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.

Michael Dolphin
Kim Lawton
In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). 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 & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd 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 or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.