The Ontario government has amended Ontario's Securities
Act (Act) to expand the scope of prohibited insider trading
and enhance the record-keeping requirements imposed upon capital
market participants in the province. This bulletin focuses on the
new record-keeping requirements, while our companion June 2015 Blakes Bulletin: Ontario Expands Scope of Prohibited Insider
Trading considers the amendments to the insider trading
NEW RECORD-KEEPING REQUIREMENTS' BROAD APPLICATION
The new amendments significantly expand the record-keeping
obligations set out in section 19 of the Act. Pursuant to the new
requirement, Ontario market participants are now subject to a broad
obligation to keep "such books, records and other documents as
may reasonably be required to demonstrate compliance with Ontario
Given the broad definition of "market participants"
set out in subsection 1(1) of the Act, the new record-keeping
obligation will apply to a wide range of companies and individuals,
including both registrants and persons exempted from the
requirement to be registered, as well as reporting issuers and
their directors and officers, and several other categories of
Given the broad nature of the record keeping-obligation itself
and the expansive application of the new requirement to all market
participants, the potential scope of the situations in which record
keeping may "reasonably be required to demonstrate compliance
with Ontario securities law" will conceivably become very
broad. The expansiveness of this new obligation raises concerns of
legislative over-reach, particularly given that the proposed
Provincial Capital Markets Act expands the definition of
"market participant" even more broadly. For more
information, see our April 2015 Blakes Bulletin: Too Many Changes, More Consultation Required:
Comments on Proposed Capital Markets Legislation.
POSSIBLE NEW DUE DILIGENCE OBLIGATION
The new record-keeping requirement carries significant
implications for the prosecution and defence of securities
enforcement proceedings in Ontario. In particular, Ontario
Securities Commission's enforcement staff may seek to present
the new record-keeping obligation as constituting an effective
reverse onus obligation on Ontario market participants, by which
those participants must present "books, records and other
documents" to prove their compliance with Ontario's
As well, these expanded requirements may provide new avenues of
attack for class action plaintiff lawyers in bringing claims under
the civil liability provisions of securities legislation.
For this reason, the new obligation is likely to prove
controversial in the years to come, with the scope of what is
"reasonably required" to show compliance with Ontario
securities law likely to be particularly hotly contested. Market
participants in Ontario should be mindful of the new record-keeping
obligation and carefully reassess their record-keeping policies and
practices in light of it.
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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