The Ontario Securities Commission (OSC) has released the
findings of its review of insider reporting practices and provided
recommendations to ensure compliance with Ontario's insider
Staff Notice 51-726 – Report on Staff 's Review of
Insider Reporting and User Guides for Insiders and Issuers
(the "Notice") summarizes the OSC's
review of the insider reporting practices of 100 reporting issuers
and approximately 1,500 reporting insiders. Based on its review,
the OSC identified two main areas where improvement is needed: (1)
the quality of insider reporting; and (2) insider trading
1. Quality of Insider Reporting
In Ontario, reporting obligations are imposed on "reporting
insiders" - generally, insiders of an issuer that have access
to material, undisclosed information and that exercise (or have the
ability to exercise) significant influence over the issuer.
National Instrument 55-104 – Insider Reporting
Requirements, for instance, requires reporting insiders to
file an initial insider report within ten calendar days of becoming
a reporting insider and a subsequent report within five calendar
days of any change in their holdings of the issuer.
Material Reporting Deficiencies
The OSC found material reporting deficiencies in approximately
15% of reporting insiders reviewed, and in approximately 70% of the
issuers reviewed, at least one reporting insider was required to
file a remedial filing to address a material deficiency, generally
discrepancies between a reporting
insider's holdings as reported on SEDI versus the issuer's
continuous disclosure records;
reporting insiders failing to create
or update insider profiles; and
reporting insiders failing to file
insider reports on SEDI.
One reason identified for material deficiencies was that some
reporting insiders relied on third parties to make their filings.
Since the responsibility to file insider reports remains with the
reporting insider regardless of whether a third party agent is
used, Staff recommends that reporting insiders periodically review
their SEDI profiles for accuracy.
Non-Material Reporting Deficiencies
In approximately 45% of the issuers reviewed, at least one
reporting insider was required to file a correctional filing to
address a non-material deficiency, including inaccurate transaction
codes and dates, inaccurate reporting regarding type of ownership,
not reporting the name of the registered holder and use of
incorrect security designations by issuers.
Other Common Findings and Recommendations
Staff also made the following recommendations based on other
common findings from their review:
Reporting insiders and issuers should
periodically review their insider profiles and issuer profile
supplements for accuracy.
Issuers should refer to Staff Notice
55-316 Questions and Answers on Insider Reporting and SEDI
for guidance on creating security designations or contact the OSC
or legal counsel for assistance.
Issuers should communicate
information about a grant in a timely manner and consider filing an
issuer grant report within five days of a grant to help avoid late
fees being charged against its insiders.
Issuers should implement a process to
annually verify the securities holdings communicated to them by
reporting insiders to reconcile public records.
Reporting insiders should review
information circulars annually and other public disclosure on a
regular basis to ensure their security holdings are property
2. Insider Trading Policies
In accordance with National Policy 51-201 Disclosure
Standards ("NP 51-201"), most issuers reviewed by
the OSC had written insider trading policies that provided for
"blackout periods" around regularly scheduled earnings
calls. In certain cases, however, these "blackout
periods" did not extend to derivative-based transactions or
the granting of stock options. While not required under NP 51-201,
the OSC recommends that all reporting issuers adopt written
policies that prohibit these activities during the "blackout
The content of this article does not constitute legal advice
and should not be relied on in that way. Specific advice should be
sought about your specific circumstances.
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