The Canadian Securities Administrators (CSA) today announced the adoption of National Instrument 55-104 Insider Reporting Requirements and Exemptions (NI 55-104), and the related companion policy, along with the repeal of, or amendments to, a number of related instruments and policies. Insider reporting requirements and exemptions have been harmonized under NI 55-104 across all Canadian jurisdictions, except in the case of Ontario, where equivalent requirements will remain in the Securities Act (Ontario). Despite the difference in approach, the substance of the new requirements will be the same across the CSA jurisdictions. An earlier form of NI 55-104 was published in December 2008 for comment. While some changes where made to NI 55-104 in response to comments received, according to the CSA the final form of the instrument is substantively similar to the earlier proposal.
Specifically, NI 55-104 reduces the range of insiders required to file insider reports by introducing the concept of “reporting insider.” According to the CSA, this approach will focus the insider reporting requirement on a core group of insiders with the greatest access to material undisclosed information and the greatest influence over the reporting issuer. Interestingly, under NI 55-104, the concept of “reporting insider” includes a shareholder whose 10% beneficial ownership, control or direction is calculated based on post-conversion beneficial ownership of any convertible securities that are convertible within 60 days.
While NI 55-104 aims to narrow the range of insiders that are subject to the reporting requirement, it also expands the nature of the interest that is to be reported by including not only an insider’s beneficial ownership of, or control or direction over, securities of a reporting issuer, but also the insider’s interest in, or right or obligation associated, with a related financial instrument involving a security of the reporting issuer. As well, NI 55-104 contains specific provisions relating to reporting requirements associated with convertible or exchangeable securities such as options and warrants as well as agreements, arrangements or understandings that have the effect of altering one’s economic exposure to a reporting issuer or involving a security, or a related financial instrument involving a security, of a reporting issuer.
NI 55-104 also accelerates the filing requirement for subsequent insider reports from 10 calendar days to five (but provides a six-month transition period until October 31, 2010 for compliance with this accelerated filing deadline).
The new instrument is expected to come into force in all jurisdictions, except Ontario, on April 30, 2010, once Ministerial approval is received. In Ontario, the new requirements are expected to come into force on the later of April 30, 2010 and the date the requisite provisions of the Budget Measures Act, 2006 (No. 2) are proclaimed into force.