The BC government proposes sweeping changes to the Securities Act (British Columbia) (the “Act”), which will allow the British Columbia Securities Commission (“BCSC”) to better address white collar investment crime. Proposed through Bill 33 Securities Amendment Act, 2019, the amendments will provide the BCSC with some of the strongest powers in Canada to protect investors and enforce sanctions. These are the first major revisions to the legislation in almost a decade.

Government Sought Changes Two Years Ago

The changes were prompted two years ago, when Finance Minister Carol James asked the BCSC to come up with a plan to increase fine collection. Ms. James encouraged the BCSC to propose new mechanisms that would allow it to more effectively collect fines and deter future misconduct. Postmedia News reported that between 2007 and 2017, the BCSC collected less than 2% of the $510 million in fines that it ordered to be paid. During fiscal 2018/2019, the BCSC imposed sanctions of $35.4 million. During the same year, it collected  $5.2 million of which $0.3 million related to sanctions imposed in that year and $4.9 million related to sanctions imposed in prior years. It also returned $7 million to investors through a court-appointed receiver. Two years after Ms. James’ plea, the proposed amendments would give the Act stronger powers and better assist the BCSC with its enforcement mechanisms.

Changes Will Assist In Collecting Fines And Enforcing Orders

The proposed changes, many of which are unprecedented in Canada, enhance the BCSC’s power to collect fines and enforce orders. A key change would allow the BCSC to seize property that was transferred to third parties for below market value. Sanctioned individuals often transfer properties to spouses or relatives for small amounts, such as $10, which has allowed them to shield properties from regulators. Other proposed changes to the Act include:

  • Increase in maximum fines;
  • Increase in maximum jail terms;
  • New minimum sentences for repeat offenders;
  • Power to seize RRSPs; and
  • Power to direct ICBC to refuse renewal or issuance of driver’s licences or license plates.

Changes Aimed At Protecting The Integrity of Capital Markets

The BCSC welcomed the amendments and the government’s goal to contribute to a fair capital market. “We’d like to thank the B.C. government for taking action to crack down on white collar crime with these ground-breaking amendments,” said Brenda Leong, chair and CEO of the BCSC. “We now have new and better tools to go after the bad actors who break the law and cause significant harm to investors and the capital markets.” The changes will help victims of investment fraud recover funds and make it less desirable for individuals to create investment scams. The second reading of Bill 33 was on Monday, October 28, 2019 and a copy of it can be found here.

On October 30, 2019, the International Limited Partner Association (ILPA) published its model limited partnership agreement (LPA) template for private equity. The model LPA is available online by clicking here and constitutes a Delaware-law based “whole of fund” waterfall LPA that can be used to structure investments into traditional private equity buyout funds. It is expected that additional models of LPAs, including one based on a “deal-by-deal” waterfall will be published by ILPA in the future.

In publishing a publicly available standard model LPA, ILPA aims to provide an LPA that can be used as starting point for managers looking to establish a limited partner friendly limited partnership agreement or as a benchmark for ILPA recommended terms. The model LPA incorporates the positions taken in ILPA Principles 3.0, published earlier this year. For more information on ILPA Principles 3.0, please see our Bulletin dated September 6, 2019.

ILPA is a global organization dedicated to advancing the interests and maximizing the performance of limited partners in the context of private equity funds. The drafting and publication of model LPAs is part of ILPA’s broader LPA Simplification Initiative which began in early 2018.

After almost fifteen years of undisturbed reign, the Business Acquisition Report (BAR) requirements for non-venture issuers are about to be relaxed.

Proposed amendments will require that non-venture issuers file a BAR only if two of the three existing significance tests are triggered, as opposed to only one, and the triggering threshold for such significance tests will be increased from 20% to 30%.

The main objective is to eliminate any unnecessary burden on the reporting issuers and avoid the anomalous outcomes of the past, without compromising investor protection.

In 2015, the CSA had already reduced the burden on venture issuers by increasing the BAR significance test threshold from 40% to 100% and by removing requirement that BARs contain pro forma financial statements.

A Fair Compromise

The so-called “two-trigger test” is the result of a consultation process led by the Canadian Securities Administrators (CSA).

Comments received by the CSA ranged from the complete elimination of the BAR requirements to reconsidering certain aspects of the significance tests, while others indicated that the BAR contains relevant information that is not provided elsewhere.

The profit or loss test was especially criticized for often producing anomalous results when compared to the other two tests (the asset test and the investment test).

Based on the feedback received and its analysis of relevant data, the CSA chose to replace the “one-trigger test” by a “two-trigger test”. In particular, the CSA deemed the two-trigger test to be more efficient in dealing with the anomalous results than the removal of the profit and loss test or other alternatives.

Current Rules

Currently, a reporting issuer that is not a venture issuer must file a BAR after completing a significant acquisition if any one of the three significance tests set out in National Instrument 51-102 Continuous Disclosure Obligations (NI 51-102) exceeds 20%.

A BAR describes the transaction, the consideration paid, the source of funds and the issuer’s plans for the business, and most importantly, it includes historical financial statements for the acquired business and pro forma financial information.

The preparation of a BAR entails significant time and cost, and the information necessary to comply with the BAR requirements may, in some instances, be difficult to obtain, therefore limiting reporting issuers’ ability to access capital markets, complete acquisitions and raise financing. Notably, the targets’ historical financial statements are often not available in the requisite form and take time to prepare.

The amendments will also be a welcome change for private companies in the process of going public, as they often complete various acquisitions in the months leading to an IPO, some of which may be considered significant. The BAR requirements incorporated into the IPO prospectus rules can therefore add considerable time and cost to the IPO process.

Significant Cost Reduction

The proposed amendments are expected to result in fewer BARs being filed overall.

The analysis of BARs filed and relief granted over a historical three-year period conducted by the Ontario Securities Commission (OSC) revealed that issuers could save approximately $15 M over a ten year period if the amendments become law.

The OSC estimates that the costs incurred by an issuer for a BAR related exemptive relief application could be up to $18,770 while the costs incurred by an issuer for the filing of a BAR could be up to $67,570. Such estimates are based on average hourly rates taking into account different levels of seniority and skill of the professionals involved in each activity. However, we know that the costs for the filing of a BAR can be significantly higher, depending on the scope of the work required to prepare the historical financial statements, including, as applicable, reconciliation to Canadian GAAP measures, preparation of carve-out financial statements, and translation costs.

International Trend

The CSA indicates that it will continue to monitor international regulatory developments, including those in the United States. The U.S. Securities and Exchange Commission is currently proposing to revise its disclosure requirements for financial statements relating to significant business acquisitions and dispositions in order to facilitate more timely access to capital and reduce the complexity and costs associated with such disclosure. For further information, please see Amendments to Financial Disclosures about Acquired and Disposed Businesses.

Comment Period

The comment period on the CSA proposed BAR amendments will close on December 4, 2019.

For further information, please see CSA Notice and Request for Comment Proposed Amendments to National Instrument 51-102 Continuous Disclosure Obligations and Changes to Certain Policies related to the Business Acquisition Report Requirements.

On October 2, 2019, securities regulatory authorities in Alberta, Manitoba, New Brunswick, Nova Scotia, Ontario, Québec and Saskatchewan published CSA Multilateral Staff Notice 58-311 Report on Fifth Staff Review of Disclosure Regarding Women on Boards and in Executive Officer Positions. The notice summarizes a review of the disclosure made by 641 reporting issuers[1] under Form 58-101F1 Corporate Governance Disclosure, particularly as it relates to gender diversity among corporate leadership. The 2019 review is the fifth annual review on the matter. Highlights of the results from this year’s review are set out below.

General Findings on Gender Diversity

The 2019 review found issuers reported a slight improvement in gender diversity among board and executive members. In particular, the following trends were observed from this year’s review:

  • 17% of total board seats were occupied by women (up from 15% last year and 11% in 2015);
  • 73% of issuers reported having at least one women on their board (up from 66% last year and 49% in 2015);
  • 15% of issuers reported having at least three women on their board (up from 13% last year and 8% in 2015);
  • 33% of board vacancies were filled by women (up from 29% last year and 26% in 2017);
  • 64% of issuers reported having at least one women in an executive officer position (down from 66% last year resulting in part by a change in the methodology used to capture executive officer data and up from 60% in 2015); and
  • 4% of issuers reported having a women chief executive officer (CEO) (no change from last year) and 15% of issuers reported having a women chief financial officer (CFO) (up from 14% last year).

It is worth noting that securities regulatory authorities in Alberta and Québec also released province-specific data based on their review of disclosure made by 132 Alberta-based and 60 Quebec-based issuers, respectively. In general, Quebec reported more favourable results across the board, including higher female representation on boards (23% of total seats), whereas Alberta reported less favourable results across the board, including lower female representation on boards (14% of total seats).

Cap Size and Industry

The 2019 review found the number of women on boards varied by industry and the size of the issuer. In particular, the following trends were observed from this year’s review:

  • the manufacturing (93%), retail (86%), and utilities (85%) industries had the highest percentage of issuers with one or more women on their boards, while mining (62%), biotechnology (67%), and oil & gas (70%) had the lowest; and
  • issuers with a market capitalization of greater than $10 billion had 27% of board seats filled by women (up from 25% last year and 21% in 2015), compared to 13% for issuers with a market capitalization of less than $1 billion (up from 11% last year and 8% in 2015).

Targets and Policies

The 2019 review found that issuers with targets and policies regarding the representation of women on boards had higher average female board representation. In particular, the following trends were observed from this year’s review:

  • 22% of issuers adopted targets for the representation of women on their boards (up from 16% last year and 7% in 2015) and those issuers with targets had higher average female representation on their boards (24%) as compared to those without targets (15%); and
  • 50% of issuers adopted a policy relating to the identification and nomination of women directors (up from 42% last year and 15% in 2015) and issuers with such a policy had higher average female board representation (21%) as compared to those with no policy (13%).

Board Renewal

The 2019 review found that issuers continue to be reluctant to set director term limits, which could hinder the goal of gender parity. Research suggests that director term limits can promote an appropriate level of board renewal, and in doing so, provide an opportunity for qualified board candidates, including those who are women to take a seat. The following trends were observed from this year’s review:

  • 21% of issuers adopted director term limits (no change from the previous three years);
  • of those issuers with term limits, 44% set age limits (average age limit being 73 years), 25% had tenure limits (average tenure limit being 13 years), and 31% had both;
  • 36% of issuers adopted other mechanisms of board renewal, including assessments of the board and individual directors, but did not adopt term limits; and
  • 39% of issuers did not have director term limits nor had they adopted other mechanisms of board renewal.

What’s Next

The Canadian Securities Administrators (“CSA”) intends to publish the underlying data from the 2019 review by early 2020 and maintains that they will continue to monitor trends in this area. However, neither the 2019 review nor CSA’s 2019-2022 business plan indicates whether or not the CSA is actively considering imposing additional measures aimed at increasing gender diversity on boards and in executive officer positions. It is uncertain whether the recent amendments to the Canada Business Corporations Act (“CBCA”) will impact the CSA’s decision or their annual review next year as the amendments, among other things, will require publicly-listed CBCA corporations, including venture issuers, to provide greater disclosure on board and executive officer diversity policies and statistics beginning in 2020.

We will continue to monitor developments in this dynamic area of law.

[1] Note that the CSA staff review of disclosure does not include all reporting issuers. The 2019 review includes, generally, all issuers listed on the Toronto Stock Exchange (“TSX”) and other non-venture issuers with year-ends between December 31, 2018 and March 31, 2019, and which filed information circulars or annual information forms by July 31, 2019. The statistics do not include data from larger Canadian banks, who are often early adopters of diversity programs.

Effective September 30, 2019, the British Columbia Securities Commission (BCSC) adopted amendments which now require investment fund issuers to file annual reports of exempt distributions online through the BCSC eServices system, as opposed to submitting the annual reports in paper format as was previously required.

In anticipation of the next upcoming filing deadline on January 30, 2020, non-reporting investment fund issuers will need to create a profile in the BCSC eServices system prior to filing an initial annual report of exempt distribution in British Columbia.

The applicable filing fees for the reports of exempt distributions are typically paid through the BCSC eServices system at the time the filing is made, however, investment fund issuers that are submitting annual reports of exempt distributions may continue to submit the filing fees by cheque to the BCSC at the time the filing is made.

For further information in connection with the above, please see BCN2019/02 – Amendments to BC Instrument 13-502 Electronic filing of reports of exempt distribution related to filing annual reports of exempt distribution in eServices.

On September 12, 2019, the Ontario Securities Commission (the OSC) issued a news release regarding certain amendments as to who can certify a registrant’s annual fee calculation form in Ontario (a Form 13-502F4), which also applies to foreign registrants relying on an international registration exemption in Ontario (each an unregistered registrant).

Whereas a Form 13-502F4 previously had to be certified and submitted to the OSC by the registrant’s or unregistered registrant’s Chief Compliance Officer (the CCO), pursuant to the proposed amendments, a Form 13-502F4 of a registrant or an unregistered registrant can now be certified by its CCO, Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, or in the case of an unregistered registrant, an individual acting in a similar capacity to one of these positions, or a director of the registrant or unregistered registrant.

These proposed amendments are expected to be in force when registrants and unregistered registrants are required to file their Form 13-502F4s later this year.

Pursuant to Ontario’s securities laws, a registered firm and an unregistered firm are required to file a Form 13-502F4 with the OC by no later than December 1st of each year disclosing the revenues they earned in Ontario and the participation fee that is payable to the OSC by no later than December 31st of that year.

For further information regarding the above, please see the Notice of Amendments to OSC Rules 13-502 and 13-503, which reflects the changes that have been made.

The Institutional Limited Partners Association (« ILPA ») is a global organization dedicated to advancing the interests and maximizing the performance of limited partners (« LPs ») in the context of private equity funds. The ILPA constitutes a forum for LPs and general partners (« GPs ») to engage in constructive dialog with respect to alignment of interests, governance, transparency and industry’s best practices.

In 2009, the ILPA published the ILPA principles which are regarded by market participants as the gold standard in respect of the terms, practices and overall management of private equity vehicles. Those principles were recently updated by the ILPA, expanding and clarifying existing industry themes and addressing emerging practices and concerns in the market. Here is a list of key topics addressed in ILPA Principles 3.0 which we believe should be of particular interest for GPs and LPs. For more information about the ILPA Principles 3.0 please read the Bulletin which the authors recently published on the subject by clicking here. For further information on the updated ILPA Principles 3.0, please contact the authors.

  • Management Fees. Management fees should be based on reasonable expenses arising from the normal operating costs of the fund. For instance, costs and expenses related to investment activities (i.e. travel, cost of research, computer software, remedial actions resulting from audit or regulatory exam), consultant’s fees, ESG-related expenses, placement agent fees and operating partners’ fees should not be allocated to the fund but be paid by the management fees paid to the GP.
  • GP Ownership. GP should proactively disclose the ownership of the management company and notify LPs of any change to such ownership during the term of the fund. Restrictions on any transfer of the GP interest seek to alleviate concerns of misalignment of interest with LPs.
  • GP Removal. GP removal without cause should require a supermajority (75%) vote of LPs whereas in the case of a GP removal for cause, LPs should be able to remove the GP upon a preliminary determination of cause, rather than a final unappealable court decision. The GP removed for cause shall also see a meaningful forfeit or reduction of carried interest, to ensure sufficient economics remain to incentivize the new manager.
  • LPAC Best Practices. The LPAC should be composed of a workable number of members accounting for investor representation in terms of commitments, type, tax status and relationship with the GP. Furthermore, LPAC should have clear mandates and defined meeting agendas, a rotating chair and greater accountability in terms of participation of meetings.
  • Lines of Credit. Credit facilities should be used primarily for the benefit of the fund as a whole and not to fund early distributions. Specifics on credit facilities should be disclosed to LPs and their terms provided to LPs upon request. Regular reporting should include performance information with and without the use of the credit line for comparison purposes.

On July 24, 2019, the Ontario Securities Commission (the “OSC”) approved a settlement agreement with CoinLaunch Corp. (“CoinLaunch”), a provider of various ICO-related services in the crypto industry. Following an investigation by the OSC, it was determined that CoinLaunch engaged in and held itself out as engaging in the business of trading in securities, without registration under Ontario’s Securities Act (the “Act”).

As a result of the investigation and resulting settlement, CoinLaunch was subjected to fines and repayments of approximately $50,000, and is prohibited from acquiring or trading in any securities or derivatives for five years. In addition, CoinLaunch’s former CEO, Reuven Cohen, agreed not to act as a director or officer of any unregistered company which engages in the business of trading in securities.

This settlement suggests that the OSC is broadening its scope of enforcement in the crypto industry beyond crypto exchanges and ICO issuers to include consultants, dealers, and advisers who may have conducted registrable activities without first registering.

The CoinLaunch Settlement

Between March 1, 2018 and September 30, 2018, CoinLaunch’s operations revolved around advertising “crypto-consulting”, i.e. marketing and promotional services, to two cryptocurrency offerings: Buggyra Coin Zero (“BCZERO”) and EcoRealEstate (“ECOREAL” and collectively, the “Issuers”). BCZERO’s business involves an off-road truck racing team in the Czech Republic, while ECOREAL is developing a resort in Portugal.

CoinLaunch provided various services to both BCZERO and ECOREAL including, but not limited to:

  • creating and preparing promotional materials for the Issuers;
  • introducing the Issuers to potential investors via an online forum;
  • providing advice to the Issuers regarding the structure of the offerings;
  • creating and managing websites to promote the Issuers’ offerings; and
  • taking the offerings on roadshows to help solicit investors.

Section 1(1) of the Act defines a “security” to include “any investment contract”[1] and while “investment contract” is not specifically defined within the Act, the Supreme Court of Canada in Pacific Coast Coin Exchange of Canada v. Ontario (Securities Commission) determined that an investment contract will be found where there is: (a) an investment of money; (b) with an intention of expectation of profit; (c) in a common enterprise, in which the fortunes of the investor are interwoven with and dependent upon the efforts and success of those seeking the investment or of third parties; and (d) that the efforts made by those other than the investor are the undeniably significant ones, those essential managerial efforts which affect the failure or success of the enterprise.[2]

The OSC took the opinion, and CoinLaunch agreed in the settlement agreement, that the Issuers’ tokens constituted investment contracts pursuant to the Act. As such, the services that CoinLaunch provided to the Issuers constituted acts in furtherance of trades and considering that those services were central to CoinLaunch’s business, required CoinLaunch to register as a dealer with the OSC. While CoinLaunch eventually took mitigating actions upon investigation from the OSC including removing webpages from the internet, ceasing their business relationship with the Issuers, and deciding to cease their crypto-consulting business rather than initiating a registration process, the OSC still levied a punishment against CoinLaunch for having provided those services without being registered.

Pursuant to the settlement agreement, CoinLaunch was ordered to pay an administrative penalty of $30,000, disgorge $12,233.06 to the OSC, pay costs of $10,000, refrain from acquiring any securities for five years, and refrain from acquiring or trading in any securities or derivatives for  five years. Furthermore, CoinLaunch’s former CEO, Reuven Cohen, gave an undertaking to: (a) not become or act as a director or officer of any company which engages in or holds itself out as engaging in the business of trading in securities without applicable registration under Ontario securities law or an exemption from such requirement; and (b) ensure that all references to the private keys in respect of all BCZERO and ECOREAL tokens received by CoinLaunch as compensation are deleted and thereby rendered inaccessible such that those tokens may not be accessed or transferred in the future.


The OSC made it clear that its intention moving forward will be to investigate and sanction all non-registrants conducting registrable activities in the crypto-asset sector, stating:

“Notwithstanding the result in this settlement, firms that are found to have ignored the registration obligation in the future should be considered on notice and can reasonably expect to face more stringent consequences. Both specific and general deterrence will likely require stronger measures if such conduct arises in the future.”

We believe this decision represents a broadening of the Canadian regulatory landscape regarding the crypto industry. Following a review of the relevant case law, it appears as though the CoinLaunch case represents the first time in Canada, and perhaps also the United States, that a securities regulator has levied penalties against consultants in the crypto-asset sector rather than issuers or exchanges.

In light of this, actors in the crypto-asset sector should cautiously approach a decision to forego the registration process given that the OSC: (a) levied penalties of over $50,000 against CoinLaunch, and (b) highlighted, in its settlement decision, the undertakings of the former CEO to refrain from future capital markets activities. With this decision, as well as their words of caution in the settlement agreement, the OSC has communicated their intention to increase the scope of their enforcement measures to include non-issuers like CoinLaunch.

If you are operating in the crypto-asset sector and have questions about registration matters, please feel free to contact Daniel Fuke at Fasken at 416-865-4436 or

[1] Securities Act, RSO 1990, c S 5, s 1(1).

[2] Pacific Coast Coin Exchange v Ontario (Securities Commission), 1977 CanLII 37 (SCC), [1978] 2 SCR 112 at 128.

In recent years, competition/antitrust enforcers around the world, including Canada, have taken a marked interest in private equity deals.  As part of a broader global trend of tougher merger enforcement, private equity firms that have taken ownership positions (controlling or minority) in portfolio companies that are competitors have been subject to heightened scrutiny.  The litigation and subsequent settlement in involving Canada’s Competition Bureau and Thoma Bravo is the most recent example.

Continue Reading Private Equity in the Cross-Hairs of the Competition Regulator: Lessons Learned from Thoma Bravo


In a number of recent cases, Canadian courts have demonstrated a willingness to vest mining claims free of royalty rights notwithstanding that those rights might constitute interests in land. One such case before the courts in Ontario is Third Eye Capital Corporation v. Ressources Dianor Inc./Dianor Resources Inc.

Continue Reading Dianor Resolved – Jurisdiction to Vest Off Interests in Land in Receivership Upheld, but GORs Hard to Impair