On March 11, 2021, the Canadian Securities Administrators (“CSA”) published Staff Notice 51-363 – Observations on Disclosure by Crypto Assets Reporting (“Notice 51-363”), the first update from CSA regarding entities dealing in crypto assets in more than a year[1]. Based on the disclosure of reporting issuers acting in the crypto asset space, Notice 51-363 provides staff guidance on expectations for disclosure in this industry.

Crypto asset reporting issuers have the same obligations as other public companies in disclosing material information and changes that affecting their businesses, as well as the financial impacts of such risks. Notice 51-363 reiterates the importance of fulfilling these obligations, and at the same time, recognizes the emerging nature of the crypto asset industry and novel issues reporting issuers may face.

Notice 51-363 can assist current and future reporting issuers because it provides detailed guidance on disclosure expectations in the context of crypto assets industry and highlights perceived insufficiencies in the disclosure of current reporting issuers. Continue Reading CSA urging crypto asset reporting issuers to improve disclosure quality

On March 15, 2021, the Investment Funds and Structured Products Branch (IFSP Branch) of the Ontario Securities Commission (OSC) issued an eNews communication advising that the IFSP Branch will consider requests for filing date extensions on a case-by-case basis for investment fund issuers that are unable to meet filing requirements as a result of difficulties arising from the ongoing COVID-19 pandemic.

Investment fund issuers that are experiencing challenges with meeting the upcoming deadline on March 31, 2021 for the filing of December 31, 2020 annual financial statements can submit a request for a filing deadline extension by providing the IFSP Branch with a detailed submission explaining why an extension is required and the length of the required extension.

In the event that the request for a filing extension is considered novel by the IFSP Branch, the IFSP Branch may have consultations with the other members of the Canadian Securities Administrators.


Recently, the Ontario Securities Commission (“OSC”) released its reasons for a September order dismissing an application for exemptive relief from the minimum tender requirement under Canada’s securities take-over bid regime.[1] ESW Capital, LLC (“ESW”), the largest shareholder of Optiva Inc. (“Optiva”), sought the relief in connection with a contested proposed take-over bid involving shares of Optiva (“Voting Shares”). The application is the first instance in which a Canadian securities regulator has been asked to grant exemptive relief from the minimum tender requirement. The OSC concluded that “there were no exceptional circumstances or abusive or improper conduct that undermined minority shareholder choice to warrant intervention…[and that] predictability is an important aspect of take-over bid regulation and [OSC] must be cautious in granting exemptive relief that alters the recently recalibrated bid regime”. Continue Reading OSC Releases Reasons for Rejection of Application to Waive Minimum Tender Condition

The author wishes to thank Gilles Leclerc for his advice and contributions.

“Nothing happens. Nobody comes, nobody goes. It’s awful.” This quote from Estragon, one of the main characters in Samuel Beckett’s play “Waiting for Godot”, summarizes well the previous year from an economic and social perspective. Today, while the hopes of a vaccine rollout and economic recovery are looming on the horizon,
the Covid-19 pandemic continues to have a material adverse impact on our economy. It poses widespread challenges for many businesses, including challenges in reporting and disclosing the effect of Covid-19 to investors.

In a series of bulletins[1] published last year, we highlighted the guidance provided by both the Canadian Securities Administrators (“CSA“) and the U.S. Securities Exchange Commission relating to the continuous disclosure obligations of public issuers in the context of Covid-19. On February 25, 2021,  CSA issued Staff Notice 51-362 (the “Staff Notice“) to report the results of  their review of the disclosure provided by reporting issuers on the impact of Covid-19 on their business. CSA examined the filings of approximately 90 issuers Continue Reading Continuous Disclosure Obligations in Times of a Continuous Pandemic: Canadian Securities Regulators’ Review of Issuers’ Disclosure

On January 3, 2019, the final phase of the Canadian Securities Administrators (“CSA”)’s Modernization of Investment Fund Product Regulation Project relating to the establishment of a regulatory framework for alternative mutual funds came into effect. These amendments introduced a new category of mutual funds, “alternative mutual funds”, which are mutual funds that have adopted investment objectives that permit those funds to invest in physical commodities or specified derivatives, borrow cash or engage in short selling in a manner not typically permitted for “regular” mutual funds.

These amendments moved most of the regulatory framework then applicable to commodity pools under National Instrument 81-104 – Commodity Pools (now renamed “Alternative Mutual Funds”) (“NI 81-104”) into National Instrument 81-102 – Investment Funds, with the exception of the proficiency standards for mutual fund dealers distributing alternative mutual funds. These proficiency standards actually prevent mutual fund restricted individuals[1] (“Restricted Individuals”) from distributing alternative mutual funds unless they possess one of the courses set forth under Part 4 of NI 81-104. These provisions were retained by the CSA “in recognition that alternative mutual funds can be more complex than other types of mutual funds and that additional proficiency may be needed for mutual funds dealers selling these products[2]”. It was the CSA’s view that maintaining more robust dealer proficiency standards for alternative mutual funds ensured Restricted Individuals were better equipped to sell these products.

Recognizing that the proficiency standards set forth under NI 81-104 have in fact limited retail investors’ access to alternative investment strategies through the mutual fund dealer channel, each member of the CSA issued on January 28, 2021 a blanket relief (the “Blanket Relief”) so as to provide Restricted Individuals and individuals designated to be responsible for the supervision of trades of securities of alternative mutual funds (“Supervisors”) with additional proficiency options in order to be authorized to distribute alternative mutual funds. These additional proficiency options are meant to expedite retail investors’ access to alternative mutual funds and enable them to benefit from additional portfolio diversification opportunities through alternative strategies.

Below is a table listing current and additional proficiency standards for Restricted Individuals and Supervisors and the terms and conditions set forth in the Blanket Relief. Note that a dealer must provide its principal regulator with a one-time notice prior to the first of any of its Restricted Individuals or Supervisors relying on the Blanket Relief.

Finally, note that this Blanket Relief is permanent in every jurisdiction except for Ontario, New Brunswick and the Northwest Territories where the Blanket Relief will cease to be effective on July 28, 2022. We expect this Blanket Relief to be codified prior to that date to make these additional course options a permanent solution.


[1] An individual registered as a dealing representative of a registered dealer, if the activities of that individual are restricted to trading in securities of mutual funds.

[2] See CSA Notice of Publication “Modernization of Investment Fund Product Regulation – Alternative Mutual Funds”, October 4, 2018.

Le 3 janvier 2019, la dernière étape du projet de modernisation de la réglementation des produits de fonds d’investissement des Autorités canadiennes en valeurs mobilières (les « ACVM ») concernant l’établissement d’un encadrement réglementaire des organismes de placement collectif est entrée en vigueur. Ces modifications ont introduit une nouvelle catégorie d’organismes de placement (ci-après, les « OPC »), soit les « OPC alternatifs », une expression qui désigne les OPC qui ont adopté des objectifs de placement leur permettant d’investir dans des marchandises physiques ou des dérivés visés, d’emprunter des fonds ou d’effectuer des ventes à découvert d’une manière généralement non permise aux OPC « réguliers ».

Ces modifications ont transféré la majorité du cadre réglementaire alors applicable aux fonds de marché à terme en vertu du Règlement 81-104 sur les fonds marché à terme (renommé le Règlement 81-104 sur les organismes de placement collectif alternatifs) (le « règlement 81-104 ») vers le Règlement 81-102 sur les fonds d’investissement, à l’exception des normes de formation visant les courtiers en épargne collective qui font des opérations sur des OPC alternatifs. Ces normes de formation interdisent aux personnes physiques dont les activités sont restreintes aux OPC[1] (les « personnes physiques dont les activités sont restreintes ») de faire des opérations sur les titres d’un OPC alternatifs sauf si elles ont réussi l’un des cours prévus dans la partie 4 du règlement 81-104. Ces normes de formation ont été conservées par les ACVM, qui « [reconnaît] que les OPC alternatifs peuvent être plus complexes que d’autres types d’OPC, et qu’une formation additionnelle pourrait s’avérer nécessaire pour les courtiers en épargne collective offrant ces produits[2] ». Selon les ACVM, le maintien de normes de formation plus rigoureuses à l’égard des OPC alternatifs contribuera à mieux outiller les personnes physiques dont les activités sont restreintes pour offrir ces produits. Continue Reading Nouvelles options de formation pour les OPC alternatifs

The Competition Bureau announced the 2021 transaction-size pre-merger notification threshold under the Competition Act is decreasing to C$93 million, effective February 13, 2021. Innovation, Science and Economic Development Canada also announced new, lower foreign investment review thresholds under the Investment Canada Act, effective January 1, 2021.

These thresholds are adjusted annually based on GDP formulas. As a consequence, they generally increase each year. This year’s decrease in merger review thresholds is a consequence of Canada’s economic contraction following from extensive restrictions on economic activity imposed by governments which were intended to slow the spread of COVID-19. If the economy recovers, it is likely these thresholds will increase in 2022.

Competition Act

In general terms, certain transactions that exceed prescribed thresholds under the Competition Act trigger a pre-merger notification filing requirement; such transactions cannot close until notice has been provided to the Commissioner of Competition (the “Commissioner”) and the statutory waiting period under the Competition Act has expired or has been terminated or waived by the Commissioner. Where both the “transaction-size” and “party-size” thresholds are exceeded, a transaction is considered “notifiable”.

Transaction-Size Threshold: the 2021 transaction-size threshold requires that the book value of assets in Canada of the target, (or in the case of an asset purchase, the book value of assets in Canada being acquired), or the gross revenues from sales in or from Canada generated by those assets exceeds C$93 million (down from C$96 million in 2020).

Party-Size Threshold: the party-size threshold requires that the parties to a transaction, together with their affiliates (as defined in subsection 2(2) of the Competition Act), have assets in Canada or annual gross revenues from sales in, from or into Canada, exceeding C$400 million. The party-size threshold remains unchanged from 2020.

It is important to note that regardless of whether a transaction is notifiable (i.e., the applicable thresholds discussed above are exceeded) the Commissioner can review and challenge all mergers prior to or within one year of closing.

Investment Canada Act

Under the Investment Canada Act (the “ICA”), the direct acquisition of control of a Canadian business by a non-Canadian is subject to a pre-closing review and approval process (an “ICA Review”) where a specified threshold is exceeded. The following thresholds for ICA Reviews have increased, effective January 1, 2021:

  • For a direct acquisition of control of a Canadian (non-cultural) business involving either a purchaser or a controlling vendor from Australia, Brunei, Chile, Colombia, the European Union (not including the United Kingdom), Honduras, Japan, Malaysia, Mexico, New Zealand, Panama, Peru, Singapore, South Korea, the United States or Vietnam, the threshold has decreased from C$1.613 billion to C$1.565 billion in enterprise value, provided that the purchaser is not a foreign state-owned enterprise.
  • For a direct acquisition of control of a Canadian (non-cultural) business involving either a purchaser or a controlling vendor that qualifies as a World Trade Organization (WTO) memberinvestor (“WTO Investor”) from a country not listed above, the threshold has increased from C$1.075 billion to C$1.043 billion in enterprise value, provided that the purchaser is not a foreign state-owned enterprise.
  • For a direct acquisition of control of a Canadian (non-cultural) business involving a purchaser that is a foreign state-owned enterprise controlled by a WTO member state, the threshold has increased from C$428 million to C$415 million in asset book value.

If the applicable threshold for a pre-merger review under the ICA is not met or exceeded, the acquisition of control of any Canadian business by a non-Canadian entity is subject to a relatively straightforward notification. In most cases, indirect acquisitions of non-cultural businesses involving WTO Investors, including state-owned enterprises, are not reviewable but are subject to a notification that may be filed before or within 30 days of closing.

All transactions have the potential to be reviewed under the national security review provisions of the ICA.


On December 22, 2020, the U.S. Securities and Exchange Commission (“SEC”) filed an action against Ripple Labs Inc. (“Ripple”), Christian Larsen, the company’s co-founder, executive chairman of its board, and former CEO; and Bradley Garlinghouse, the company’s current CEO (together, the “Defendants”) for conducting an unregistered securities offering with a total value of US$1.38 billion.

The Defendants have sold over 14.6 billion units of Ripple’s digital asset known as “XRP” to investors in the U.S. and worldwide for cash or other considerations since the beginning of 2013.

The SEC has taken the position that XRP are “investment contracts” and therefore securities under the Securities Act of 1933. Because the Defendants did not view XRP to be a security, they did not seek to register XRP with the SEC and accordingly failed to meet the SEC’s requirements for securities offerings. Similar to the previous enforcement actions against Kik Interactive Inc., the SEC is seeking a permanent injunction, disgorgement of ill-gotten gains, and civil penalties against the Defendants.

This case holds implications for participants throughout the entire crypto asset industry. Issuers of digital assets are faced with yet another conservative interpretation of the Howey Test, a 75-year old test believed by many to be ill-suited for crypto assets. Crypto exchanges and brokerages are left in limbo, uncertain whether to continue supporting a popular and well-performing asset for fear of attracting regulatory scrutiny themselves.  


Ripple was founded in 2012. It developed and manages the XRP ledger, an underlying peer-to-peer database on which the XRP tokens operate. As a digital asset, XRP is different from Bitcoin or Ethereum in that the latter two are minted through an ongoing process called mining. The supply of XRP, on the other hand, was fixed in advance at 100 billion XRP in 2012, 80 billion of which was to be held in reserve for scheduled allotments, and the remaining 20 billion XRP is held by individuals, including the two executives. Since then, Ripple has gradually released XRP pursuant to the alleged unregistered described above.

The SEC alleges that Ripple began its efforts of increasing speculative demand and trading volume for XRP in 2013 and pursued those efforts through multiple avenues: 1) Ripple conducted a “Market Sale” through intermediaries who sold XRP to public investors; 2) Ripple offered and sold XRP to at least 26 institutional investors through its “Institutional Sale”; 3) Ripple distributed and transferred XRP to third parties as compensation, service fee, commission and incentives with no restrictions on the resale of XRP; and 4) Ripple provided incentives in XRP to at least 10 digital asset trading platforms for listing XRP and meeting certain trading volume metrics. According to the SEC, prior to the distribution, Ripple was fully aware that XRP could be considered an “investment contract” (thus a security) and was warned by its lawyers regarding the risk should the SEC made such a finding.

In 2018, Ripple developed a use case for XRP – the “On-Demand Liquidity” (ODL) product. The ODL network enables money transmitting businesses to make cross-border payments through XRP as an intermediary between two local fiat currencies. Ripple issued 324 million XRP to entities associated with ODL.

XRP, sold as a “security”, for “use”, or as “currency”? 

The SEC claims XRP is a security because money was invested in a common enterprise with a reasonable expectation of profit to be derived from the entrepreneurial or managerial effort of others (this analysis is commonly referred to as the “Howey Test”, after the 1946 US Supreme Court case SEC v. W.J. Howey Co.). In its analysis, the SEC highlighted the following aspects of the offering that led to the conclusion:

  • Ripple distributed XRP for cash or other considerations worth over 1.38 billion USD.
  • Purchasers of XRP made an investment into a common enterprise because the gain and loss of XRP were tied to Ripple’s success and failure in driving the demand and price of XRP. Ripple, as an entity, not only manages the public market of XRP, it also shares a common interest with the investors as it holds a significant amount of XRP and uses proceeds from XRP sale to fund its operation.
  • The Defendants promised to undertake significant efforts to develop, monitor, and maintain a public market and a secondary market for XRP with a goal to increase trading volume and resale opportunities. The Defendants made repeated public statements highlighting its business development effort that will drive demand, adoption and liquidity of XRP.
  • Ripple held itself out as the primary source of information regarding XRP. These efforts led investors to reasonably expect that Ripple’s entrepreneurial and managerial effort would drive the success or failure of Ripple’s XRP Project.

After concluding that XRP is an investment contract under the Howey Test, the SEC further argued XRP is not sold for its utility function within the ODL network. According to the SEC, ODL was not commercially available until 2018, and even after its launch, usages of XRP by money transmitters were heavily incentivized by Ripple. XRP was sold and traded in an amount that “far exceeds any potential use of XRP as a medium to transfer value”. Furthermore, the SEC denied the possibility that XRP as “currency” because “using XRP as a ‘bridge’ between two real fiat currencies does not bestow legal tender status on XRP”.

The SEC also alleged that Ripple manually controlled XRP’s trading activity by “selectively disclosing information” to investors. The SEC further alleges that Ripple manipulated the price and liquidity of XRP to maximize the amount of money Ripple could raise.

Implications and Impact

This lawsuit marks another high-profile case in the SEC’s continued enforcement activities against unregistered offerings of crypto tokens. XRP is among the top five most traded cryptocurrency with a market cap of $12.1 billion.[1]. Different from other digital tokens, XRP is held by a large number of institutional investors and money transmitters like banks. According to Ripple’s CEO Brad Garlinghouse, who is also a defendant to the complaint, Ripple will fight back and “prove their case in the court.”[2]. Garlinghouse argued the legal action against the XRP is “an assault on crypto at large” and will have a “snowball effect” on the industry as a whole.[3].

Crypto-asset exchange platforms like CoinDesk have delisted XRP pending the result of this litigation. Given the regulatory uncertainty, Ripple is also considering moving its headquarters outside the US to a country that does not consider XRP as a security.

Industry participants who hold XRP or have business dealing in XRP should proceed with caution and re-evaluate the potential implications of the SEC succeeding with this lawsuit. Industry participants who seek to deal exclusively in assets that are not securities might find themselves subject to securities regulatory requirements in the event the lawsuit is determined in favour of the SEC.

We will continue to monitor the development of this case and encourage issuers and stakeholders to consult advisors and securities commissions for further guidance.


[1] CoinMarketCap as of Jan 25: https://coinmarketcap.com/

[2] https://ripple.com/insights/the-secs-attack-on-crypto-in-the-united-states/

[3] ibid.



On January 14, 2021, Laurel Hill Advisory Group (“Laurel Hill”) and Fasken hosted a webinar on ESG (environmental, social and governance) considerations of which companies should be aware for the upcoming 2021 proxy season. The webinar’s panelists were David Salmon of Laurel Hill and Emilie Bundock, Stephen Erlichman and Grant McGlaughlin of Fasken and was moderated by Gordon Raman of Fasken. Set out below are some of the comments made by the speakers on the webinar.


The importance of ESG considerations in today’s corporate governance model has developed over the past 50 years.  In the early 1970’s the Milton Friedman view of corporations was the dominant business mindset.  In a forceful New York Times article he said that business leaders that “believed business is not concerned ‘merely’ with profit but also with promoting desirable ‘social’ ends …[were]… preaching pure and unadulterated socialism”.  Since that time, certainly in North America,  corporations have assumed a central role in the growth of economies.  With that central role has come the recognition that corporations play a greater role in society, as noted in 2017 by Larry Fink, the head of Blackrock.  In his annual letter to CEOs he wrote: “ To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society. Companies must benefit all of their stakeholders, including shareholders, employees, customers, and the communities in which they operate.” Continue Reading Proxy Season Preview 2021: ESG Considerations

On January 14, 2021, the Toronto Stock Exchange (“TSX”), Laurel Hill Advisory Group (“Laurel Hill”) and Fasken hosted a conversation on important disclosure and corporate governance considerations for issuers leading into the 2021 proxy season. The panel discussed four discrete areas of recent developments in corporate governance which companies should be aware of before this upcoming 2021 proxy season:

  1. An Update from Proxy Advisory Firms
  2. An Update from the TSX
  3. Diversity Disclosure
  4. COVID-19: Lasting Repercussions

The webinar discussion featured Bill Zawada of Laurel Hill, Valérie Douville of the TSX, and Sarah Gingrich and Neil Kravitz of Fasken and was moderated by Gordon Raman of Fasken. Continue Reading Proxy Season Preview 2021