Canada: Summary Of Oversight And Regulatory Activities: AMF's 2019 Report On Quebec Capital Markets

The Corporate Finance division of the Autorité des marchés financiers (AMF) recently released its third annual Summary of Oversight and Regulatory Activities (Report). Along with an overview of Quebec's capital markets, the Report provides constructive feedback for issuers arising from the AMF's oversight activities, as well as information on the development and the implementation of guidance and regulations for insiders and reporting issuers in Quebec. We highlight below some of the Report's key takeaways.

QUEBEC CAPITAL MARKETS

  • 696 companies (out of a total of 1,957 reporting issuers in Quebec) had Quebec as their principal regulator in 2018, a decrease from 724 companies (out of a total of 2,026 reporting issuers in Quebec) in 2017. Of those, 56 per cent were venture issuers, principally consisting of issuers listed on the TSX Venture Exchange (TSXV), and 44 per cent were other issuers.
  • Total market capitalization of Quebec companies decreased from C$440-billion in 2017 to C$396-billion in 2018, but still accounted for 16 per cent of the aggregated market capitalization of companies in Canada.
  • The number of Quebec companies listed on the Toronto Stock Exchange (TSX) and the TSXV has slightly decreased from 189 to 184, in keeping with the downward trend of the past ten years in both Quebec and Canada as a whole. At the same time, the Report notes that 13 Quebec companies were listed on the Canadian Stock Exchange (CSE).
  • After two consecutive years without a Quebec initial public offering (IPO) on either the TSX or TSXV, last year, Quebec companies completed one IPO on the TSX, one IPO on the CSE, three IPOs on the TSXV by capital pool companies, one IPO for the sole purpose of listing securities on the TSX and four reverse takeovers or qualifying transactions.
  • In total, 452 prospectuses were filed in Canada in the last year, 150 of which were filed in every Canadian province (33 per cent) and 91 were filed in every Canadian province, excluding Quebec (20 per cent). The remaining 211 prospectuses were filed in only certain Canadian provinces (47 per cent), including Quebec in some cases.
  • During the past year, Quebec companies raised C$3.7-billion on the public market and C$8.1-billion on the exempt market, for a total of C$11.8-billion, down from C$13.3-billion in 2018 and C$16.3-billion in 2017.
  • Of Quebec companies listed on the TSX, 92 per cent have at least one woman on the board of directors and 30 per cent have at least three women sitting on the board. These figures have been steadily climbing over the past few years.

DISCLOSURE DEFICIENCIES

Management's Discussion and Analysis

The Report notes that deficiencies in management's discussion and analysis (MD&A) were among the most common issues raised in continuous disclosure reviews conducted by the Canadian Securities Administrators (CSA). The AMF notes that the MD&A of some issuers disclose proposed activities which are often incomplete or of a promotional nature, reminding issuers that announcements about a business expansion must disclose complete facts and risks, and not contain promotional commentary on potentially quick profits.

Marketing Materials vs. Standard Term Sheet

The AMF notes that, in connection with distributions taking place by way of prospectus, certain issuers confuse a standard term sheet with marketing materials. Unlike the marketing materials which contain more detailed information, a standard term sheet does not have to be filed on System for Electronic Document Analysis and Retrieval (SEDAR) and must not contain any information other than what is prescribed in the securities legislation. The information in both the standard term sheet and the marketing materials must, however, be included in the relevant prospectus.

Problematic Promotional Activities

The AMF restated in the Report its concerns regarding promotional activities that are not compliant with applicable securities laws, particularly in the mining sector. On November 29, 2018, the CSA released CSA Staff Notice 51-356 Problematic promotional activities by issuers, which cautions companies to avoid disclosure and promotional practices that are manipulative or that may mislead investors. For more information on the CSA's staff notice, please see our December 2018 Blakes Bulletin: CSA Warn Against Certain Problematic Promotional Activities.

Shareholder Approval Under Complex Transaction Structures

The AMF highlights in its Report that issuers are making increasing use of complex transaction structures, which often lack adequate disclosure to shareholders, as compared to the more comprehensive disclosure usually prescribed for similar transactions with a simpler structure. The disclosure relating to the transaction must provide enough information for the shareholders to make an informed decision on the transaction and on its various steps.

As an example, the AMF refers to an issuer which obtains the approval from its securityholders in order to delist its shares from a stock exchange, but omits to disclose that after the delisting, it will complete a restructuring transaction and then list its shares on another stock exchange. In this scenario, the AMF considers that the subsequent transactions should be disclosed to the securityholders approving the delisting in order for them to be able to make an informed decision.

The AMF further notes that it will intervene where the information disclosed to shareholders regarding the transaction or its structure is incomplete or insufficient. In this regard, the AMF also announces in its Report that it has expanded its artificial intelligence oversight tools and has developed and implemented a real-time alert and analysis system, affording heightened oversight of companies having their head office in Quebec.

AT-THE-MARKET (ATM) DISTRIBUTIONS

On May 9, 2019, the CSA published for comment Proposed Amendments to National Instrument 44-102 Shelf Distributions and its Companion Policy (Proposed ATM Amendments) that would permit ATM distributions of equity securities in Canada to proceed without the need for an exemptive relief order from Canadian securities regulators.

The AMF reminds issuers in its Report that, as indicated in the Proposed ATM Amendments, since ATM distributions are made through stock exchanges accessible in all jurisdictions, such distributions cannot exclude Quebec. As a result, issuers making ATM distributions are required to file their base shelf prospectus and ATM supplement in Quebec. We note that this, in turn, triggers the requirement to file a French version of such documents, including all documents incorporated by reference therein, unless an exemption from Quebec's translation requirements is obtained. For more information on the Proposed ATM Amendments, please see our May 2019 Blakes Bulletin: CSA Propose Rules to Streamline "At-The-Market" Equity Offering Process for Canadian Issuers.

CRYPTO ASSET TRADING PLATFORMS

The AMF is actively engaged in a working group with other regulators focusing on regulatory issues relating to crypto assets and their oversight.

On March 14, 2019, the CSA and the Investment Industry Regulatory Organization of Canada (IIROC) jointly published Consultation Paper 21-402 Proposed Framework for Crypto-Asset Trading Platforms, in which they sought feedback from industry actors on crypto asset trading platforms. As the comment period ended on May 15, 2019, the Report notes that the CSA and IIROC are currently in discussions with international regulators regarding the approach for the regulation of crypto asset trading platforms. For more information on the CSA and IIROC's consultation paper, please see our March 2019 Blakes Bulletin: Now's Your Chance: CSA Seeks Input on Regulation of Crypto Asset Trading Platforms.

RENEWED RECORDS FILING SYSTEMS

The CSA are working on a digital transformation program to, among other things, replace SEDAR, the System for Electronic Disclosure by Insiders (SEDI), the National Registration Database (NRD) and various local records filing systems.

On May 2, 2019, the CSA published CSA Notice 13-103 and Request for Comment – Proposed National Systems Renewal Program Rule and Related Amendments and CSA Notice 13-102 and Request for Comment – Proposed Repeal and Replacement of Multilateral Instrument 13-102 System Fees for SEDAR and NRD, which set out the requirements and procedure for the new electronic system. The first phase of the project is expected to be implemented in 2021. For more information on the CSA's notices seeking input on the new records filing system, please see our May 2019 Blakes Bulletin: CSA Propose New National Records Filing System to Replace SEDAR, SEDI and NRD.

CURRENT AND PLANNED ISSUE-ORIENTED REVIEWS

The Report states that during the coming year, the AMF will focus on issue-oriented reviews in the following areas:

  • Financial statements, in order to ensure compliance with the new IFRS standard on leases
  • Information circulars and filing statements filed in connection with a reverse takeover or qualifying transaction, in order to ensure that these materials comply with regulatory requirements
  • Technical reports of mining companies, in order to ensure that these materials comply with the requirements in Item 14 (Mineral Resources Estimates) of Form 43-101F1 and to verify the qualifications of the qualified person responsible for the disclosure of mineral resources

For permission to reprint articles, please contact the Blakes Marketing Department.

© 2019 Blake, Cassels & Graydon LLP.

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
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
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please 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

Mondaq.com (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 www.mondaq.com

To Use Mondaq.com 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.

Disclaimer

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.

General

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