Ontario Securities Commission

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:


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

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.


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

On January 18, 2018, the Ontario Securities Commission (OSC) published and requested comments for a proposed change to OSC Policy 15-601 Whistleblower Program (Policy). The  Whistleblower Program came into effect in July 2016 and is intended to encourage individuals to report information on serious securities-related misconduct to the OSC to prevent

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.


Continue Reading Kik Interactive Excludes Canadians from Kin Token Sale

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.


Continue Reading Public Company Directors Take Note: Canadian Securities Regulators weigh in on Material Conflict of Interest Transactions

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The Ontario Securities Commission (OSC) announced today its new initiative, OSC LaunchPad, described as the first dedicated team by a securities regulator in Canada to help fintech businesses navigate securities law requirements and accelerate time-to-market.

OSC LaunchPad will provide direct support to eligible new and early-stage fintech businesses through meetings with the OSC LaunchPad

The Ontario Securities Commission (OSC) published OSC Staff Notice 33-746 (Notice) on September 21, 2015.

The Notice focuses on registered firms and individuals directly overseen by the OSC describing the initiatives within the Compliance and Registrant Regulation Branch (CRR), notices published, rule amendments and regulatory action taken as a