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
Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
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
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

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 or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq 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 of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions