Canada: A Newsletter Providing Concise Updates On Securities Law Developments

Last Updated: February 4 2013
Article by Michael Dolphin and Kim Lawton

Our coverage is succinct and targeted to serve the needs of issuers and their advisors. For more detailed analysis, please visit us online at Click here for the previous issue of this newsletter.

In the fourth quarter of 2012, market participants and regulators focused on new measures to support positive economic activity while enhancing investor protection. To improve market efficiency, notice-and-access measures are now available for the 2013 proxy season, the Ontario Securities Commission ("OSC") continues to examine opportunities to improve financing via the exempt market - even looking into crowdfunding, the TSX Venture Exchange ("TSXV") has also extended some temporary relief measures it put in place in August 2012. On the investor protection side, the Canadian Securities Administrators ("CSA") released a consultation paper exploring whether to impose a fiduciary duty on dealers and advisors and the Toronto Stock Exchange ("TSX") has tightened its rules for director elections. Alongside these regulatory developments, there has also been a policy focus on emerging market issuers. The OSC has released a paper containing helpful guidance for issuers and the TSX and TSXV are evaluating changes to their rules for emerging market issuers.

Distributions & Trading

TSXV Extends Temporary Relief from Certain Private Placement Requirements

The TSXV is extending the relief measures it put in place on August 17, 2012 to April 30, 2013 (the "Relief Period"). The relief measures are with regard to certain existing pricing requirements related to private placement financings. The three temporary measures allow: (1) a share/unit offering with an offering price below $0.05; (2) a debenture offering with a debenture conversion price below $0.10; and (3) an offering involving a warrant with an exercise price below $0.10. There are specific conditions associated with the use of all relief measures including compliance with existing policy obligations; timing requirements (i.e. the private placement must be completed during the Relief Period); price protection is available by news release only; issuers are not entitled to expedited filings; and NEX listed issuers may avail themselves of the relief measures only if they comply with certain additional measures.

Continuouse Disclosure

Notice-and-Access Measures Available for 2013 Proxy Season

On November 29, 2012, the CSA announced the adoption of amendments to National Instrument 54-101 Communication with Beneficial Owners of Securities of a Reporting Issuer and National Instrument 51-102 Continuous Disclosure Obligations (along with related forms and companion policies). The amendments are intended to improve the shareholder communication process by allowing greater use of the internet to send proxy-related materials to securityholders.

The biggest change is the availability of a "notice-and-access" mechanism whereby issuers are permitted to deliver proxy materials by (i) posting them on a website other than SEDAR (the issuer's website or a service provider website, for example) and (ii) sending of a notice package to beneficial owners to inform them how to access the materials online. There is a potentially significant cost savings to issuers who will no longer have to print and mail documents such as financial statements, MD&As, and information circulars.

Four important items to note if an issuer chooses to use the "notice-and-access" mechanism: (i) the record date for meetings where notice-and-access will be used must be at least 40 days prior to the meeting (regular meetings are only 30 days); (ii) the materials must be posted and the notice package must be sent at least 30 days before the meeting; (iii) reporting issuers must provide advance notice of their intention to use notice-and-access for the first time (at least 25 days, so 65 days in total before the meeting date) - this notice can be filed on SEDAR; and (iv) this mechanism is only available to an issuer if it is permissible under the issuer's constating corporate documents.

The amendments will come into force on February 11, 2013 but issuers will only be able to take advantage of the amendments for securityholder meetings taking place on or after March 1, 2013. The amendments also simplify the process by which beneficial owners are appointed as proxy holders in order to attend and vote at shareholder meetings and require reporting issuers to provide enhanced disclosure regarding the beneficial owner voting process.


CSA Explore Fiduciary Duty for Dealers and Advisors

On October 25, 2012, the CSA published a consultation paper exploring the desirability and feasibility of introducing a statutory "best interest" duty to address potential investor protection concerns regarding the current standard of conduct that advisers and dealers in Canada owe to their clients. Since the global financial crisis began, there has been significant debate on the standard of conduct that advisers and dealers owe to their clients when they provide advice on investing in financial products.

The paper is intended to facilitate public consultation and discussion and no decision has been made as to whether a statutory best interest standard should be adopted. Nonetheless, it is worth noting that several international securities regulators are also reconsidering the relationship between clients and their securities advisors. The U.K. and E.U. already impose a qualified best interest standard on their advisors, Australia has passed legislation making such a standard mandatory by July 1, 2013, and in the U.S., staff of the U.S. Securities and Exchange Commission have recommended such a uniform standard be introduced for broker-dealers and investment advisers.

OSC Releases Annual Report for Dealers, Advisers, and Investment Fund Managers

On November 22, 2012, the OSC released OSC Staff Notice 33-738 - OSC Annual Summary Report for Dealers, Advisers, and Investment Fund Managers which was prepared by their Compliance and Registrant Regulation branch and provides important information to assist registrants. The report summarizes five key areas: (i) new and proposed rules and initiatives affecting registrants; (ii) know-your-client requirements, know-your-product and suitability assessments by registrants; (iii) notable registrant misconduct cases from the past year; (iv) registration of firms and individuals; and (v) key findings and outcomes from the OSC's ongoing compliance reviews of registrants.

The report is essential reading for registrants in the province, particularly as a self-assessment tool. Compliance has been a key focus of the OSC in recent years and the regulator has intensified its efforts through a greater volume of reviews. A dedicated "Registrant Conduct and Risk Analysis Team" was created to focus on registrant delinquency during the reorganization of the Compliance and Registrant Regulation Branch of the OSC in March 2010.

Exempt Market

OSC Considers "Crowdfunding" and Other New Exemptions

On December 14, 2012 the OSC published Consultation Paper 45-710 - Considerations For New Capital Raising Prospectus Exemptions, which discusses concepts for new prospectus exemptions in Ontario. The Consultation Paper describes and explores four concept ideas on which the OSC is seeking feedback: (i) an exemption to allow crowdfunding subject to limits for issuers and retail investors; (ii) an offering memorandum exemption; (iii) an exemption based on an investor's investment knowledge; and (iv) an exemption based on an investor receiving advice from a registrant.

The OSC is considering some new prospectus exemptions including one allowing crowdfunding, which it defines as "a method of funding a project or venture through small amounts of money raised from a large number of people over the internet via an internet portal intermediary." The crowdfunding discussed in the paper involves the distribution of a security although there are at least five different models of crowdfunding discussed: donation model, reward model, pre-purchase model, peer-to-peer lending model, and equity securities model.

Interestingly, the paper also discusses a potential model for an offering memorandum exemption for Ontario (this exemption is already available in other Canadian jurisdictions). The release of the consultation paper is in line with several other moves by Canadian regulators to examine the available exemptions. These include the CSA review of the accredited investor and minimum amount exemptions which began in November 2011 and also the June 2012 OSC expansion of the CSA review, which broadens the scope to consider whether new prospectus exemptions should be introduced.

During the comment period, the OSC plans to hold public consultation sessions, conduct investor research and solicit feedback from interested stakeholders. The comment period for this Consultation Paper closes February 12, 2013.

Corporate Governance

TSX Changes to Director Election Process

For companies listed on the TSX, the New Year will bring new rules for director elections. The TSX will be strengthening corporate governance standards by incorporating changes to the TSX Company Manual. Effective December 31, 2012, these amendments to the Manual will require Issuers listed on the TSX to: (1) elect directors individually; (2) hold annual elections for all directors; (3) disclose annually in their Management Information Circular: (a) whether they have adopted a majority voting policy for directors for uncontested meetings; and (b) if not, to explain: (i) their practices for electing directors; and (ii) why they have not adopted a majority voting policy; (4) advise the TSX if a director receives a majority of "withhold" votes (if a majority voting policy has not been adopted); and (5) promptly issue a news release providing detailed disclosure of the voting results for the election of directors.

Security holder meetings which have already been set and for which proxy materials have already been approved by the TSX, will be unaffected by the amendments until their next meeting at which directors are to be elected. As a result, Issuers with meetings scheduled for early 2013 will likely be unaffected by the amendments. For a more detailed analysis of these changes, please click here.

Update on Empty Voting

Last quarter, we discussed a case out of the British Columbia Supreme Court (Telus Corporation v CDS Clearing & Depository Services Inc.) that negatively commented on a hedge fund's practice of empty voting and suggested that a dissident's right to requisition a shareholder meeting might be impaired by its economic motives. The case has since been overturned. While the Court of Appeal found empty voting to be a "cause for concern", it also found no basis for the court to intervene in these circumstances. Further, the Court of Appeal stated "to the extent that cases of 'empty voting' are subverting the goals of shareholder democracy, the remedy must lie in legislative and regulatory change."

Emerging Markets

OSC Provides Guidance to Emerging Market Issuers

On November 9, 2012, the OSC released OSC Staff Notice 51-720 Issuer Guide for Companies Operating in Emerging Markets (the "Guide") in response to recent concerns involving Canadian public companies with significant business operations in emerging markets ("Emerging Market Issuers" or "EMIs"). The purpose of the Guide is to: (i) highlight to Emerging Market Issuers and their directors and management potential areas of risk or red flags that may warrant further scrutiny; (ii) set out questions that directors and management of Emerging Market Issuers should consider when deciding how to address risks of doing business in emerging markets; and (iii) outline OSC expectations regarding compliance with existing disclosure requirements.

The OSC will be looking to boards to ask relevant questions of management and to ensure that proper policies, procedures and reporting requirements are in place to meet the issuer's obligations. These areas will not only be reviewed by the OSC (for example in connection with a prospects offering) but also by the TSX/TSXV in connection with a listing or change of business and by brokers in connection with, among other things, financing diligence.

TSX and TSXV Issue Emerging Market Consultation Paper

The TSX and TSXV have also turned their attention to EMIs. On December 17, 2012 the TSX and TSXV issued a joint consultation paper on emerging market issuers. The exchanges are in the process of reviewing the listing requirements applicable to issuers with a significant connection to an emerging market jurisdiction (defined by the exchanges as any jurisdiction outside of Canada, the United States, Western Europe, Australia and New Zealand). There are three principal purposes of this consultation paper - present risks, provide guidance, and solicit feedback. The exchanges have asked for comments from market participants on matters related to listing EMIs, including possible new guidance or requirements that TSX or TSXV may implement.

In the paper, the exchanges have identified and presented the principal risks associated with listing EMIs. They note that they are particularly concerned with the following potential risks associated with EMIs: (i) management and corporate governance; (ii) financial reporting; (iii) non-traditional corporate/capital structures; and (iv) legal matters relating to title and ability to conduct operations.

The paper also provides some preliminary guidance to issuers and their advisors with respect to listing considerations applicable to EMIs. Of note, the exchanges recommend that issuers with significant connections to an emerging market should arrange a "pre-filing conference" with the applicable exchange. The exchanges also state that they are unlikely to waive the sponsorship requirement in assessing EMIs. Further, in connection with an original listing, the exchanges may call for ongoing requirements from issuers to mitigate particular risks. These may include pre-clearance of a change of auditors and pre-clearance of new board members or new senior management.

These changes, along with those from the OSC (mentioned above), have created a regulatory environment which is very cautious in dealing with EMIs. As a result, EMIs can expect to see increases in the time frames associated with regulatory approvals and a rise in related costs. This state of affairs will be the "new normal" for EMIs for the foreseeable future and business plans and business expectations will need to adjust accordingly.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Events from this Firm
28 Oct 2019, Other, Toronto, Canada

Delegates will include CNAR members, provincial and territorial regulatory bodies, other non-profit organizations engaged in regulatory work, federal/provincial/territorial government representatives and others with an interest in regulatory issues.

28 Oct 2019, Conference, Toronto, Canada

The Canadian Network of Agencies for Regulation (CNAR) conference, which will be held on October 28 to 30, will bring together delegates from across the country to discuss challenges and share ideas and best practices related to a wide range of issues relevant to organizations engaged in the self-regulation of professions and occupations.

28 Oct 2019, Conference, Toronto, Canada
CAN-TECH Law is hosting its annual conference in Toronto on October 28 and 29, 2019. Join our Partner and President of CAN-TECH, James Kosa, and associate and conference committee member, Lisa Danay Wallace, for this exciting event.
Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions