Legal Updates

Perry _work (1)


Thursday, March 10, 2016

On February 18, 2016, the Ontario Securities Commission (“OSC”) released OSC Staff Notice 51-726 Report on Staff’s Review of Insider Reporting and User Guides for Insiders and Issuers (the “Staff Notice”). The purpose of the OSC’s review (the “Review”) was to assess compliance and assist reporting insiders with meeting insider reporting requirements.

The Staff Notice notes that the term “reporting insider” is defined in National Instrument 55-104 Insider Reporting Requirements and Exemptions (“NI 55-104”) and generally includes persons who have routine access to material undisclosed information concerning a reporting issuer and/or significant influence over the reporting issuer. The Staff Notice also outlines that reporting insiders are (i) generally required to file an initial insider report within 10 calendar days of becoming a reporting insider, and (ii) required to file subsequent insider reports reflecting changes in an insider’s holdings within five calendar days of a change.

Scope of the Review

OSC Staff examined the continuous disclosure records and insider filings of 100 reporting issuers whose principal regulator is Ontario. The reporting issuers were randomly selected from all industries in proportion to the total number of reporting issuers in each industry whose principal regulator is Ontario. The Review included 65 reporting issuers listed on the Toronto Stock Exchange and 27 reporting issuers listed on the TSX Venture Exchange. Each of the reporting issuers had, on average, 15 active reporting insiders for a combined total of approximately 1,500 reporting insiders.

The Review was conducted by comparing the insider information contained in public continuous disclosure documents available on the System for Electronic Document Analysis and Retrieval (“SEDAR”) with the information reported by insiders on the System for Electronic Disclosure by Insiders (“SEDI”) in order to identify any discrepancies. The OSC also reviewed insider trading policies of certain reporting issuers to determine if the policies are in accordance with the best practices set out in National Policy 51-201 Disclosure Standards (“NP 51-201”).

Results of the Review

OSC Staff found that approximately 70% of the reporting issuers reviewed had at least one insider who was required to file a remedial filing to correct a material deficiency (a “Material Insider Reporting Deficiency”). In addition, OSC Staff found Material Insider Reporting Deficiencies in approximately 15% of the reporting insiders reviewed, which resulted in approximately 200 reporting insiders making one or more remedial filings on SEDI to address these deficiencies and subjected the insider to late fees. OSC Staff also found that approximately 45% of the reporting issuers reviewed had at least one insider who filed inaccurate insider reports on SEDI with one or more non-material deficiencies that required a correctional filing, which resulted in approximately 150 reporting insiders making correctional filings to address these deficiencies but did not subject the insider to late fees.

Staff Guidance

In order to assist reporting issuers and their reporting insiders, the Staff Notice includes checklists as appendices to the Staff Notice that identify some of the key points that reporting insiders and reporting issuers should consider in complying with insider reporting requirements.

Reporting Insiders

  • Potential reporting insiders should review the definition of “reporting insider” under NI 55-104 to determine whether they need to register as a SEDI user and file an insider profile.
  • Reporting insiders should ensure they have filed reports on SEDI that reflect all of their securities holdings and periodically review their filings on SEDI for any discrepancies with their records of securities holdings. This is especially important where the insider relies on a third party to complete the insider’s filings on SEDI.
  • Reporting insiders should review the continuous disclosure filings of the reporting issuer on SEDAR for accuracy and completeness and compare to the insider’s securities holdings and report any discrepancies to the reporting issuer.
  • Reporting insiders should check the reporting issuer’s SEDI profile within five days of a grant of stock options or other forms of compensation under the reporting issuer’s compensation plans to determine if the reporting issuer has filed an issuer grant report. If an issuer grant report has not been filed, the reporting insider must report each grant on SEDI within five days of the grant.

Reporting Issuers

  • A reporting issuer should periodically review its security designations on its issuer supplement on SEDI to ensure that all securities have been designated and archived as appropriate.
  • Reporting issuers that are purchasing their own securities must create an insider profile on SEDI and report acquisitions and dispositions of their securities, regardless of the reporting issuer’s intentions for the securities after the purchase or disposition.
  • Reporting issuers should consider implementing a process to compare securities holdings disclosed by its reporting insiders on SEDI to the balances communicated to the reporting issuer for its continuous disclosure documents in order to avoid any discrepancies.
  • Reporting issuers should consider filing an issuer grant report within five days of a grant to provide timely information to the market and allow the reporting insiders to use the delayed reporting exemption in section 6.2 of NI 55-104.

The Staff Notice states that while most issuers had a written insider trading policy that was compliant with the best practices set out in NP 51-201, certain policies reviewed by OSC Staff did not restrict derivative-based transactions or the grant of stock-based compensation during “blackout periods” around regularly scheduled earnings announcements. OSC Staff believe that having a written insider trading policy that prohibits such transactions during blackout periods is essential to avoid public and regulatory scrutiny relating to the opportunistic timing of such actions.


The Staff Notice concludes that many reporting insiders need to improve the quality of their insider reporting for accuracy, completeness and timeliness. Reporting issuers and reporting insiders may be subject to fines or other regulatory enforcement action for failing to comply with the insider reporting regime.

It is important to note that an obligation to make filings under the insider reporting regime arises in several types of situations and may not always be readily apparent. Reporting issuers and reporting insiders should consider seeking appropriate legal advice having regard to their particular circumstances to ensure compliance with the insider reporting regime.

If you have any questions with respect to the information and guidance in the Staff Notice or insider reporting requirements in general, please contact Sanjeev Patel or any other member of our firm.