The New Insider Reporting Regime

21 mars 2010

( Disponible en anglais seulement )

On April 30, 2010, new insider reporting rules are scheduled to take effect, as the Canadian Securities Administrators (the “CSA”) will be adopting a new reporting regime for insiders of reporting issuers in Canada (the “New Regime”)1. The New Regime will be set out in National Instrument 55-104 Insider Reporting Requirements and Exemptions (“NI55-104”), Companion Policy 55-104CP and related amendments to other instruments. The changes introduced in the New Regime include a significant change to the persons to whom insider reporting requirements apply, as well as the reporting requirements applicable to such persons.

Reporting Insiders

The New Regime introduces a principled approach to determining which insiders will be subject to reporting requirements.  It will reduce the number of persons required to file insider reports by focusing the reporting requirement on “reporting insiders”.

Significant Shareholders

Under the New Regime, “significant shareholders” are included in the definition of reporting insiders.  A person or company is a significant shareholder if that person has beneficial ownership of, or control or direction over, whether direct or indirect, or a combination of beneficial ownership of, and control or direction over, whether direct or indirect, securities of an issuer carrying more than 10 percent of the voting rights attached to all the issuer’s outstanding voting securities.

The Concept of “Post-Conversion Beneficial Ownership”

The New Regime also provides for the concept of a shareholder being recognized as a significant shareholder on a post conversion beneficial ownership basis, and therefore being caught in the definition of a “reporting insider”. A “significant shareholder based on post-conversion beneficial ownership” is a person or company that is not a significant shareholder but that has beneficial ownership of, post-conversion beneficial ownership of, control or direction over, or any combination of beneficial ownership of, post-conversion beneficial ownership of, or control or direction over, whether direct or indirect, securities of an issuer carrying more than 10 percent of the voting rights attached to all the issuer’s outstanding voting securities, including securities in respect of which a person or company has post-conversion beneficial ownership. A person or company is considered to have, as of a given date, post-conversion beneficial ownership of a security, including an unissued security, if the person or company is the beneficial owner of a security convertible into the security within 60 days following that date or has right or obligation permitting or requiring the person or company, whether or not on conditions, to acquire beneficial ownership of the security within 60 days, by a single transaction or a series of linked transactions.

Directors and Certain Officers of the Reporting Issuer, of its Significant Shareholders and of its Major Subsidiaries

The chief executive officer, the chief operating officer, the chief financial officer and directors of the reporting issuer, of a significant shareholder (including a significant shareholder based on post-conversion beneficial ownership) of the reporting issuer or of a “major subsidiary”  of the reporting issuer are reporting insiders under the New Regime. The definition of a reporting insider also catches a person or company responsible for a principal business unit, division or function of the reporting issuer or of a major subsidiary2 of the reporting issuer, as well as any individual performing functions similar to the functions performed by any of the positions described in this paragraph.

Management Companies

Also caught in the definition of reporting insider is a management company that provides significant management or administrative services to the reporting issuer or to a major subsidiary of the reporting issuer; every director, officer and significant shareholder (including a significant shareholder based on post-conversion beneficial ownership) of the management company; and any individual performing functions similar to the functions performed by any of the positions described in this paragraph.

The Issuer Itself

The reporting issuer itself will be a reporting insider if it has purchased, redeemed or otherwise acquired a security of its own issue, for so long as it continues to hold that security.

Income Trusts

In the case of an issuer that is an income trust, every director, officer and significant shareholder (including a significant shareholder based on post-conversion beneficial ownership) of a principal operating entity will be a reporting insider under the New Regime.

Access to Material Undisclosed Information and Exercise of Significant Influence

The definition of reporting insider also contains a basket clause that catches any other insider who (a) in the ordinary course receives or has access to information as to material facts or material changes concerning the reporting issuer or a major subsidiary of the reporting issuer before the material facts or material changes are generally disclosed; and (b) directly or indirectly, exercises, or has the ability to exercise, significant power or influence over the business, operations, capital or development of the reporting issuer or of a major subsidiary of the reporting issuer.

Reporting Requirements

Retroactive Filings

Under the New Regime, when an issuer becomes an insider of another issuer, every director and officer of both issuers will be deemed to have been insiders of the other for the past six months and will have to file insider reports in respect of securities transactions relating to the other issuer that occurred during such time (or such shorter period during which he or she acted as a director or officer of the first issuer), provided, however, that insider reports will only be required in respect of securities of reporting issuers.

Filing Deadlines

Starting on October 31, 2010, the deadline for insiders to report changes in their interests will be accelerated to five calendar days from ten calendar days.  The New Regime will maintain the current ten calendar days deadline for insiders’ initial reports, the retroactive reports discussed above and for reports disclosing the material terms of any agreement, arrangement or understanding that was entered into before the date on which such insider most recently became a reporting insider and that remains in effect on or after the date the insider most recently became a reporting insider.

Reporting Automatic Securities Purchase Plans

The New Regime provides for an exemption that will simplify the reporting requirements for the acquisition or disposition or transfer of securities3 acquired under an automatic securities purchase plan in limited circumstances.  This exemption is meant to cover situations in which the insider is not making discrete investment decisions.  A director or officer of a reporting issuer4 will be exempt from insider reporting requirements provided that he or she files an alternative report with respect to such transactions.  Alternative reports with respect to securities acquired that have not been disposed of or transferred (other than specified dispositions) are due by March 31, in each year with respect to prior calendar year transactions. Alternative reports with respect to securities acquired that have been disposed of or transferred (other than specified dispositions) will be due within five days of the disposition or transfer.

Reporting Stock-Based Compensation Arrangements

The New Regime provides for an exemption that will simplify the reporting requirements for certain reporting issuer grants made under stock-based compensation arrangements of a reporting issuer or a subsidiary of the reporting issuer. A director or officer of a reporting issuer5 will be exempt from filing an individual report provided that (a) the reporting issuer has previously disclosed the existence and material terms of the arrangement in a public filing on SEDAR; (b) the reporting issuer has previously filed an “issuer grant report” on SEDAR; and (c) the director or officer files an alternative report with respect to such transactions.  Alternative reports with respect to securities6 acquired are due by March 31, in each year with respect to prior calendar year transactions. Alternative reports with respect to securities acquired under the compensation arrangement that have been disposed of or transferred will be due within five days of the disposition or transfer.

Other Exemptions

NI55-104 contains a variety of other exemptions, including for normal course issuer bids, for any other transactions involving the issuer’s own securities that has otherwise been generally disclosed in a public filing on SEDAR, for changes that result from “issuer events”7, as well as a number of general exemptions.

 

1 In Ontario, the insider reporting rules will remain in the Securities Act (Ontario), however the substance of the requirements will be the same across the CSA jurisdictions.
2 A subsidiary will be considered a “major subsidiary” if the assets or revenues of the subsidiary, as included in the issuer’s most recent annual or interim balance sheet, are 30% or more of the consolidated assets or consolidated revenues of the issuer on that balance sheet.
3 References to securities in this paragraph include a related financial instrument involving a security of the reporting issuer.
4 References to directors or officers in this paragraph include a director or officer of a reporting insider in respect of the reporting issuer and a director or officer of a subsidiary of a reporting issuer and a reporting insider of the reporting issuer.
5 See note 3.
6 See note 4.
7 An “issuer event” means a stock dividend, stock split, consolidation, amalgamation, reorganization, merger or other similar event that affects all holdings of a class of securities of an issuer in the same manner, on a per share basis.

Avis de non-responsabilité

Cette publication est fournie à titre informatif uniquement. Elle peut contenir des éléments provenant d'autres sources et nous ne garantissons pas son exactitude. Cette publication n'est ni un avis ni un conseil juridique.

Miller Thomson S.E.N.C.R.L., s.r.l. utilise vos coordonnées dans le but de vous envoyer des communications électroniques portant sur des questions juridiques, des séminaires ou des événements susceptibles de vous intéresser. Si vous avez des questions concernant nos pratiques d'information ou nos obligations en vertu de la Loi canadienne anti-pourriel, veuillez faire parvenir un courriel à privacy@millerthomson.com..

© 2020 Miller Thomson S.E.N.C.R.L., s.r.l. Cette publication peut être reproduite et distribuée intégralement sous réserve qu'aucune modification n'y soit apportée, que ce soit dans sa forme ou son contenu. Toute autre forme de reproduction ou de distribution nécessite le consentement écrit préalable de Miller Thomson S.E.N.C.R.L., s.r.l. qui peut être obtenu en faisant parvenir un courriel à newsletters@millerthomson.com.