Timely Disclosure

Timely Disclosure

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

Reducing Regulatory Burden for Investment Fund Issuers

On May 24, 2018, the Canadian Securities Administrators (CSA) released CSA Staff Notice 81-329 Reducing Regulatory Burden for Investment Fund Issuers, which outlines the CSA’s plan to implement four near-term initiatives to lessen the regulatory burden on investment fund issuers. Specifically, CSA staff will undertake to: (i) remove redundant information in disclosure documents; (ii) use the web to provide certain information about funds; (iii) codify exemptive relief that is routinely granted; and (iv) minimize the filing of documents that may contain duplicative information.

The proposed initiatives form part of the CSA Rationalization of Investment Fund Disclosure project, which was launched in March 2017 to identify opportunities to alleviate regulatory burden for investment fund issuers without compromising investor protection and the efficiency of the markets.

The CSA expects to publish for comment proposed rule amendments to address these initiatives by March 2019.

TSX & TSXV Extend Deadline for Mandatory PIF Electronic Submission

On June 14, 2018, the Toronto Stock Exchange (TSX) and the TSX Venture Exchange (TSXV, and together with the TSX, the TMX Exchanges) announced that they were extending the deadline beyond which certain documents can only be submitted in electronic format.

The TMX Exchanges will now continue to accept current paper versions of the TSX Form 4 and TSXV Form 2A Personal Information Form (PIF) and the related TSX Form 4B and TSXV Form 2C1 Declaration until September 30, 2018. Such documents, when filed electronically, do not need to be notarized and are executed by the individual with an electronic signature, eliminating the need to submit an original of an executed copy to the TMX Exchanges.

Individuals have been able to populate their PIF and Declaration on the TMX Portal since late 2017, and the TMX Exchanges have attempted to encourage electronic filings.

Additionally, the TSX has granted the same extension in respect of its amended listing application; the amended application no longer has to be notarized.

This represents an extension to the prior deadline of June 30, 2018, which we discussed in a previous post on this blog. For more information, access the online versions of the relevant TSX staff notice and TSXV bulletin.

ASC Proposes Amendments to Facilitate Cross-Border Offerings

The Alberta Securities Commission (ASC) has proposed replacing the current ASC Rule 72-501 with a new ASC Rule 72-501 (Proposed Rule).  The Proposed Rule is intended to reduce regulatory impediments and facilitate offerings by Alberta issuers to investors outside of Alberta by removing the potentially duplicative application of Alberta prospectus requirements where an offering materially complies with the securities laws of the foreign jurisdiction.  The ASC has historically taken the position that a distribution by an issuer with a fundamental or, in certain cases, significant connection to Alberta is a distribution from Alberta and subject to Alberta securities laws.  The approach in the Proposed Rule follows new rules recently released by the Ontario Securities Commission under OSC Rule 72-503 Distributions Outside Canada (OSC Rule 72-503) regarding distributions of securities outside of Canada.  The Proposed Rule should primarily benefit issuers with a fundamental connection to Alberta that are distributing securities to persons located outside Canada.

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IIROC Oversight Review Report

On April 24, 2018, the Canadian Securities Administrators published the Oversight Review Report of the Investment Industry Regulatory Organization of Canada (Report). The Investment Industry Regulatory Organization of Canada (IIROC) is a not-for-profit self-regulatory organization that regulates investment dealers and trading on Canada’s capital markets with a view to protecting investors and maintaining fairness and order in the market.

To assess the risks associated with IIROC’s operations and to ultimately hold IIROC accountable for its internal controls and procedures, the provincial securities regulators conduct an annual risk-based oversight review of a number of IIROC’s processes. The most recent review, covering the period from August 1, 2016 to August 31, 2017 (Review), was conducted by eight of the provincial securities regulators, namely, the British Columbia Securities Commission, the Alberta Securities Commission, the Financial and Consumer Affairs Authority of Saskatchewan, the Manitoba Securities Commission, the Ontario Securities Commission, the Autorité des marchés financiers, the Financial and Consumer Services Commission of New Brunswick, and the Nova Scotia Securities Commission (Participating Regulators).  The Review focused on four areas: (1) Financial and Operations Compliance, (2) Corporate Governance, (3) Risk Management, and (4) Financial Operations.

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CSA adopts new prospectus exemption making it easier to resell securities of non-Canadian issuers

The Canadian Securities Administrators (CSA) have adopted amendments to National Instrument 45-102 Resale of Securities (NI 45-102) and changes to Companion Policy 45-102CP which provide for a new prospectus exemption for the resale by Canadian investors of securities of non-Canadian issuers. The amendments are expected to come into force as of June 12, 2018. The amendments will be applied to all Canadian jurisdictions other than Alberta and Ontario.

In Alberta and Ontario, the new exemption will be found in the following local instruments:

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Aurora-CanniMed: Securities Regulators Hold Firm on New Bid Regime

On March 15, 2018, the Ontario Securities Commission (OSC) and the Financial and Consumer Affairs Authority of Saskatchewan (FCAAS) released highly anticipated reasons for a combined decision relating to Aurora Cannabis Inc.’s (Aurora) unsolicited take-over bid to acquire CanniMed Therapeutics Inc. (CanniMed). The reasons followed a December 21, 2017 decision in which the OSC and FCAAS, among other things:

  • Permitted Aurora’s use of “hard” lock-up agreements with other CanniMed shareholders to build support for its bid (finding that the locked-up shareholders were not “acting jointly or in concert” with Aurora).
  • Cease traded a tactical shareholder rights plan (poison pill) implemented by the CanniMed board in the face of the Aurora bid.
  • Declined to grant Aurora exemptive relief from the 105-day minimum deposit period.
  • Declined to restrict Aurora’s ability to rely on the exemption from the general restriction on purchases by a bidder to purchase up to 5% of the target company’s shares during the currency of its bid.

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Ontario’s New Rules on Distributions Outside Canada Now In Effect

On March 31, 2018, the new rules from the Ontario Securities Commission (OSC) on distributions of securities outside of Canada came into force. OSC Rule 72-503 Distributions Outside Canada (Rule 72-503) provides clarity on a previously opaque subject in Canadian securities law: how do market participants comply with securities law when selling securities to buyers that reside in other countries? In response to this ambiguity, Rule 72-503 creates four new exemptions from the Ontario prospectus requirement for issuers distributing securities to buyers residing in other countries.

Background

Since its publication in 1983, Interpretation Note 1 Distributions of Securities of Ontario (Interpretation Note) governed OSC policy on distributions outside of Canada. As a statement of principle, the Interpretation Note allows distributions of securities effected outside of Ontario without triggering Ontario’s prospectus requirement where “reasonable steps are taken by the issuer, underwriter and other participants effecting such distributions to ensure that such securities come to rest outside of Ontario.” The Interpretation Note then cites several examples of such “reasonable steps” including representations in the selling documents and legends on the securities, without committing to a bright-line test or concrete criteria. In the intervening decades, market participants have often complained about the vagueness of the Interpretation Note and the corresponding lack of certainty to international securities offerings in an increasingly globalized world.

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BCSC Seeks Feedback on Fintech Regulation

The British Columbia Securities Commission (BCSC) published BC Notice 2018/01 – Consulting on the Securities Law Framework for Fintech Regulation on February 14, 2018.  The Notice follows from a series of consultations (both in person and by survey) conducted by the BCSC on various elements of the financial technology (fintech) industry.  The Notice sets out the results of the consultations, the general approach to date of the BCSC on certain of the matters and poses specific questions for comment on potential regulatory action to clarify or modernize securities laws in the space. Written submissions are due on April 3, 2018.

The Notice discussed the following topics, among others:

  • crowdfunding and online lending business models
  • online adviser business model
  • cryptocurrency funds
  • initial coin offerings (ICOs) and cryptocurrencies.

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Regulatory Net Tightening on the “Wild West” of the Blockchain and Cryptocurrency Industry

In August 2017, we considered the guidance offered by the Canadian Securities Administrators (CSA) regarding the application of securities laws to the blockchain industry and initial coin offerings (ICOs), primarily as set out in CSA Staff Notice 46-307 Cryptocurrency Offerings.  In that post, we noted that the CSA have provided little guidance regarding when they would consider cryptocurrencies to be securities, and thus subject to Canadian securities rules.

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Bill C-25 and its Amendments to the CBCA: A Legislative Tortoise Approaches a Finish Line

Bill C-25 is a federal government bill that would, if adopted, introduce sweeping changes to the corporate governance regime for reporting issuers incorporated under the Canada Business Corporations Act (CBCA). Like the proverbial tortoise, the bill has moved unhurriedly through the legislative process, in part due to several changes made to the bill since our previous post that discussed Bill C-25. The bill’s enactment would be just one of many “finish lines”, and it may take several years for all provisions of the bill and accompanying regulations to be drafted and brought into force. This post will canvass the amendments made so far to Bill C-25, with a focus on the proposed gender diversity disclosure framework, and will show a path forward to its eventual coming into force.

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