Canadian Securities Law : Canadian Securities Lawyer & Attorney : Stikeman Elliott Law Firm : Montreal, Ottawa, Calgary, Vancouver, Montreal, Toronto

Philip Henderson

On June 11, 2008, the federal government published the new Principal Protected Notes Regulations (the Regulations), which are intended to come into force on July 1, 2008. The Regulations were introduced in response to the growing variety and complexity of principal protected notes (PPNs) currently being offered by financial institutions and build on the existing Index-linked Deposits Interest Disclosure Regulations, which will be repealed with the adoption of the new Regulations. The new requirements seek to ensure that investors in PPNs are adequately informed by improving the manner, content and timing of disclosure for these types of investments.

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The TSX has adopted and the OSC has approved various amendments to the TSX Company Manual. The Amendments, effective as of June 16, 2008, are of a housekeeping nature and including the following:

• Amendments to correct references to the Securities Act in Part III and Part VI of the Manual, required as a result of changes to the OSA.
• Changes to Appendix H: Form 11 -- Notice of Private Placement, to clarify that blanket shareholder approvals are not permitted.
• Changes to Appendix H: Form 12 - Notice of Intention to Make a Normal Course Issuer Bid
• Appendix A -- Original Listing Application is being replaced with a streamlined application, but no substantive changes have been made.

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The CSA have approved amendments to NI 81-106, NI 81-106F1 and the related Companion Policy which will also result in changes to NI 81-102 Mutual Funds and the related Companion Policy, Form 81-101F2 Contents of Annual Information Form, and Form 41-101F2 Information Required in an Investment Fund Prospectus.

These amendments, scheduled to come into force on September 8, 2008, have been made further to a proposal and request for comments published on June 1, 2007 and are intended primarily to modify the requirements regarding the calculation of net asset value following the introduction of Section 3855 Financial Instruments -- Recognition and Measurement of the CICA Handbook; and clarify or correct certain provisions of the Instrument.

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The CSA have approved amendments to NI 21-101 Marketplace Operation (NI 21-101) and and NI 23-101 Trading Rules (NI 23-101) to deal mostly with the best execution obligation of dealers and advisers.

The Amendments, now scheduled to come into force on September 12, 2008, were initially published for comment along with other proposed amendments on April 20, 2007 with the Joint Notice on Trade-Through, Best Execution and Access to Marketplaces (originally published in conjunction with RS, now IIROC. The CSA have now decided to separate these three topics and deal with each separately on separate timetables.

The current amendments deal with best execution along with some other minor changes, including changes related to the electronic audit trail provisions. Amendments dealing with trade-through protection and rules related to access to marketplaces are proposed to be dealt with under separate requests for comment in the coming months.

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The CSA have approved amendments to NI 55-102 effective June 13, 2008.

Amendments have been made to SEDAR filing procedures as well as to Form 55-102F1 Insider Profile, Form 55-102F2 Insider Report, Form 55-102F3 Issuer Profile Supplement and Form 55-102F6 Insider Report. These amendments are mostly of a house-keeping nature intended to streamline the filing and flow of information on SEDI.

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Alix d'Anglejan-Chatillon and Jason Streicher | Version française

On May 30, 2008, the Montréal Climate Exchange (MCeX) officially launched the trading of a futures contract on Canada carbon dioxide equivalent (CO₂e) units.

As was noted by MCeX chairman Luc Bertrand at the official launch ceremony, "the listing of the MCeX futures contract is a 'first' and it makes the Montréal Climate Exchange the first regulated environmental market in Canada." The MCeX is a joint venture between the TMX Group's Montréal Exchange (MX) (the Canadian derivatives exchange) and the Chicago Climate Exchange® (CCX), which operates the world's first greenhouse gas (GHG) emissions reduction and trading system. The launch of the MCeX is intended, in the words of CCX Chairman and Founder Richard Sandor, to position Canada "at the forefront of environmental finance and integrated emissions trading."

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CSX Corporation v. TCI and 3G Fund, June 11, 2008 | 08 CV 02764, U.S. District Court (S.D. N.Y.).

Alex Colangelo

U.S. Court deems hedge fund beneficial owners of shares due to arrangements designed to avoid disclosure obligations. The Court, however, finds itself constrained from ordering remedy sought by target company.

In a somewhat empty victory for the plaintiff railroad company, the U.S. District Court for the Southern District of New York found that the defendant hedge funds employed surreptitious means to avoid disclosure requirements while accumulating shares of CSX. Despite its findings, the District Court found itself restrained by precedent from preventing TCI and 3G Fund from exercising the votes associated with the shares they acquired during the time they were offside disclosure obligations. The plaintiff, therefore, had to settle for an injunction inhibiting the defendants from any future violations of disclosure obligations.

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Ralph A. Hipsher and Kenneth G. Ottenbreit | Version française

The Ontario Securities Commission has recently granted relief to dealers distributing foreign securities by way of private placement into Canada to address uncertainties caused by new forward-looking information disclosure requirements.

Effective December 31, 2007, the Canadian Securities Administrators (CSA) made significant amendments to forward-looking information disclosure requirements under continuous disclosure rules applicable to Canadian reporting issuers. The Ontario Securities Commission (OSC) also concurrently amended requirements relating to offering memoranda disclosure contained in OSC Rule 45-501. As a result of these amendments to OSC Rule 45-501, any offering memorandum provided to purchasers in Ontario that contains material forward-looking information (including future-oriented financial information and financial outlooks) is required to also contain certain prescribed forward-looking information disclaimers or safe-harbour type of disclosure. While this disclosure is similar to safe-harbour disclosure provided under U.S. or foreign securities law requirements, it also requires the issuer to address additional matters not typically encompassed by the equivalent non-Canadian disclosure.
 

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The OSC has approved amendments to NI 24-101 to further extend the phased-in transition periods under that Instrument.  Under this extension, the deadline for registrants to comply with the matching deadline of midnight on T has been extended to July 1, 2010 and other transitional phase-in periods have been extended by another 24 months.

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OSC Notice 81-709 summarizes findings relating to the OSC’s continuous disclosure review of conventional mutual funds. The notice primarily highlights compliance issues with NI 81-106 disclosure matters and, while focussed on conventional mutual funds, includes guidance of benefit to closed-end and exchange traded funds.

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The OSC and a number of other Canadian securities regulatory authorities or regulators have published this notice of approval of the Investment Industry Regulatory Organization of Canada (IIROC). IIROC is a result of the combination of the regulatory activities of the Investment Dealers Association of Canada (IDA) and Market Regulation Service Inc. (RS).

The notice of approval is comprised of IIROC’s official Recognition Order, a memorandum of understanding with respect to the regulatory oversight program for rule review and approval, IIROC’s new By-law No. 1 and Transition Rule No. 1 and certain consequential amendments to related documents. 

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