a proxy for sophistication or the ability to withstand financial loss for individual investors. Continue Reading

Canadian Securities Administrators Implement Enhanced Oil and Gas Disclosure Requirements

On December 4, 2014, the Canadian Securities Administrators (CSA) published amendments to National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities (NI 51-101) and Companion Policy 51-101 Standards of Disclosure for Oil and Gas Activities and related forms. The amendments will:

  • permit disclosure from alternative resources evaluation standards and regimes, provided that such disclosure: (i) is accompanied by the disclosure required by NI 51-101; (ii) is made in respect of a regime comparable to the Canadian Oil and Gas Evaluation Handbook (COGE Handbook); (iii) has a scientific basis and is based on reasonable assumptions; and (iv) is prepared or audited by a qualified reserves evaluator or auditor;
  • import and refine the product type definitions from the COGE Handbook for which disclosure must be made, removing the concept of product groups and focusing on the oil and gas sources and recovery processes;
  • enhance and improve disclosure requirements with respect to the disclosure of contingent resources data and prospective resources data in annual filings;
  • set out principle-based requirements to describe the standard, methodology and meaning of a publicly disclosed oil and gas metric and, if no standard is used, require an issuer to describe the parameters used in calculating the oil and gas metric and to provide a cautionary statement;
  • provide guidance on marketability in the reporting of oil and gas volumes, requiring a reporting issuer to report volumes and values at the first point of sale of the particular product type where relevant;
  • clarify what constitutes abandonment and reclamation costs and require more detailed disclosure of reserves data, both in the future net revenue disclosure and in the significant factors or uncertainties disclosure in the statement prepared in accordance with Form 51-101F1 Standards of Disclosure for Oil and Gas Activities;
  • revise the manner of presenting resources over which a reporting issuer does not have control; and
  • align NI 51-101 with the amended COGE Handbook, including the guidelines for the estimation and classification of resources other than reserves (ROTR Guidelines) which became effective July 17, 2014 and the guidelines for the estimation and classification of bitumen resources (Bitumen Guidelines) published on April 1, 2014.

Subject to Ministerial approval, the amendments will come into force on July 1, 2015. As such, issuers with a December 31 year end should note that the changes to the annual disclosure requirements will apply in respect of the year ending December 31, 2015. Reporting issuers are immediately required to follow the latest requirements of the COGE Handbook, including the ROTR Guidelines and the Bitumen Guidelines.

In connection with the amendments to NI-51-101, the CSA also published CSA Staff Notice 51-324 Revised Glossary to NI 51-101 Standards of Disclosure for Oil and Gas Activities to update the defined terms to align with the COGE Handbook and CSA Staff Notice 51-327 Revised Guidance on Oil and Gas Disclosure to provide additional disclosure guidance.

Feedback sought for the OSC’s Proposed Whistleblower Program

On February 3, 2015 the Ontario Securities Commission (OSC) published Staff Consultation Paper 15-401 Proposed Framework for an OSC Whistleblower Program (Paper). The Paper outlines the OSC’s proposal for an award-based whistleblower program (Program). The OSC is welcoming written comments on the Program until May 4, 2015.

The purpose of the Program is to encourage individuals to come forward with information regarding breaches of Ontario securities law. The Program would offer a discretionary financial award to individuals who provide information of misconduct that leads to monetary penalties or settlements of over $1,000,000.


The Paper follows OSC Staff Notice 15-704 Request for Comments on Proposed Enforcement Initiatives published for comment in October 2011. The Program would be the first of its kind amongst Canadian securities commissions. It follows the example of the U.S. Securities and Exchange Commission’s (SEC) whistleblower program established in 2011.

Objectives of the Program

The Program is part of an effort by the OSC’s Enforcement Branch to obtain information regarding securities law transgressions quickly and effectively. The Paper outlines certain specific objectives of the Program, including:

  • motivating those most likely to have information to come forward;
  • increasing the number and efficiency of securities law cases handled by the OSC;
  • increasing the quality of the information used in investigations and proceedings;
  • encouraging cooperation from the whistleblower throughout the investigation and proceedings; and
  • encouraging issuers to self-report misconduct.

In pursuing these objectives, the OSC aims to investigate more securities law cases involving sophisticated players and complex issues, with better information.

Financial Incentive

Under the Program the OSC would offer awards to individuals who provide information that lead to monetary sanctions or settlements under section 127 of the Securities Act (Ontario) of over $1,000,000.  Where penalties exceed this amount, the OSC would have the discretion to award the whistleblower up to 15% of the total sanction or settlement, excluding costs, capped at a maximum award of $1,500,000.


In order to be eligible for the award, the whistleblower must be an individual and the information must be original, provided voluntarily (i.e. not compelled or requested from the individual) and be of high quality. The Paper describes “high quality information” as information that is timely, relates to serious misconduct, is detailed, may stop further harm and is likely to save the OSC significant time and resources. In particular the OSC is looking for information regarding securities law transgressions that are extensive, abusive, create significant risks to investors and are perpetrated by individual in positions of authority. Continue Reading

CSA Releases Status Report on Proposed Changes to Methodology for Fund Risk Determination


On January 29, 2015, the Canadian Securities Administrators (CSA) published CSA Staff Notice 81-325 Status Report on Consultation under CSA Notice 81-324 and
Request for Comment on Proposed CSA Mutual Fund Risk Classification Methodology
for Use in Fund Facts
(Staff Notice).

As its names  reveals, the Staff Notice was a follow-up to previously issued CSA Staff Notice 81-324 (Previous Staff Notice).  The Previous Staff Notice proposed a new framework and methodology (Proposed Methodology) for the purpose of calculating and disclosing a fund’s volatility risk in its Fund Facts document (or other similar documents for other types of investment funds, such as ETFs) and requested feedback on the Proposed Methodology.  Currently, the manager of a mutual fund has the discretion to choose what it believes to be an appropriate risk methodology.  The CSA were therefore seeking industry feedback on the merits of introducing a standardized methodology  to determine a fund’s risk rating.

The Staff Notice set out the key themes arising from the feedback received, as well as potential next steps to be taken by the CSA.

Key Themes

Certain of the key themes discussed in the Staff Notice were as follows:

  • Use of Standard Deviation (SD) as the risk indicator – the majority of commenters agreed with the use of SD as a fund’s risk indicator.
  • 10 year history to calculate SD – many supported a 10 year history, as such a relatively lengthy measurement period would be less sensitive to sudden market changes. Such period would also provide a reasonable balance between indicator stability and availability of data.  However, concerns were raised by some that a shorter period is more appropriate given that the lifespan of the majority of mutual funds is only 5 or 6 years.
  • Fund series/class used - most commenters agreed that, in most instances, all series and classes of a Fund bear the same risk and therefore applying the Proposed Methodology to the oldest series/class of a fund (rather than all series/classes) is appropriate.
  • Use of reference index data – for funds without a 10 year history, the Proposed Methodology contemplates using the returns of an appropriate index to provide the missing performance data required to calculate SD. There were a wide range of comments, concerns and discussion points that arose from this suggestion.
  • Six Category Risk Scale - the Proposed Methodology contemplates changing the Fund Facts volatility scale from five bands to six. Most were opposed as such a change would likely lead to a large number of funds being re-labeled with an apparent higher risk classification, without any change in the fund’s volatility.
  • Monitoring and changing of risk categorizations – the Proposed Methodology sets out a monthly process that must be followed by fund managers when monitoring changes in the risk categories. Many commenters felt that monthly monitoring is excessive and burdensome and that an annual monitoring process would be more appropriate.

Next Steps

The CSA confirmed that SD continues to be the preferred risk indicator for the Proposed Methodology.  The CSA will continue also to assess the impact of moving to a six category risk scale.  Proposed rule amendments, based on the feedback received on the Proposed Methodology, are expected to be issued for comment by the CSA at some point in 2015 addressing risk classification.


Divulgation des activités professionnelles externes des personnes physiques inscrites et autorisées — Amnistie des frais de retard de la CVMO

Suite aux modifications au Règlement 33-109 sur les renseignements concernant l’inscription (Règlement 33-109) apportées le 11 janvier dernier, le Formulaire 33-109A4 inscription d’une personne physique et examen d’une personne physique autorisée (Formulaire 33-109A4) a été modifié et prévoit que les personnes inscrites et les personnes autorisées (les représentants) doivent divulguer chacune des activités professionnelles externes exercées y compris les postes de dirigeant ou d’administrateur ou tous postes équivalents, ainsi que les postes d’influence, que ces postes soient occupés contre rémunération ou non et à titre professionnel ou non.

L’Instruction générale relative au Règlement 31-103 sur les obligations et dispenses d’inscription et les obligations continues des personnes inscrites (IG 31-103) a aussi été modifiée le 11 janvier dernier et contient des lignes directrices additionnelles sur la divulgation des activités professionnelles externes.

Les amendements mentionnés ci-dessus sont venus clarifier la position bien établie des Autorités canadiennes en valeurs mobilières (ACVM) quant à la divulgation des activités professionnelles externes. Se rendant compte que certaines activités professionnelles externes n’ont pas été divulguées, la Commission des valeurs mobilières de l’Ontario (la CVMO) a mis en place une procédure permettant aux sociétés inscrites de « rattraper » leur retard dans les dépôts requis pour la divulgation des activités professionnelles externes et considérera une réduction des frais de retard de ces dépôts si les activités professionnelles externes divulguées n’ont pas de conséquence sur la capacité des représentants à être inscrits.

Afin de pouvoir bénéficier de la réduction des frais de retard, un Formulaire 33-109A5 dûment complété et mettant à jour l’item 10 du Formulaire 33-109A4 sur les activités professionnelles externes, doit être déposé par le truchement de la Banque de données nationale d’inscription au plus tard le 27 mars 2015.

Un Formulaire 13-705A1 doit être déposé auprès de la CVMO d’ici le 27 mars 2015 pour que la CVMO considère la demande de dispense pour les frais de retard habituellement imposés, c’est-à-dire, 100 $ par jour ouvrable de retard, sujet à un maximum de 5 000 $ pour tous les documents devant être déposés ou livrés par une société inscrite dans l’année.

Voir l’avis no. 13-703 du personnel de la CVMO pour plus de détails sur les critères applicables et sur la procédure à suivre afin d’obtenir une dispense de paiement de frais de retard. (Disponible en anglais uniquement)

Study of hostile take-over bids in Canada reveals that a change of control is not inevitable

Fasken Martineau’s 2015 Canadian Hostile Take-Over Bid Study sets out the results of a ten-year empirical analysis of hostile take-over bids in Canada.

Key findings include: When initiating a public contest for control, a hostile bidder was successful more than half the time; however, a change of control was by no means inevitable, with targets of these bids remaining independent almost 30% of the time.



The study contains additional findings on certain factors that impact outcomes, namely, competition, bidder tactics, shareholder rights plans and board recommendation, and should be of interest to all participants in Canada’s thriving M&A market.  Read more in our 2015 Canadian Hostile Take-Over Bid Study.

Registrants’ Disclosure of Outside Business Activities – OSC Late Fee Amnesty

Further to amendments to National Instrument 33-109 Registration Information (NI 33-109) on January 11 of this year, the Form 33-109F4 Registration of Individuals and Review of Permitted Individuals (F4) was amended and sets out that registered and permitted individuals (representatives) must disclose other business activities (OBA) relating to all officer, director or equivalent positions held, and all positions of influence, whether or not one receives compensation and whether or not the position is business related.

Companion Policy 31-103CP Registration Requirements, Exemptions and Ongoing Registrant Obligations (31-103CP) was also amended on January 11 and provides further guidance on OBA disclosure.

The above amendments have clarified the CSA’s long-standing expectation on OBA disclosure. Recognizing that previously existing OBAs have not been disclosed, the OSC is providing registrants with an opportunity to “catch up” on overdue OBA filings and willing to consider a reduction in late filing fees if the OBA does not affect a representative’s suitability for registration.

In order to qualify for a reduction of late fees, a completed Form 33-109F5, updating item 10 of the F4 relating to OBAs, must be submitted via the National Registration Database by no later than March 27, 2015.

A completed Form 13-705F1 Application for Reduced Late Fee Relief – Outside Business Activities must be submitted to the OSC by March 27, 2015 in order to be considered for relief from the late fees normally imposed, i.e. $100 per business day filing is late, subject to a maximum aggregate late fee of $5,000 for all documents required to be filed or delivered by a registered firm in a calendar year.

See OSC Staff Notice 13-705 Reduced Late Fee for Certain Outside Business Activities Filings for further details on eligibility criteria and the late fee relief application process.

Mise à jour sur l’encadrement des fonds d’investissement alternatifs

Mise à jour sur l’encadrement des fonds d’investissement alternatifs

Dans le cadre des efforts menés par les Autorités canadiennes en valeurs mobilières (« ACVM ») en vue de moderniser la réglementation des produits de fonds d’investissement, celles-ci ont publié récemment une mise à jour sur les propositions relatives aux fonds alternatifs.

Les « propositions relatives aux fonds alternatifs » sont les propositions des ACVM concernant l’élaboration d’un projet d’encadrement réglementaire plus complet des fonds d’investissement faisant appel public à l’épargne qui souhaitent investir dans des actifs ou utiliser des stratégies de placement non autorisées par le Règlement 81-102 sur les fonds d’investissement. Les propositions relatives aux fonds alternatifs seraient adoptées en même temps que certaines restrictions en matière de placement applicable aux fonds d’investissement à capital fixe en ce qui a trait aux placements dans des marchandises physiques, aux ventes à découvert, à l’utilisation de dérivés et aux emprunts de fonds (les « restrictions interreliées en matière de placement »).

Les ACVM avaient sollicité des commentaires sur les propositions relatives aux fonds alternatifs en mars 2013. Dans cette mise à jour, les ACVM discutent des thèmes clés découlant des commentaires reçus dont certains sont repris ci-dessous.

Les attributs d’un fonds d’investissement alternatif

Plusieurs intervenants ont souhaité plus d’information sur les critères qui pourraient être utilisés pour distinguer un fond alternatif des autres fonds d’investissement offerts au public. Certains intervenants ont exprimé leur avis que l’octroi de dispenses aux fonds d’investissement qui souhaitent utiliser des stratégies alternatives ou investir dans des catégories d’actifs alternatifs de façon limitée devrait être envisagé plutôt que d’obliger des fonds à se conformer aux propositions relatives aux fonds alternatifs.

Convention de désignation

Les intervenants semblaient généralement opposés à une convention de désignation. Ils craignent qu’obliger l’utilisation de l’expression « fond alternatif » puisse donner inutilement l’impression que ces fonds sont plus risqués ou plus volatiles que les autres. Ils semblent également être d’avis que désigner un fond comme « alternatif » n’est pas suffisant pour que les investisseurs individuels comprennent le niveau de risque et de complexité de ces fonds.

Restrictions en matière de placement

Plusieurs intervenants ont suggéré que les fonds alternatifs ne devraient être assujettis à aucune restriction ou à aucun plafond en matière de placement (effet de levier, vente à découvert, etc.). Ils croient que de telles restrictions freineront l’émergence de nouveaux types de fonds alternatifs ou de nouvelles stratégies de placement alternatives.

Prochaines étapes

Les ACVM continueront leur analyse des commentaires reçus sur les propositions relatives aux fonds alternatifs et les restrictions interreliées en matière de placement et continueront également de consulter directement les intervenants. Les consultations devraient être achevées d’ici la mmi-2015, après quoi les ACVM entendent publier pour consultation des propositions de modification réglementaire afin de mettre en œuvre les propositions relatives aux fonds alternatifs avant la fin de l’année.

Update on an Alternative Funds Framework for Investment Funds

Update on an Alternative Funds Framework for Investment Funds

As part of their ongoing efforts to modernize investment fund product regulation, the Canadian Securities Administrators (CSA) recently published an update on the status of the creation of an Alternative Funds Proposal.

The Alternative Funds Proposal is the CSA’s proposal calling for a more comprehensive regulatory framework for publicly offered investment funds that wish to invest in assets or use investment strategies not permitted under National Instrument 81-102 Investment Funds. The Alternative Funds Proposal would be adopted in conjunction with certain investment restrictions for non-redeemable investment funds in respect of physical commodities, short selling, the use of derivatives and borrowing cash (the Interrelated Investment Restrictions).

The CSA had previously sought comments on the Alternative Funds Proposal in March 2013. In this update, the CSA discusses the key themes that emerged from their request for comments, some of which are summarised below.

The Attributes of an Alternative Investment Fund

Many commenters sought more information about the criteria which would be used to differentiate alternative funds from other publicly offered investment funds. Some commenters expressed the view that granting exemptive relief to investment funds that wish to use alternative strategies or invest in alternative asset classes on a limited basis should be considered instead of requiring such funds to comply with an alternative fund framework.

Naming Convention

Commenters seemed generally opposed to a naming convention. They worry that requiring the use of the expression “alternative fund” may result in such funds being unnecessarily labeled as high risk or more volatile than other investments funds. They also seemed to be of the view that labeling funds as “alternative” would not be sufficient for retail investors to understand the level of risk and complexity of such funds.

Investment Restrictions

Many commenters suggested that alternative investments funds should not be subject to investment restrictions or limits (leverage, short selling, etc.). They believe such restrictions would impede the development of new types of alternative investment funds or alternative investment strategies.

Next Steps

The CSA will continue to consider the feedback provided on the Alternative Funds Proposal and the Interrelated Investment Restrictions and will also continue to speak directly to stakeholders. Consultations are expected to be completed by mid-2015, after which the CSA expect to publish for comment proposed rule amendments aimed at implementing the Alternative Funds Proposal by the end of the year.