The reporting obligations set out in Part XXI of the OSA operate in tandem with the following insider trading prohibitions contained in section 76 of the OSA:
Trading where undisclosed change. No person or company in a special relationship with an issuer shall purchase or sell securities of the issuer with the knowledge of a material fact or material change with respect to the issuer that has not been generally disclosed.
Tipping. No issuer and no person or company in a special relationship with an issuer shall inform, other than in the necessary course of business, another person or company of a material fact or material change with respect to the issuer before the material fact or material change has been generally disclosed.
Transactions. No person or company that is considering or evaluating whether, or that proposes:
to make a take-over bid for the securities of an issuer;
to become a party to a reorganization, amalgamation, merger, arrangement or similar business combination with an issuer; or
to acquire a substantial portion of the property of an issuer,
shall inform another person or company of a material fact or material change with respect to the issuer before the material fact or material change has been generally disclosed except where the information is given in the necessary course of business relating to the take-over bid, business combination or acquisition.
Recommendation. No issuer, no person or company in a special relationship with an issuer and no person or company that is considering or evaluating whether, or that proposes:
to make a take-over bid for the securities of an issuer;
to become a party to a reorganization, amalgamation, merger arrangement or similar business combination with an issuer; or
to acquire a substantial portion of the property of an issuer,
shall recommend or encourage, other than in the necessary course of business, another person or company to purchase or sell securities of the issuer with knowledge of a material fact or material change with respect to the issuer that has not been generally disclosed.
There is a defence available if the person or company proves that they reasonably believed that the material fact or material change had been generally disclosed.
The reporting may help determine whether or not section 76 of the OSA has been breached in connection with a particular issuer. Where, for example, an issuer announces a material change in its affairs, the Securities Regulatory Authorities can review the insider trading reports filed prior to the announcement to determine if there was unusual activity in the issuer's securities undertaken by insiders, which might suggest a breach of section 76 of the OSA.
For the purposes of section 76 of the OSA, "person or company in a special relationship with an issuer" means:
A person or company that is an insider, affiliate or associate of:
the issuer;
a person or company that is considering or evaluating whether to make a take-over bid, as defined in Part XX of the OSA, or that proposes to make a take-over bid, as defined in Part XX, for the securities of the issuer;
a person or company that is considering or evaluating whether to become a party, or that proposes to become a party, to a reorganization, amalgamation, merger or arrangement or similar business combination with the issuer or to acquire a substantial portion of its property.
A person or company that is engaging in any business or professional activity, that is considering or evaluating whether to engage in any business or professional activity, or that proposes to engage in any business or professional activity if the business or professional activity is:
with or on behalf of the issuer;
with or on behalf of a person or company described in the last two sub-bullets under the preceding bullet.
A person who is a director, officer or employee of:
the issuer;
a subsidiary of the issuer;
a person or company that controls, directly or indirectly, the issuer;
a person or company described in the preceding bullet or in the last two sub-bullets under the first bullet.
A person or company that learned of the material fact or material change with respect to the issuer while the person or company was a person or company described in the preceding three bullets.
A person or company that learns of a material fact or material change with respect to the issuer from any other person or company described in any of these bullets, including this one, and knows or ought reasonably to have known that the other person or company is a person or company in such a relationship.
Note that Bill 91 amended the OSA to extend the application of insider trading provisions from reporting issuers to all issuers effective June 4, 2015. There are otherwise similar provisions in the Applicable Securities Laws of other jurisdictions in Canada with respect to reporting issuers.
For more information see Practice Note, Insiders: Overview of Insider Trading Laws and Insider Reporting Obligations.
END OF DOCUMENT
RESOURCE ID 9-575-5032
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