Bill 135, Helping Ontario Families and Managing
Responsibly Act, 2010 (the Act), first introduced by
Ontario's Minister of Finance on November 18, 2010 as an act to
implement certain financial and budget matters, received Royal
Assent on December 8, 2010. The Act contains several amendments to
Ontario securities law, most significantly the establishment of a
legislative framework for regulating derivatives which, to date,
has not been covered by Ontario's Securities Act. The
Act also makes a few notable amendments to the illegal insider
trading rules in Ontario which are described below.
Ontario's Securities Act prohibits persons in a
special relationship with a reporting issuer from trading where
they have knowledge of a material fact or material change with
respect to the reporting issuer that has not been generally
disclosed (insider trading) and from informing others of such
information, other than in the necessary course of business, before
such information has been generally disclosed (tipping). Prior to
the amendments made by the Act, these prohibitions only applied in
respect of Ontario reporting issuers. The amendments made by the
Act extend the definition of "reporting issuer" in the
Securities Act to include issuers that have "a real
and substantial connection to Ontario and whose securities are
listed and posted for trading on the TSX Venture
What exactly a "real and substantial connection to
Ontario" means is not defined, but it is expected that the
"significant connection to Ontario" test set out in
Policies of the TSX Venture Exchange will be a key factor in the
determination since the analysis will always be in respect of
issuers listed on the TSX Venture Exchange.
Given that the key amendments made under the Act establish a
regulatory framework for derivatives, the amendments to the
Securities Act also extend the provisions dealing with
insider trading and tipping, misrepresentation in disclosure
documents and fraud or market manipulation to include derivatives.
The provisions concerning civil liability for insider trading and
tipping have also been extended to apply to "related
derivatives." With respect to a security, a "related
derivative" is defined to be "a derivative that is
related to the security because the derivative's market price,
value, delivery obligations, payment obligations or settlement
obligations are, in a material way, derived from, referenced to or
based on the market price, value, delivery obligations, payment
obligations or settlement obligations of the security."
While the amendments to the Securities Act establishing
the framework for regulating derivatives will not come into force
until a date to be determined in the future, the amendments to the
illegal insider trading rules discussed above came into force on
December 8, 2010. See our related article, "
OTC Derivatives Regulation", in this issue of
Co-Counsel Business Law Quarterly.
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.
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The Canadian Office of the Superintendent of Financial Institutions ("OSFI") recently ruled that a bank cannot promote comprehensive credit insurance ("CCI") within its Canadian branches under the Insurance Business (Banks and Bank Holdings Companies) Regulations (the "Regulations").
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