As ICO regulatory landscape gradually takes shape, Kik Interactive excludes Canadians from Kin token sale

On September 7, 2017, Kik Interactive Inc. (Kik), a Waterloo-based digital messaging company, announced that it would not permit Canadian investors to purchase its “Kin” crypto-tokens in its currently ongoing public sales process. Kik had previously announced plans to sell up to U.S.$125 million of Kin tokens, including to Canadians. Kin tokens are envisioned as a general purpose cryptocurrency for use in services such as chat, social media, and payments, all within the Kin ecosystem.

The announcement was made in a blog post by Kik Chief Executive Officer Ted Livingston, who cited “weak guidance” from the Ontario Securities Commission (OSC) regarding whether Kin tokens are securities as the reason for banning Canadians. The OSC later clarified to the National Post that they had reviewed the Kin token and concluded that it is a security, but that they were willing to grant Kik exemptive relief from certain securities law requirements provided additional protections were granted to retail investors.

While Kik’s submissions to the OSC and the details of the OSC’s conclusion are not public, the OSC’s conclusion nevertheless provides some regulatory guidance at a time when industry participants are eager to determine precisely when tokens will be subject to securities laws. Another example of such guidance was provided in the case of Impak’s MPK tokens, which are designed to allow holders to purchase goods and services from like-minded merchants operating within the “impact” economy. Similar to Kin, the MPK tokens are considered a security, in this case by both the Autorité des Marchés Financiers in Quebec (AMF) and the OSC.


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On Thursday, July 27, 2017, staff of the Ontario Securities Commission and its counterparts in Québec, Alberta, Manitoba and New Brunswick (Staff) published important guidance on Staff’s expectations of market participants, including boards and their advisors, in material conflict of interest transactions.[1]  The guidance highlights the important role of public company directors in such transactions, including conducting a sufficiently rigorous and independent process while appropriately addressing the interests of minority security holders and ensuring detailed public disclosure of the board’s review and approval process.  In addition, the guidance confirms that Staff are actively reviewing such transactions “on a real-time basis” to assess compliance, to determine whether a transaction raises potential public interest concerns, and, if appropriate, to intervene on a timely basis prior to any security holder vote or closing of the transaction.

“material conflict of interest transactions” and “minority security holders”

Staff note that a “material conflict of interest transaction” is a transaction governed by Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions (MI 61-101) that gives rise to substantive concerns as to the protection of minority security holders, being equity security holders who are not “interested parties” in the transaction.  For example, a transaction pursuant to which an insider of the company acquires the company would be considered to be a material conflict of interest transaction.  Among other things, MI 61-101 prescribes detailed procedural safeguards when a company undertakes an insider bid, issuer bid, business combination, or related party transaction, including enhanced disclosure and, absent an exemption, a requirement to obtain “minority approval” (essentially an affirmative vote by a majority of the votes cast by minority security holders) and a formal valuation of the subject matter of the transaction.  In interpreting MI 61-101, Staff note that they apply a “broad and purposive interpretation” to these requirements that emphasizes the instrument’s underlying policy rationale.


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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

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On March 27, 2017, for the first time in Canadian history, an appellate Court revoked a voluntary settlement made between an individual and a securities regulator. Agreeing with the grounds for appeal raised in Mr. Daniel Pharand’s notice of appeal and in view of the Court of Appeal’s decision to grant leave to appeal to Mr. Pharand, the Autorité des marchés des financiers (“AMF”) acquiesced to the entirety of the conclusions sought by Mr. Pharand in appeal, including the dismissal of the proceedings instituted by the AMF against Mr. Pharand.

In the matter of Daniel Pharand v. Autorité des marches financiers et al.[1], Mr. Daniel Pharand, a former director of Arura Pharma Inc. (“Arura”), had entered into a settlement agreement with the Autorité des marches des financiers (the “AMF”) in which he was asked to make a number of admissions of fact and law. In particular, Mr. Pharand was required to admit that he had sold shares of Arura while in possession of privileged information (or material non-public information) thus breaching section 187 of the Québec Securities Act, the prohibition against insider trading.

Mr. Pharand entered into the settlement to avoid engaging in an expensive seven day trial, the cost of which would have greatly exceeded the $8,700 fine being sought against him (and the $5,000 fine he ultimately agreed to pay in the settlement). The AMF also entered into a settlement with Mr. Jacques Gagnon, but Mr. Gagnon did not appeal the decision sanctioning the settlement agreement.


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