Canada: 2012 Securities Law Review

This securities law review provides a brief overview of some key securities law developments over the past year. This review also comments on two of 2013's proposed legislative changes.

I.    The Securities Act Reference - Death of the National Regulator

In December 2011, the Supreme Court of Canada ("SCC") ruled that the federal government's proposed plan to set up a single national securities regulator was unconstitutional.

The federal government argued that the plan was within its constitutional right to govern trade and commerce, but the SCC was not persuaded and ruled that the day-to-day regulations of the markets are contractual in nature and thus fall within the provinces' jurisdiction over property and civil rights.

However, the SCC suggested that a co-operative approach, which recognizes the provincial nature of securities regulation and allows the federal government to deal with genuine national concerns, would be supported by Canadian constitutional principles.

II.    Shareholder Rights Plans

The following summarizes three of 2012's principal decisions in the area of shareholders rights plans ("SRP") as well as comments from the Executive Director of the Ontario Securities Commission ("OSC").

Notable Decisions Relating to SRPs

AbitibiBowater Inc. c. Fibrek Inc.

AbitibiBowater launched an unsolicited bid for Fibrek shares and locked-up certain Fibrek shareholders.

In response, Fibrek sought out Mercer International Inc. as a white knight and proposed to issue warrants to Mercer; Mercer launched a friendly bid for Fibrek shares and offered a higher price than AbitibiBowater.

As a result of a series of regulatory and judicial decisions, the proposed warrant issuance to Mercer was cease traded, with the SCC eventually refusing leave to appeal.

Fibrek illustrates that in the absence of a real need for financing, the Québec Bureau de décision et de révision will consider it improper for a board to issue securities to dilute a potential acquiror, even if allowing the dilution would result in a higher offer for all shareholders.

For an earlier McMillan comment on Fibrek click here.

Inmet Mining Corporation v. Petquilla Minerals Ltd., BCSC

In Inmet the British Columbia Supreme Court held that the test for determining when a SRP should be rendered ineffective turned on two factors: 1) the period of time the offer had been announced and outstanding; and 2) whether there was a real and substantial possibility of an alternative that would increase shareholder choice and maximize shareholder value.

The commission found that Petquilla had 60 days to find a better offer and that it did not demonstrate that there was a "real and substantial" possibility of a superior bid forthcoming. The commission concluded that it was time for Petaquilla's SRP to go.

Thirdcoast Limited and Parrish & Heimbecker Limited, OSC

In ordering a cease trade order for Thirdcoast's SRP, the OSC considered the amount of time Thirdcoast had to respond to the bid.

The formal bid had been outstanding for 35 days prior to its expiry and Parrish & Heimbecker's intention to make the bid had been publically known for 122 days.

Since no other viable bidder had come forward, the OSC held that it was not satisfied that the SRP would serve the purpose of enhancing shareholder value.

Comments from Maureen Jensen, Executive Director of the OSC

In March 2012, Maureen Jensen, executive director of the OSC, commented on SRPs in the context of shareholder democracy stating that SRPs go "to the heart of how decision-making authority is allocated between the board and shareholders".

Jensen further commented that the CSA's regulatory approach to SRPs is based on commission decisions interpreting the national policy on defensive tactics.

This interpretation has effectively meant that the role of target boards in responding to hostile bids is limited to using a SRP to solicit a better offer.

Jensen stated that this approach needs to be revisited in light of significant market, governance and regulatory developments that have occurred since the policy was adopted in 1986.

The OSC and CSA are creating a framework for SRPs that allow target boards more latitude in responding to hostile bids if shareholder approval of the SRP has been obtained.

The aim of the proposed legislation is to leave the decision on how to respond to a hostile bid to an issuer's board and its shareholders, rather than a decision made by regulators. In January 2013, Instrument 62-105 Security Holder Rights Plans is expected to be published for public comment.

III.    Notable Judicial Decisions

Development of Securities Class Actions

Fischer v. IG Investment Management, Ontario Court of Appeal 

In Fischer the Ontario Court of Appeal considered the relationship between OSC proceedings and proceedings commenced under Ontario's Class Proceedings Act ("CPA") and held that persons that settle complaints with the OSC may still be subject to class action lawsuits.

Sharma v. Timminco, Ontario Court of Appeal

In Sharma the Ontario Court of Appeal held that the limitation period governing a cause of action created by section 138. 3 of the Securities Act (Ontario) ("OSA"), for misrepresentations in an issuer's continuous disclosure, will continue to run until leave is granted by the court, and that the limitation period is not suspended by the CPA. The SCC dismissed the plaintiff's application for leave to appeal.

Definition of a "Responsible Issuer" - Abdula v. Canadian Solar Inc., Ontario Court of Appeal

In Abdula, the Ontario Court of Appeal ruled that a statutory cause of action for secondary market misrepresentations can be raised against foreign-listed issuers that maintain a "real and substantial connection" to the province of Ontario, even though their shares are not traded on a Canadian exchange.

Empty Voting - Telus Corporation v. CDS Clearing and Depository Services Inc. and CDS & Co., British Columbia Court of Appeal 

In Telus Corporation, Telus argued that Mason Capital Management LLC ("Mason"), a U.S. hedge fund, should not be allowed to requisition a shareholders' meeting because it had a very limited financial interest in the company.

The British Columbia Court of Appeal held that, while it recognized there was a strong concern that Mason's interests did not align with the economic well-being of the company, there was no indication that Mason violated any laws. Further, Telus did not point to any viable statutory authority which would allow the courts to intervene on broad equitable grounds.

The British Columbia Court of Appeal concluded that the remedy to the concern of empty voting must lie in legislative and regulatory change.

For an earlier McMillan comment on the Telus - Mason decision click here.

Televote System - International Energy and Mineral Resources Investment Hong Kong Company Limited v. Mosquito Consolidated Gold Mines Limited, the British Columbia Supreme Court

The BC Supreme Court ruled in Mosquito that before telephone solicitation systems can be widely used there are multiple protocol issues that must be resolved.

The court's decision arose in the context of a proxy fight between the present directors of Mosquito and a dissent slate led by two former directors of Mosquito.

The directors used the televote system, and instructed their televote operators to accept verbal voting instructions from the solicited shareholders and to execute proxies on their behalf. 

The court identified the following items relating to the televote system as problematic:

(i) oral grant of authority insufficient - the televote system's reliance on an oral grant of authority (as opposed to written confirmation) is inconsistent with legislative requirements;

(ii) no unique identifier - the televote system did not have a reliable means of identifying the person giving instructions, nor ensuring the integrity of the information contained in the proxy;

(iii) no complete record - the televote system did not produce a complete record of oral grants of authority;

(iv) agency relationships - the proxy solicitor acting as agent for both the shareholders and management creates potential for confusion and possible conflict of interest;

(v) lack of prior disclosure - the facts that a televote system was going to be used was not mentioned in any of the meeting materials; and

(vi) lack of sufficient safeguards - the court cautioned that there is danger of abuse when partisan solicitation is combined with vote taking. A televote system must have sufficient safeguards built into it to ensure that instructions are properly given and shareholders have freedom to vote as they choose.

The court noted that televote systems are relatively new and encouraged the industry to take steps to establish appropriate protocols, which will include addressing the issues presented above, to ensure that proxy and voting instructions are properly given and that shareholders have the freedom to vote as they choose.

Advance Notice By-Laws - Northern Minerals Investment Corp. v. Mundoro Capital Inc., BCSC

In Mundoro Capital, Mundoro adopted an Advance Notice Policy ("Policy"), which set a deadline for shareholders to submit nominations for directors, and stated that only persons nominated before the deadline would be eligible for election.

The Policy also specified that the chairman of the meeting has the power and duty to determine whether a nomination was made in accordance with the Policy and that the board could waive any Policy requirement.

The petitioner, Northern Minerals, argued that there was no legal basis for the Policy.

The BCSC held that nothing expressly prevented the directors from creating the Policy, nor did the petitioner establish that the Policy infringed shareholder rights.

The BCSC found that the Policy encouraged an orderly nomination process and ensured that shareholders are informed of the issues in advance of the AGM.

McMillan publicly advocates for public companies to adopt advance notice by-laws. During the 2012 proxy season, the firm assisted several clients in adopting advance notice by-laws; in each case the by-laws were approved by shareholders without legal challenge.

For an earlier McMillan comment on advance notice by-laws click here and here.

OSC Public Interest Jurisdiction  – Paul Donald

Paul Donald, a vice president at RIM, bought $300,000 worth of shares in Certicom Corp., after learning from another RIM executive that RIM was interested in acquiring Certicom.

The OSC determined that while Donald's trading did not technically breach insider trading securities laws, his actions were contrary to public interest.

The OSC explained that market participants and officers of public companies are expected to adhere to a high standard of behavior, and that Donald's conduct impugned the integrity of Ontario's capital markets.

For an earlier McMillan comment on the Donald decision click here.

IV.    Legislation – Adoption of Amendments

Amendments to NI 31-103: Registration Requirements, Exemptions and Ongoing Registrant Obligations

In January 2012, amendments providing exemptions to registered members of the IIROC or the Mutual Fund Deals Association were approved. These amendments came into force on February 28, 2012.

In June 2012, the CSA published for comment proposed amendments to provide investors with increased disclosure regarding compensation as well as investment performance reports.

In November 2012, the CSA published for comment proposed amendments requiring all registered dealers and advisors, outside of Québec, to utilize the Ombudsman for Banking Services and Investments to resolve client disputes and complaints.

Amendments to NI 54-101: Communication with Beneficial Owners of Securities of a Reporting Issuer (Notice and Access)

The amendments are focused on modernizing and improving communications between reporting issuers and their shareholders by allowing a greater use of the internet to deliver proxy-related materials.

It is anticipated this system will cut costs of proxy voting communication materials.

The system allows issuers to distribute their materials to shareholders by posting the documents on SEDAR, a website that is not SEDAR, such as the reporting issuer's own website or that of a service provider and by sending a specified notice to beneficial owners.

For an earlier McMillan comment on Notice and Access click here.

Amendments to the TSX Company Manual

In December 2012, the TSX's amendments to its Company Manual regarding the election of directors came into in force.

The amendments require issuers to: 1) elect directors individually (opposed to slate); 2) hold annual elections for all directors; 3) disclose in their company's information circular whether they have adopted a majority voting policy for uncontested director elections, and if not, to explain their practices for electing directors and 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.

The TSX has also published for comment a proposed amendment which would require all TSX issuers to adopt a majority voting policy effective January 1, 2014.

For an earlier McMillan comment on the TSX amendments click here.

V.    Canadian Securities Administrators Comments

In 2012, the CSA issued multiple notices to provide the public with guidance and support when interpreting securities legislation. The following summarizes four such notices.

CSA Staff Notice 41-307 – Concerns regarding an issuer's financial condition and the sufficiency of proceeds from a prospectus offering

Staff Notice 41-307 provides guidance to issuers with short-term liquidity concerns, on how to avoid a prospectus receipt refusal.

First, the prospectus must contain clear disclosure on how the proceeds will be used, as well as the issuer's financial condition.

Second, the anticipated proceeds from the prospectus offering must be sufficient to accomplish the purpose of the offering.

Anticipated proceeds from an offering may be considered insufficient if they are raised: 1) for a specific purpose, but do not address the issuer's short-term liquidity requirements; 2) through a best efforts offering without a minimum subscription, or a minimum subscription that does not appear to be sufficient to satisfy the issuer's short-term liquidity requirements; or 3) through a shelf prospectus offering that can be drawn down in small increments that, when considered separately, may not be sufficient to satisfy short-term liquidity requirements.

CSA Staff Notice 43-307 – Mining Technical Reports – Preliminary Economic Assessment

Staff Notice 43-307 discusses the CSA's concerns regarding the recent misuse of Preliminary Economic Assessments ("PEAs").

The notice states that issuers should not be representing that their PEA has been or will be done at or close to the level of a prefeasibility study.

The CSA recommends that issuers be careful to not describe a study as a PEA unless it falls within the PEA definition.

CSA Staff Notice 51-720 – Issuer Guidance for Companies Operating in Emerging Markets

Staff Notice 51-720 summarizes the CSA's concerns from its March 2012 report titled Emerging Market Issuers Review ("Report").

The Report was published to assess the quality and adequacy of emerging market issuers' compliance with disclosure and other regulatory requirements.

The notice provides emerging market issuers with guidance on the following eight areas: 1) business and operating environment; 2) language and cultural differences; 3) corporate structure; 4) related parties; 5) risk management and disclosure; 6) internal controls; 7) use of and reliance on experts; and 8) oversight of the external auditor.

TSX Emerging Markets Consultation Paper

Following CSA Staff Notice 51-720, the TSX and TSXV published a consultation paper on their respective listing requirements applicable to issuers with a significant connection to an emerging market jurisdiction. The principal purposes of the paper are to: 1) present the potential risks associated with listing emerging market issuers (EMIs) that have been identified by the TSX and the TSXV; 2) provide preliminary guidance to issuers and their advisors with respect to listing considerations applicable to EMIs; and 3) solicit comments from market participants on matters related to listing EMIs, including possible new guidance or requirements the TSX and TSXV may implement.

Consultation Paper 25-401 – Potential Regulation of Proxy Advisory Firms

The Consultation Paper attempts to address the public's concerns regarding proxy advisory firms and their potential impact on Canadian capital markets, and serves as a tool to further inform the CSA of whether there is a need to regulate proxy advisory firms.

Concerns raised by the public include: 1) potential conflict of interest; 2) lack of transparency; 3) potential inaccuracies and limited opportunity for issuer engagement; 4) perceived corporate governance implications; and 5) the extent of reliance by institutional investors.

VI.    Proposed Legislative Changes for 2013

NI 51-103: Ongoing Governance and Disclosure Requirements for Venture Issuers

NI 51-103 will introduce a new regulatory regime for venture issuers focused on streamlining and tailoring continuous disclosure requirements and governance obligations.

The aim of NI 51-103 is to: 1) improve access to key information and facilitate informed decision-making through improved disclosure requirements; 2) allow management more time to focus on the growth of their company by streamlining and reducing disclosure requirements; 3) enhance investor confidence in the venture market by introducing substantive governance standards; and 4) enhance the ability of securities regulators to focus on the unique challenges associated with the venture market.

For an earlier McMillan comment on NI 51-103 click here.

The foregoing provides only an overview. Readers are cautioned against making any decisions based on this material alone. Rather, a qualified lawyer should be consulted.

© Copyright 2013 McMillan LLP

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.

Amandeep Sandhu
Pamela Lindsay (Articling Student)
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.