Canadian securities regulators have recently revised some of the rules governing insider reporting. National Instrument 55-101, Insider Reporting Exemptions, provides relief from the obligation to file insider reports in certain situations and has been amended, effective September 10, 2007, as follows.
First, a reporting issuer is no longer required to maintain a list of insiders who are relying on the exemptions provided by NI55-101. An issuer may want to continue preparing lists of personnel who have access to confidential material information, as part of its overall compliance processes (for example, when considering who should be covered by trading "blackout" periods). However, maintaining such a list is no longer a precondition for the insider reporting exemptions.
Second, the definition of a "major subsidiary" has been changed to an entity whose assets or revenues represent 20% of its parent reporting issuer’s consolidated assets or revenues, based on the most recent annual audited financial statements. Formerly, the threshold was 10%. Since senior officers of major subsidiaries may not rely on the NI55-101 insider reporting exemptions, this change may increase the number of insiders who benefit from the exemptions.
Finally, the amendments restrict the ability of executive officers and directors to rely on the exemption that permits delayed reporting of acquisitions under automatic securities purchase plans. The exemption will now be available only for acquisitions of stock options or similar securities if the issuer has previously disclosed the grant and its material terms on SEDAR. These terms include the following:
the date on which the options or other securities were issued or granted;
the number of options or other securities issued or granted to each insider who is an exempt executive officer or director;
the price at which the options or other securities were issued or granted and the exercise price; and
the number and type of securities issuable on the exercise of the options or other securities.
A plan will be considered "automatic" if it sets out a written formula or criteria for establishing the timing of the acquisitions, the number of securities that the insider may acquire and the price payable. If an insider is able to exercise discretion regarding these terms – whether as a grantee or as a participant in the reporting issuer’s decision-making process – the securities regulators will not consider the grant to be automatic, and the exemption permitting delayed reporting will not be available.
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