Introduction

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 Ontario Securities Commission, like several other regulatory investigators, has extensive power to compel testimony and require the disclosure of documents and information.  A recent decision of the OSC, B (Re) (2020 ONSEC 21), has highlighted a gap in the Commission’s power to compel testimony from a witness where such testimony may constitute a breach of the witness’s contractual obligations to a third party.

The Case

Staff of the Commission is conducting an investigation pursuant to an investigation order issued by the OSC under section 11 of the Securities Act.  Investigation orders empower Staff to issue a summons pursuant to section 13 of the Act, to compel an individual to provide oral testimony under oath and to provide documentary evidence.  Section 16 of the Act prohibits the recipient of a summons from disclosing information relating to the summons or the investigation, subject to narrow exceptions.

Staff served upon an individual, identified only as “B”, a summons under section 13 of the Act.  Although B was prepared to cooperate with Staff, B was concerned that doing so would violate B’s employment contract, which imposes confidentiality over all matters relating to B’s employment without an exception that is relevant to a regulatory investigation.
Continue Reading Recent OSC Decision Raises Uncertainty for Witnesses Responding to a Summons

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

The Ontario Securities Commission released OSC Staff Notice 33-749 Annual Summary Report for Dealers, Advisers and Investment Fund Managers on August 23, 2018 (Staff Notice).

The Staff Notice included, at Part 1.3, a review of the recent activities of the OSC LaunchPad.  The LaunchPad is actively engaged with novel fintech businesses providing support in navigating regulatory requirements.  The Staff Notice highlighted the following key accomplishments of the OSC LaunchPad in fiscal 2017-2018:

  • 242 Meetings with fintech businesses and stakeholders
  • 156 requests for support received and direct support provided to fintech businesses
  • 55 events hosted by the OSC LaunchPad or in which it participated
  • 25 collaborative reviews with the Canadian Securities Adminstrators’ Regulatory Sandbox regarding novel business models that want to operate across Canada.

Although the industry was initially focussed on online advisors, online lenders and crowdfunding portals, OSC Staff advised in the Staff Notice that industry focus has largely shifted to cryptoasset-related businesses, including initial coin and token offerings, cryptoasset investment funds, traditional financial service businesses utilizing blockchain technology and crypto asset trading platforms.  In addition, the OSC Launchpad is seeing businesses focussed on RegTech services, technology-based compliance solutions and data analytics services.Continue Reading OSC LaunchPad – Annual Summary Report

The Ontario Securities Commission released OSC Staff Notice 33-749 – Annual Summary Report for Dealers, Advisers and Investment Fund Managers on August 23, 2018 (OSC Staff Notice).

In the OSC Staff Notice, OSC staff identified that some investment fund managers (IFMs) have outsourced fund administration functions (including fund accounting and transfer agency) to related parties.  Under National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations, IFMs are required to establish a system of controls and supervision to ensure compliance with securities legislation and are responsible and accountable for all functions that they outsource to a service provider.  Accordingly, IFMs should not rely solely on the related service provider and assume that all obligations under securities legislation are being met.Continue Reading OSC Staff Notice Comments on Fund Manager Oversight of Related Party Service Providers

On June 28, 2018, the Investor Office of the Ontario Securities Commission (OSC) published a report entitled “Taking Caution: Financial Consumers and the Cryptoasset Sector”. The report summarizes the results of a survey, conducted in March 2018, of more than 2,500 Ontarians aged 18 and older.

Cryptoasset Ownership

The report describes that 5% of Ontarians currently own cryptoassets (or, as the survey referenced, cyrptocurrencies). This translates into approximately 500,000 Ontarians. Furthermore, an additional 4% of Ontarians in the age bracket owned cryptoassets in the past but no longer do.

Of particular note was the report’s determination that men aged 18-34 are more likely to own a cryptoasset in comparison to any other demographic. However, of those surveyed, only half have invested approximately $1,000 and only 9% invested more than $10,000, primarily in Bitcoin and Ether.Continue Reading How much do you know about Cryptoassets?

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 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.

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

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