Timely Disclosure

Timely Disclosure

Updates and Commentary on Current issues in M&A, Corporate Finance and Capital Markets

New Themes and Direction Resulting from CSA Consultation Paper 33-404


On May 11, 2017, the Canadian Securities Administrators (CSA) published CSA Staff Notice 33-319 Status Report on CSA Consultation Paper 33-404 Proposals to Enhance the Obligations of Advisers, Dealers, and Representatives Toward Their Clients (Notice).

The Notice provides a high level summary of the consultation process to date regarding CSA Consultation Paper 33-404 Proposals to Enhance the Obligations of Advisers, Dealers, and Representatives Toward Their Clients (Consultation Paper), and identifies certain high level themes arising in the process and gives a sense of the direction that the CSA will take in regards to certain of the proposals from the Consultation Paper.


The Consultation Paper is part of the CSA’s effort in improving the relationship between clients and their advisers, dealers and representatives, and sought comments on proposed regulatory action aimed at enhancing same.  The Consultation Paper proposed two regulatory changes: (1) amendments to NI 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations (NI 31-103) that would work together to better align the interests of registrants to the interests of their clients and enhance various specific obligations that registrants owe to their clients, and (2) a regulatory best interest standard, accompanied by guidance, that would form both an over-arching standard and the governing principle against which all other client-related obligations would be interpreted.  All CSA jurisdictions are participating in the consultation process on these topics, with the exception of the British Columbia Securities Commission who is only consulting on the proposed amendments to NI 31-103.

Continue Reading

CSA Proposed Amendments: Foreshadowing Future Changes to the Securities Resale Regime?

Downtown Hong Kong

CSA Proposed Amendments to Increase Canadian Investors’ Access to Exempt Market Offerings by Foreign Issuers


On June 29, 2017, the Canadian Securities Administrators (CSA) released proposed amendments to National Instrument 45-102 Resale of Securities (NI 45-102) and corresponding amendments to  Companion Policy 45-102CP to National Instrument 45-102 Resale of Securities for a 90-day comment period.  The proposed amendments relate primarily to section 2.14 of NI 45-102 which sets out a prospectus exemption permitting the resale of securities by an investor where the issuer of those securities is not a reporting issuer in any Canadian jurisdiction.

Currently, section 2.14 permits the resale of securities on a prospectus exempt basis only if the issuer was a non-reporting issuer at the time of the distribution or at the time of the resale; residents of Canada, at the distribution date, did not own more than 10% of the outstanding securities of the class or series and did not represent more than 10% of the total number of security holders (10% Ownership Ceiling); and the resale is made on an exchange or market outside of Canada or to a person or company outside of Canada.

The purpose of the existing section 2.14 exemption is to permit the resale of securities over foreign markets or to persons outside of Canada if the issuer has minimal connection to Canada and it is unlikely that a market for these securities would be developed in Canada.  The 10% Ownership Ceiling was initially intended to define when an issuer has minimal connection to Canada.  The proposed amendments to section 2.14 remove the 10% Ownership Ceiling for Canadian residents.

Continue Reading

Should Securities Regulators Play a Larger Role in Canadian Capital Markets?

Investor Protection & Dual Class Share Structures

The recent initial public offerings (IPOs) of major players in the Canadian market, including Aritzia in September 2016, Freshii in January 2017 and Canada Goose in March 2017, have sparked debate about the use of dual class share structures and whether regulatory reform is necessary in order to ensure adequate investor protection.

Corporate Legislation of Dual Class Share Structures:

Pursuant to section 24(3) of the Canada Business Corporations Act (CBCA),[1] when a corporation has only one class of shares, the rights of the holders of those shares are equal in all respects and include the right to vote at any meeting of shareholders of the corporation; to receive any dividend declared by the corporation; and to receive the remaining property of the corporation on dissolution.

Section 24(4) of the CBCA allows for a corporation to have more than one class of shares (Dual Class Share Structure).  The CBCA requires that the rights, privileges, restrictions and conditions attaching to each class of shares be set out; and that the rights to vote, to receive any dividend declared, and to receive the remaining property of the corporation on dissolution be attached to at least one class of shares, but all such rights are not required to be attached to one class.

Although the use of a Dual Class Share Structure is allowed by the CBCA (as well as by provincial corporate legislation, including the Business Corporations Act (Ontario)), securities regulators have imposed some regulations regarding the use of such a structure. For example, the Toronto Stock Exchange (TSX) requires that companies issuing a class of shares with multiple votes have a coattail provision in order to ensure that all investors are treated equally in the case of a takeover[2], and the Securities Act (Ontario) mandates various initial and continuous disclosure requirements for securities issuers.[3]

Continue Reading

Canadian Securities Administrators Publish 2016 Enforcement Report

The Canadian Securities Administrators have published their 2016 Enforcement Report (Report) describing the securities law enforcement process and analyzing enforcement results from 2016. The Report discusses a variety of enforcement matters, including number and type of proceedings commenced and results of enforcement proceedings.

A subset of the Report’s findings include:

  • There were 109 enforcement matters concluded in 2016, compared to 145 cases concluded in 2015. A matter is concluded when a decision is issued or a settlement is reached.
  • There were 56 enforcement matters commenced in 2016 compared to 108 matters commenced in 2015.
  • The majority of the concluded and commenced matters in 2016 were related to illegal distributions of securities with the second highest frequency of matters being related to fraud. These results followed a similar pattern to 2015.
  • In 2016, 57% of concluded matters were decided by a contested hearing before a tribunal. A settlement was reached in 21% of concluded matters and a court decision was issued in 22% of concluded matters.
  • The aggregate amount of fines, penalties and other similar payments that were ordered in 2016 was approximately $62 million compared to approximately $138 million in 2015. The aggregate amount of restitution, compensation and disgorgement ordered in 2016 was approximately $350 million compared to approximately $112 million in 2015.

The Report also summarized certain cases in the areas of fraud, illegal distributions and market manipulation, among others.

New disclosure obligation: What you should know about the “Financial Information – Annual form”

Fasken Martineau’s Investment Products and Wealth Management team wishes to remind dealers and advisers registered under the Securities Act (Quebec) (the “registrants“) that as of June 19, 2017, registrants are subject to a new financial information disclosure obligation. Registrants whose main regulator is the Autorité des marchés financiers (the “AMF“) must now complete a new annual form which can be downloaded from the AMF’s website.

The new Financial Information – Annual form enables the AMF to analyze the risks associated with each registrant more effectively by centralizing financial information, and automating the process in order to reduce the number of omissions by registrants when disclosing financial information. The form does not create an obligation to provide new information to the AMF. Instead, the purpose is to gather information already subject to disclosure in one document and to remind registrants about certain obligations. The new obligation does not generate any additional costs for registrants.

Implementation period for filing the Financial Information – Annual form

The obligation to file the Financial Information – Annual form is not codified and is based on the AMF’s general power to require disclosure of any document or information believed to be useful in accomplishing its mission. Failure to comply with the obligation to file the form may result in administrative penalties.

The period and process for implementing the filing obligation will be done in steps according to the date of each registrant’s financial year-end:

  • Registrants whose financial year-end falls between December 31, 2016, and February 28, 2017, (registrants having normally already filed their audited non-consolidated annual financial statements and calculation of excess working capital) must file steps 4 to 9 in the form before October 31, 2017. Steps 4 to 9 must be filed by email at: inscription@lautorite.qc.ca, or by regular mail at the address indicated on the form;
  • Registrants whose financial year-end falls between March 31 and June 30, 2017, must complete and file the entire form no later than October 31, 2017, by email at the address indicated above or via the E-Services platform accessible on the AMF website(the “E-Services”)Note that these registrants must still file their audited non-consolidated annual financial statements and calculation of excess working capital no later than 90 days following the fiscal year-end;
  • Registrants whose financial year-end falls on July 31, 2017, or after must complete and file the entire form together with their audited non-consolidated annual financial statements and calculation of excess working capital no later than 90 days following the fiscal year-end.

Starting January 2018, every registrant must file the form together with their audited non-consolidated annual financial statements and calculation of excess working capital no later than 90 days after the end of their fiscal year.

Compliance mechanisms

Last, note that E-Services users will no longer be able to file their audited non-consolidated annual financial statements and calculation of excess working capital without completing the Financial Information – Annual form. It will also not be possible to submit the form if a field has not been filled out correctly.

Please don’t hesitate to contact our Investment Products and Wealth Management team should you have any questions about the new Financial Information – Annual form. We will be happy to help you complete the form.

The SCC Confirms No Right to a Jury Trial for Securities Law Offences

calgary-1751846_1920The Supreme Court of Canada (SCC) recently dismissed two separate appeals whereby the defendants, Ronald Aitkens and Jeremy Peers, argued for a right to trial by jury for securities law offences.

Aitkens and Peers were charged with offences under the Securities Act (Alberta). Section 194 of the Securities Act (Alberta) provides for a maximum penalty of a fine of $5 million, imprisonment for a term of not more than five years less a day, or both. Section 11(f) of the Canadian Charter of Rights of Freedoms (Charter) provides for a right to a trial by jury in cases where the maximum punishment for the offence is imprisonment of at least five years or a “more severe punishment”. Aitkens and Peers argued that the potential punishment of five years less a day, plus a $5 million fine amounted to a “more severe punishment”, thereby giving them the right to a jury trial pursuant to the Charter.

The Alberta Court of Appeal dismissed the appeal by Aitkens and Peers in December 2015 noting that the purpose of Section 11(f) was obviously to entrench the traditional right to a trial by jury for the most serious offences. In addition, the Alberta Court of Appeal noted that if the drafters of the Securities Act (Alberta) thought that a combination of imprisonment and fines should compel a jury trial, one would expect some reference to that.

On February 14, 2017, the SCC heard Aitkens and Peers’ appeals and issued a unanimous ruling, dismissing the appeals, substantially for the reasons of the majority of the Alberta Court of Appeal.

Aitkens’ trial is scheduled for April 2018. Peers pled guilty in February 2016.

This decision confirms that securities law offences will continue to be prosecuted in provincial courts in trials before a judge alone. In addition the decision confirms that adding economic sanctions to a prison term of five years less a day does not does amount to a “more severe punishment” and therefore does not trigger Section 11(f) of the Charter.

The Repeal of Ontario’s Bulk Sales Legislation

buildings-1194224_1920On March 22, 2017, Ontario’s Bulk Sales Act (BSA) was repealed by way of Schedule 3 of Ontario’s Burden Reduction Act. This repeal marks the end of bulk sales legislation in Canada as Ontario was the last Canadian jurisdiction to have such legislation.

Enacted in 1917, the BSA was intended to protect creditors from a sale of assets by a business without the creditors first getting what they are owed. Before its repeal, the parties to an asset transaction would satisfy the bulk sales legislation requirements in one of three ways: (a) by complying with the procedures of the BSA, (b) by obtaining a court order or (c) by waiving compliance with the BSA. If the bulk sales legislation was not satisfied, the consequences ranged from the transaction being set aside to the purchaser being subject to additional costs.

For a while now, bulk sales legislation has been viewed as an unnecessary burden and cost to parties involved in asset transactions. This is so because other means for protection of creditors now exist, including: obtaining a security interest under the Personal Property Security Act, the oppression remedy available under applicable corporate legislation, and general protections under the Bankruptcy and Insolvency Act and assignment and preference legislation.

Now that the BSA is repealed, vendors and purchasers involved in asset transactions in Ontario will not have to incur the costs and administrative burden associated with compliance of bulk sales legislation. However, addressing the policy concerns that bulk sales legislation was originally intended to address may require that they be extra cognizant of these other creditor protections.

Website Disclosure by TSX Issuers – Revised Proposal


In late May 2016, the TSX proposed amendments to the TSX Company Manual (Initial Proposal), most notably in Part IV, which contains the requirements for maintaining a listing. In our earlier post, we provided an overview of the Initial Proposal, which was to introduce a requirement for certain corporate documents to be disclosed, and publicly accessible, on a listed issuer’s website. In the Initial Proposal, the TSX pointed out that while many relevant corporate documents are already publicly available (typically on SEDAR), they are often difficult to find and categorize.

At the conclusion of the initial comment period, the TSX identified concerns from market participants regarding the potential increased regulatory burden and the general uncertainty surrounding the types of documents that fall within the scope of the Initial Proposal. As a result, the proposed amendments were revised (Revised Proposal) and the TSX has issued a further request for comments, to be completed by May 8, 2017. While the rationale of providing participants with easy centralized access to key information remains unchanged, the Revised Proposal attempts to remedy the potential regulatory burden and clarity issues of the Initial Proposal.

The Initial Proposal created ambiguity by providing for broad categories of documents, with short non-exhaustive lists as guidance, that an issuer would be required to post online. For example, an issuer was required to post “constating documents including articles, trust indentures, partnership agreements, by-laws and other similar documents” and “corporate policies that may impact meetings of security holders and voting, including advance notice and majority voting policies.” The Revised Proposal attempts to address the ambiguity by providing specific lists (for example, “articles of incorporation, amalgamation, continuation…”) and in some cases, a catch-all for documents of a similar nature.

Continue Reading

A Radical Shift to Say-On-Pay under OBCA’s Bill 101


Shareholder Control over Executive Compensation under Bill 101

Bill 101, An Act to Amend the Business Corporations Act (Bill 101), proposes a number of updates to the Ontario Business Corporations Act (OBCA). Introduced as a private member’s bill in early March, Bill 101 aims to shift power to shareholders through amendments in areas such as shareholder meetings, shareholder proxies, as well as the election and diversity requirements of directors. Among Bill 101’s most ambitious changes is to provide shareholders with power over executive compensation. These executive compensation amendments build on a trend in which many public companies are voluntarily providing shareholders with a “say-on-pay”. Bill 101’s proposal in this area, however, goes much further by providing shareholders with the unprecedented ability to both propose and approve executive remuneration policies. The implications of this power raises important questions regarding the respective responsibilities and duties of directors and shareholders.

Shareholders’ Current Say-On-Pay

Most Canadian business statutes, including the OBCA and the Canada Business Corporations Act, explicitly provide directors with the authority to fix compensation for directors, officers and employees, subject only to the company’s articles, by-laws and any unanimous shareholder agreement. Today in Canada there are no corporate or securities laws that provide shareholders with the ability to approve, much less propose, executive compensation.

While not legally required to do so, a trend in recent years has seen many publicly listed Canadian companies voluntarily provide shareholders with a vote on executive compensation. These say-on-pay motions are advisory only, with the results not binding the directors’ decisions. Although non-binding, the say-on-pay process is seen as providing shareholders with value by encouraging directors to consider and clearly explain compensation policies to shareholders.

While the voluntary adoption of non-binding advisory votes is steadily increasing, Canada lags behind certain other jurisdictions in both mandating say-on-pay votes and in providing teeth to the votes through binding outcomes (see a recent Timely Disclosure post). For example, the United Kingdom and Australia have mandated periodic shareholder votes on executive compensation policies.

Continue Reading

Government Access to Information – Part 3


Part 3: Reform To Canadian Access to Information

Co-authored by Gianrico DePasquale and Roseanna Dat.

In Part 1, we discussed access to information requests in Canada and in Part 2, we discussed freedom of information requests in the United States.

As a follow up to Part 1, we report that the Government of Canada is in the process of amending the Access to Information Act[1] and is considering potential reform which may have an impact on businesses.  In its Review of the Access to Information Act, the Standing Committee on Access to Information, Privacy and Ethics recommended, among other things, that the Act should apply to institutions that are publicly funded by the Government of Canada.[2] There are three potential options suggested to determine whether an institution would be subject to the Act under the proposed reform.

Proposed Reform

The Information Commissioner of Canada (Commissioner) has proposed the following three options to determine whether an institution that is funded by the Government of Canada should be subject to the Act under the proposed reform:

  • if the institution receives a loan, grant or contribution of $5 million or more;
  • if the source of 50% of the institution’s funding originates (directly or indirectly) from the Government of Canada, and
  • if the institution’s income from the federal government reaches a certain percentage or an absolute threshold higher than $5 million of public funding.

According to the Commissioner, the criteria in option A is proposed to include expenditures, grants and contributions equal to or in excess of $5 million which are voted on by Parliament as separate line items in the Federal budget.[3] The criteria in option B is proposed as it is the method used in both Denmark and Serbia. The criteria in option C is proposed as it is a middle ground or saving grace between options A and B.[4]

Continue Reading