The threshold in Canada when one becomes a “reporting insider” of a “reporting issuer” is at an ownership level (including control and direction) of 10 percent. When a purchaser acquires ownership or control of greater than 10 percent (on a partially diluted basis) of a reporting issuer, such purchaser can no longer stay below the reporting “radar”.
Once a purchaser eclipses the 10 percent threshold, insider reporting and early warning reporting obligations will take effect. The reporting insider must then create a profile on the Canadian System for Electronic Disclosure by Insiders (SEDI), and file an insider report. Additionally, the reporting insider will be required to file an early warning report and press release on the System for Electronic Document Analysis and Retrieval which, like SEDI, is web based and accessible to the public. Institutional investors may decide, instead, to adhere to a separate reporting regime.
Additionally, a reporting insider is required to file subsequent reports on SEDI within five days of any changes to the reporting insider’s ownership or control of the reporting issuer. As well, additional press releases and early warning reports are required to be disseminated and filed whenever (i) a reporting insider’s ownership or control increases by 2 percent or more from the last filed report filed, or (ii) there is a change in a material fact from the last report filed.
Further, the reporting insider is prohibited from acquiring or offering securities for a period commencing on the date on which the early warning report is required to be filed and expiring one business day after the date the report is filed.
The above is a very brief summary and does not cover every investing situation. For example, the above rules would be modified if (i) the purchaser is also an insider of the issuer or a significant shareholder of the issuer, or (ii) a take-over bid for the issuer has been launched.