Canada: Hecla Decision—The British Columbia Securities Commission Continues To Narrow The Use Of The Public Interest Power

Last Updated: December 10 2016
Article by Paul D. Davis and Allison Vale

On October 24, 2016, the Ontario Securities Commission (OSC) and British Columbia Securities Commission (BCSC, together with the OSC, the "Commissions") released their joint reasons relating to the proposed private placement undertaken by Dolly Varden Silver Corporation ("Dolly Varden") in the context of an unsolicited take-over bid by Hecla Mining Company ("Hecla").[1] The proceedings were closely watched as this was the first hostile bid since Canada's amended take-over bid rules took effect in May 2016.[2]


In June 2016, Hecla announced its intention to acquire Dolly Varden by way of an insider bid (the "Offer") subject to Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions (MI 61-101). Shortly thereafter, Dolly Varden announced its intention to undertake a private placement financing (the "Private Placement").

Hecla subsequently filed applications with the BCSC and OSC seeking to cease trade the Private Placement on the basis that it was an abusive defensive tactic under National Policy 62-202 – Take-Over Bids – Defensive Tactics.

Dolly Varden then applied to the OSC to cease trade the Offer on the basis that Hecla's circular did not include a formal valuation as required by MI 61-101. Although the BCSC has not adopted MI 61-101, Dolly Varden also applied for the same relief from the BCSC under its public interest authority.

In the joint decision, the Commissions upheld the Private Placement. However, the Commissions reached disparate conclusions with respect to the Dolly Varden application. Whereas the OSC ordered Hecla to provide a formal valuation and otherwise to comply with the requirements of MI 61-101, the BCSC declined to make a similar order under its public interest power.

As previously noted, MI 61-101 has not been adopted by the BCSC. Therefore, the BCSC's analysis of this issue involved a determination of whether Hecla's failure to include a formal valuation in the circular was contrary to the public interest, thereby permitting the BCSC to invoke its public interest jurisdiction to cease trade the Offer. 

BCSC Public Interest Analysis

In deciding whether to exercise its public interest jurisdiction, the Panel revisited its recent decision in Re Carnes.[3] In that case, the BCSC concluded that, in the enforcement context (i.e., decisions not directly related to M&A or other capital market transactions), where the Securities Act (British Columbia) (the "Act") prohibits specific conduct, the public interest power should only be used in "very rare circumstances"—that is, where the conduct is abusive of the capital markets[4]—to sanction that type of conduct absent a breach of securities laws. However, where the Act does not prohibit the type of conduct in question, the abuse standard "may or may not be the applicable test."[5]

In Hecla, the BCSC noted that, notwithstanding that this was not an enforcement decision, the public interest power should be narrowly applied given its potentially significant impact on the transaction and on the shareholders of Dolly Varden. Accordingly, the Panel would have to find abuse of the capital markets or investors in order to exercise its public interest power. The Panel then concluded that, since (i) the Private Placement would result in a 40% dilution and was negotiated at arm's length at an issue price lower than that offered by Hecla, and (ii) Hecla did not appear to have material undisclosed information that would make the Offer, without a valuation, abusive, the BCSC should not require a formal valuation as a matter of public interest.

There has been debate as to whether the public interest power should be exercised absent a breach of securities laws only in circumstances where the conduct or transaction is clearly "abusive", or whether it may also be exercised "where the market conduct engages the animating principles of [securities legislation]."[6] We believe that neither position provides a cogent or transparent basis for the exercise of the public interest power.[7] The decision in Hecla further supports the proposition that use of the animating principles standard may be waning. However, the application of the abuse standard has, once again, served merely as shorthand for a conclusion reached by the Panel. Although the Panel outlined its rationale for not exercising its public interest authority, it entirely sidestepped an explanation of what exactly constitutes "abuse" under this standard. We continue to believe that securities regulators should be able to develop a standard that is cogent and transparent, where the results of its application are predictable and easily understood by securities law practitioners and market participants alike.[8]

[1] Re Hecla Mining, 2016 BCSECCOM 359 (October 24, 2016); Re Hecla Mining Company (2016), 39 OSCB 8927 [Hecla].

[2] For an overview of the adopted amendments, see Paul Collins, Paul Davis and Adam Kline, " For The Times They Are A-Changin: Canadian Regulators Adopt Fundamental Changes to the Take-over Bid Regime" (March 2016).

[3] 2015 BCSECCOM 187 (May 14, 2015).

[4] Ibid at para 131.

[5] Ibid at para 132. In response to this conclusion, we suggested that, with respect to the exercise of the public interest power, the distinction between enforcement and other decisions was a tenuous one (see Paul Davis & Samantha Gordon, " British Columbia Securities Commission Seeks to Limit Exercise of Public Interest Power in the Enforcement Context" (May 2015).

[6] Re Biovail Corp (2010), 33 OSCB 8914 at para 382.

[8] Ibid.

The foregoing provides only an overview and does not constitute legal advice. Readers are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained.

© McMillan LLP 2016

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.

Paul D. Davis
Allison Vale
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.