From the Regulators
News and Notices
OSC Provides New Guidance on Related Party Transaction Disclosure
By: Justin Dick, Jessica Lee and Kyle Simpson
On January 29, 2015, the Ontario Securities Commission released
Staff Notice 51-723: Report on Staff's Review of
Related Party Transaction Disclosure and Guidance on Best
Practices following a review of reporting by 100 Ontario-based
issuers selected at random across all industries.
The Report found that while there is a general awareness among
issuers of the need to provide related party transaction
("RPT") disclosure in both financial statements and in
management discussion and analysis ("MD&A"), such
disclosure was sometimes lacking in the appropriate level of detail
that was required. The Report points to areas of focus for issuers
to improve their RPT disclosure, emphasizing that RPT disclosure in
MD&As should complement and supplement the financial
statements, and that it is intended to provide both qualitative and
quantitative information that is necessary for an understanding of
the business purpose and economic substance of a transaction.
Disclosure must be specific and detailed, and it is not sufficient
for RPT disclosure in MD&As to simply repeat that which is
contained in an issuer's financial statements.
CSA Releases Progress Report on Proxy Voting Infrastructure
By: Justin Dick, Jessica Lee and Kyle Simpson
On January 29, 2015, members of the Canadian Securities
Administrators ("CSA") published CSA Staff Notice 54-303
- Progress Report on Review of the Proxy Voting
Infrastructure (the "Progress Report") to update the
progress of their ongoing review. The Progress Report concludes
that the current proxy voting infrastructure is in need of
modernization and improvement.
The Progress Report enumerates five improvements that CSA members
feel must be made regarding vote reconciliation:
- modernizing how meeting tabulators receive information about who is entitled to vote;
- ensuring that the information meeting tabulators receive is accurate and complete;
- enabling each intermediary who submits proxy votes on behalf of clients to find out how many shares the intermediary is entitled to vote, according to calculations made by meeting tabulators (its "Official Vote Entitlement");
- increasing consistency in how meeting tabulators reconcile proxy votes submitted by intermediaries to Official Vote Entitlements; and
- establishing communication between meeting tabulators and intermediaries about whether proxy votes are accepted, rejected or pro-rated.
The CSA is directing all entities that play key roles in vote reconciliation to assess their processes and identify ways to improve vote reconciliation for the 2015 proxy season. The CSA has released a Request for Proposals for expert advice from a proxy solicitor and plans to continue their review throughout 2015.
IIROC Publishes Annual Consolidated Compliance Report
By: Justin Dick, Jessica Lee and Kyle Simpson
On January 27, 2015, the Investment Industry Regulatory
Organization of Canda ("IIROC") published its Annual Consolidated Compliance Report to
assist IIROC Dealer Members in focusing their supervision and risk
management efforts to ensure compliance with regulatory
requirements. The Report seeks to address a number of current
issues and challenges to be addressed by Dealer Members in order to
improve investor protection and foster market integrity in a
rapidly evolving and increasingly complex environment.
The Report, together with IIROC's body of guidance notes, its
annual compliance conferences, and the day-to-day contact IIROC
regulatory teams have with Dealer Member staff, are all intended to
help Dealer Members better understand and ensure compliance with
IIROC's requirements.
IIROC will continue to proactively oversee and regulate IIROC
Dealer Members to protect investors and promote fair, efficient and
competitive capital markets, and will continue to focus on and take
action against Dealer Members that fail to address significant
compliance findings and/or fail to demonstrate a commitment to the
development of a strong compliance culture.
OSC Provides New Guidance on REIT Distribution Disclosure
By: Justin Dick, Jessica Lee and Kyle Simpson
On January 26, 2015, the OSC published Staff Notice 51-724: Report on Staff's Review of REIT Distribution
Disclosure following a review of the public disclosure of 30
Real Estate Investment Trusts ("REITs") with head offices
in Ontario. The Report focuses on disclosure relating to cash flow
and situations in which a REIT distributes more cash than it
generates from operations, referred to as "excess
distributions."
The OSC believes that investors should be provided with more
transparent disclosure about the risks of excess distributions and
identifies four target areas for improvement:
- the content of disclosure where excess distributions are paid;
- the consistency of disclosure about excess distributions;
- timely disclosure where a reduction or termination of distributions occurs; and
- presentation of non-GAAP metrics, such as adjusted funds from operations.
The OSC will continue to monitor reporting, and REITs that do not comply with the updated disclosure expectations will be expected to take corrective action.
Rule Proposals
TSX Publishes Proposed Amendments to Rules for Voluntary Delisting
By: Justin Dick, Jessica Lee and Kyle Simpson
On January 22, 2015, the Toronto Stock Exchange published for
comment proposed amendments to the voluntary delisting
requirements (the "Delisting Amendments") in section
720 of the TSX Company Manual (the "Manual").
Under the Delisting Amendments, the TSX will require majority
approval by the holders of the affected class or series of
securities for a voluntary delisting application, unless the TSX is
satisfied that:
- an acceptable alternative market exists or will exist for the listed securities on or about the proposed delisting date;
- security holders have a near term liquidity event, such as a going private transaction, for which all material conditions have been satisfied and the likelihood of non-completion is remote;
- the listed issuer is under delisting review and it is unlikely that TSX will be satisfied that the deficiencies will be cured within the prescribed period; or
- in the case of listed securities other than shares, if the listed securities are not convertible, exercisable or exchangeable at the holder's option into another class of listed securities.
Insiders who have an interest that materially differs from other
securityholders or any securityholder that holds more than 50% of
the issued securities of the affected class or series will not be
eligible to vote.
The Delisting Amendments would require an issuer to submit an
application for voluntary delisting to the TSX, accompanied by a
resolution of the issuer's board of directors authorizing the
application to delist and a draft copy of the press release to be
pre-cleared by the TSX. In addition, a draft copy of the
information circular or form of written consent used to obtain
security holder approval for the voluntary delisting application
must be submitted to the TSX for pre-clearance at least five
business days prior to finalization.
The Delisting Amendments, which will be effective upon approval by
the OSC following a public notice and comment period, are aimed at
ensuring fair treatment for all securityholders when an issuer
delists and improving the consistency of information available to
the market. The 30-day comment period is open until February 23,
2015.
To read this article in full, please click here.
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.