March was once again a busy month this year for corporate and securities law developments, with the publishing of staff notices by the Toronto Stock Exchange (TSX), the Ontario Securities Commission (OSC) and Canadian Securities Administrators (CSA), as well as developments regarding proposed amendments to the Canada Business Corporations Act (CBCA) that continued to make their way through the legislative process. For last year’s developments, please see our March 2017 Blakes Bulletin: No Such Thing as March Break – Selected Corporate and Securities Law Developments.
On March 22, 2018, the TSX published a Staff Notice to provide guidance on its rules concerning listing representations in offering documents. Pursuant to the notice, the TSX will not object to a representation being made that an issuer has applied to list its securities on the TSX, prior to receiving conditional listing approval. The TSX will generally consent to such representation being disclosed in a preliminary prospectus, draft prospectus or other draft offering document, subject to: (i) the issuer having properly applied to list its securities; (ii) compliance with prescribed language for how the listing representation may be made; (iii) the inclusion of a risk factor that the conditional approval of the listing application has not been received and there is no assurance that it will be; and (iv) the representation being made in compliance with applicable securities laws. The TSX also noted that it will not object to issuers citing a proposed stock symbol, provided that the stock symbol has been properly reserved. The foregoing guidance is in addition to current TSX rules permitting the inclusion of listing representations in final prospectuses and other offering documents or by issuers that already have another class of listed securities.
On March 8, 2018, the OSC published a revised version of Staff Notice 51-711 Refilings and Corrections of Errors, which provided an updated discussion of the OSC’s expectations when an issuer amends its continuous disclosure record or makes changes to its website or social media to comply with continuous disclosure requirements. Among other guidance, the notice provides that: (i) an issuer making corrective disclosure (including the filing of a document that should have been filed at an earlier date) should clearly and broadly disclose the correction to the market in a timely manner by way of a news release (and, if appropriate and required, a material change report) and prominently display such a news release and the corrective disclosure on the issuer’s website; and (ii) if an issuer provides social media disclosure which OSC staff conclude is potentially misleading or unbalanced, or is otherwise inconsistent with information already disclosed on SEDAR, the issuer should clarify the disclosure on SEDAR as soon as possible and/or remove the social media disclosure.
On March 15, 2018, the OSC published Notice 13-707 Fees under OSC Rule 13-502 Fees and OSC Rule 13-503 (Commodity Futures Act) Fees, noting that levels for participation fees and activity fees will remain unchanged for a period of two years beginning April 1, 2018.
On March 22, 2018, the OSC announced that Rule 72-503 Distributions Outside Canada had been approved by the Minister of Finance (Ontario), effective March 31, 2018. See our January 2018 Blakes Bulletin: Clarity for Offshore Distributions by Ontario Issuers: OSC Adopts Rule 72-503 Distributions Outside Canada.
On March 29, 2018, the OSC published Notice 11-780 Statement of Priorities – Request for Comments Regarding Statement of Priorities for Financial Year to End March 31, 2019, setting out, in draft form, the priority areas on which the OSC intends to focus its resources and actions in 2018–2019. The OSC has requested that written submissions on the draft priorities be made by May 28, 2018.
On March 28, 2018, the Government of Ontario announced its 2018 budget, which included measures concerning the following: (i) strengthening protection for investors in syndicated mortgages (see “CSA” below); (ii) establishing the Cooperative Capital Markets Regulatory System (see our March 2018 Blakes Bulletin: Supreme Court Hearing Leaves Cooperative Capital Markets Regulatory System in Limbo); and (iii) updating capital markets law (see our April 2018 Blakes Bulletin: 2018 Ontario Budget Looks to Enhance Securities Enforcement Activities).
In its 2017 Budget, the Government of Ontario announced that it intended to transfer the regulatory oversight of syndicated mortgage investments from the Financial Services Commission of Ontario to the OSC. On March 8, 2018, the CSA published proposed changes to introduce additional investor protections related to the distribution of syndicated mortgages and to increase harmonization regarding the regulatory framework for syndicated mortgages across all CSA jurisdictions. The CSA defines a syndicated mortgage as a mortgage in which two or more persons participate, directly or indirectly, as lenders in the debt obligation that is secured by the mortgage. Under the proposed amendments: (i) prospectus and registration exemptions that currently apply to syndicated mortgages in certain jurisdictions would be removed; (ii) the offering memorandum exemption would be updated to provide heightened disclosure for investors, including disclosure of development risks, prior obligations secured against the real property and the price paid by the developer to acquire the real property, and require the delivery of property appraisals prepared by an independent, qualified appraiser; and (iii) syndicated mortgages would be excluded from the private issuer exemption from the prospectus requirement. The CSA has requested that comments on the draft amendments be submitted by June 6, 2018.
On March 29, 2018, the CSA published Staff Notice 51-353 Update on CSA Consultation Paper 51-404 Considerations for Reducing Regulatory Burden for Non-Investment Fund Reporting Issuers. See our April 2018 Blakes Bulletin: CSA Announces Policy Projects to Reduce Regulatory Burden for Public Companies.
Also on March 29, 2018, the CSA published final rule amendments and policy changes relating to designated rating organizations and credit ratings to recognize the credit ratings of Kroll Bond Rating Agency, Inc. for the purposes of the alternative eligibility criteria for issuers of asset-backed securities to file a short-form prospectus or shelf prospectus. These changes are expected to be effective on June 12, 2018. The other currently recognized designated rating organizations are S&P Global Ratings Canada, Moody’s Canada Inc., Fitch Ratings, Inc. and DBRS Limited.
Further on March 29, 2018, the CSA adopted amendments related to reselling securities of foreign issuers. The amendments introduce a new prospectus exemption for the resale of securities (and underlying securities) of a foreign issuer if the issuer is not a reporting issuer in any jurisdiction of Canada, and the resale is on an exchange or a market outside of Canada or to a person or company outside of Canada. For these purposes, a foreign issuer is an issuer that is not incorporated or organized under the laws in Canada unless circumstances suggest that the issuer has more than a minimal connection to Canada (i.e., the issuer has a head office in Canada or the majority of its directors or executive officers ordinarily reside in Canada). These changes are expected to come into force on June 12, 2018.
For more information, please see our April 2018 Blakes Bulletin: Foreign Policy: Canadian Securities Administrators Release New Foreign Issuer Exemption.
On March 22, 2018, Bill C-25 An Act to amend the Canada Business Corporations Act, the Canada Cooperatives Act, the Canada Not-for-profit Corporations Act and the Competition Act passed its third reading in the Senate of Canada and was, as amended by the Senate, referred back to the House of Commons. The Senate amendments include the addition of provisions permitting a director that does not receive majority support for re-election to continue to serve on the company’s board of directors until the earlier of the 90th day after the day of the election and the day on which a successor is appointed or elected. In January 2018, the proposed amended regulations to the CBCA were revised to provide that the comply or explain regime established with respect to gender diversity in Items 10 to 15 of Form 58-101F1 of the CSA be applied to, at a minimum, the designated groups as defined by the Employment Equity Act (Canada), being women, aboriginal peoples, persons with disabilities and members of visible minorities. See also our January 2017 Blakes Bulletin: Proposed Regulations for Revised CBCA Provide Structure to Changes Proposed in Bill C-25 and our October 2016 Blakes Bulletin: Bill C-25 Looks to Include Majority Voting, Diversity Disclosure Requirements in Canada Business Corporations Act.