The Ontario government has recently amended the insider trading
rules under the Ontario Securities Act (the
"Act")1. The Act's prohibitions have been
expanded so as to restrict a company (an "issuer" under
the Act) and those in a special relationship with a company from
recommending or encouraging the sale or purchase of such
company's securities where such person making the
recommendation possesses undisclosed material information.
Insider Trading – An Overview
Insider trading prohibitions under the Act encompass two general
prohibitions. These prohibitions limit the ability of a company, in
certain situations, and those in a "special
relationship"2 with a company, to:
buy or sell the securities of such
company (i.e. the"true" insider trading prohibition),
share inside information, not in the
ordinary courseof business (i.e. the "tipping"
It is the latter of these two restrictions that the amendment
Recommending Was Not Tipping
Before the amendments came into force, the tipping prohibition
restricted the sharing of material undisclosed
information.3 However, this prohibition did not catch
instances where a company or person in a special relationship with
that company prompted another person to make a trade without
informing them of any particular material fact or material change.
In other words, simply giving an indication that one should buy or
sell a security did not itself constitute the sharing of material
Amendment to the Ontario Securities Act Regarding
The newly enacted s. 76(3.1) of the Act provides that no
company, no person in a special relationship with a company, and no
person that is considering or evaluating whether to engage in a
transaction with the company shall recommend or encourage, other
than in the necessary course of business, another person to
purchase or sell securities of the company with the knowledge of a
material fact or material change with respect to the company that
has not been generally disclosed.
The amendments codify certain actions already taken by the
Ontario Securities Commission (the "OSC") through the use
of its discretionary public interest power, and thereby may
increase certainty for insiders. Recently, for example, in Re
Finkelstein et al.,4 the OSC used its public interest
power to find against certain investment advisers who recommended
the shares of target companies; this despite those advisers
technically being onside the tipping prohibitions. The OSC may
therefore not need to rely on its public interest jurisdiction in
future similar cases. Moreover, we note that the change brings
Ontario legislation closer into line with the securities
legislation in other Canadian provinces, many of which already
prohibit such recommendations.5
1 Ontario Budget Measures Bill 173, Schedule 26, s. 2
(1), which received royal assent on April 19, 2016 and was
proclaimed into force effective July 1, 2016.
2 The definition of "special relationship"
under the Act includes, among others, those who (i) are an insider,
affiliate, or associate of (A) the issuer, (B) a company
considering certain transactions with the issuer or its
securityholders; (ii) are engaging in business or advisory services
with a company; (iii) learned of the material fact or material
change with respect to the issuer while the person or company was
previously in a special relationship; and (iv) learn about a
material fact or change with respect to the issuer from another
person or company that is in a special relationship with the issuer
where that person knows or ought reasonably to have known that the
other person or company is a person or company in such a
relationship; see the Act, ss. 76(5).
3 See the Act, ss. 76(2) and (3).
4 OSC, March 24, 2015.
5 For e.g. Securities Act (British Columbia), s. 57.2(5)
and Securities Act (Alberta), s. 147(5).
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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Under the Income Tax Act, the Employment Insurance Act, and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions or GST.
Under the Income Tax Act, the Employment Insurance Act, the Canada Pension Plan Act and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions.
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