Anaya Nolan
Securities law in Canada is a complex and broad area of legislation, with each province and territory having its own set of laws, regulations, and policies. Canada does not have a federal securities regulator, unlike other major capital markets, and instead, 13 provincial and territorial securities regulators work together to harmonize regulations across the country through national instruments. These laws cover a wide range, including public offerings, issuances, and transfers of securities, with a particular focus on protecting investors and promoting transparency. Securities laws in Canada also encompass corporate governance, mergers and acquisitions, and continuous disclosure requirements for reporting issuers. The scope of these laws is extensive and can impact businesses and individuals involved in the issuance, distribution, and transfer of securities within the country.
| Characteristics | Values |
|---|---|
| Federal securities regulator | Canada does not have a federal securities regulator, unlike other major capital markets |
| Provincial/territorial securities regulator | Each province and territory has its own regulator and its own set of laws, regulations, rules and policies |
| National instruments | 13 provincial and territorial securities regulators work together to harmonize regulation across the country through rules known as "national instruments" |
| Passport system | Issuers can rely on a "passport" system, allowing them to deal with only one or two regulators |
| Prospectus | A distribution of securities cannot be completed without the filing of a prospectus, which provides detailed information on the issuer's business and the securities being offered |
| Reporting issuers | Reporting issuers have liability to investors under Canadian securities legislation for misrepresentations in publicly disclosed communications or failure to disclose |
| Annual corporate governance disclosure requirements | TSX and Cboe Canada-listed issuers must disclose information relating to the representation of women on boards and in senior management, and director term limits |
| Diversity compliance | A "distributing corporation" must comply with disclosure requirements relating to diversity, including representation of "designated groups" such as Aboriginal peoples and members of visible minorities |
| Scope of securities regulation | The scope of Canadian provincial/territorial securities laws is broad and extends beyond public offering or issuance of securities, applying to all issuances and transfers of securities within a jurisdiction |
| Provincial securities laws | In several provinces, distributions of securities by an issuer based in the province are subject to that province's securities laws, even if issued to persons outside the province |
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What You'll Learn
Securities regulators and their authority
Canada does not have a federal securities regulator, unlike other major capital markets. Instead, each province and territory has its own securities regulator and its own set of laws, regulations, rules, and policies. There are 13 provincial and territorial securities regulators in total, and they work together to harmonize regulation across the country through rules known as "national instruments". Issuers can also use a "passport" system, which allows them to deal with only one or two regulators.
The scope of Canadian provincial and territorial securities laws is broad and covers matters beyond the public offering or issuance of securities. These laws generally apply to all issuances and transfers of securities within a jurisdiction. In some provinces, distributions of securities by an issuer based in the province are subject to that province's securities laws, even if the securities are only issued to persons outside the province.
Securities regulators in Canada have the authority to review and monitor compliance with applicable disclosure and other requirements. For example, they may review take-over bid circulars or information circulars in relation to a business combination. This may be initiated due to objections made by competing prospective acquirors or in the case of a hostile takeover bid.
Canadian securities laws also impose specific requirements on reporting issuers. Reporting issuers in all Canadian jurisdictions have liability to investors for misrepresentations in publicly disclosed communications or failures to make timely disclosures. This liability also extends to the directors and officers of the reporting issuer and other persons who knowingly influence the release of a misrepresentation.
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Prospectuses and disclosure requirements
Canada does not have a federal securities regulator, unlike other major capital markets. Instead, each province and territory has its own securities regulator and its own set of laws, regulations, rules, and policies. There are 13 provincial and territorial securities regulators in total, and they work together to harmonize regulation across the country through rules known as "national instruments". Issuers can often rely on a
In Canada, a distribution of securities cannot be completed without the filing of a prospectus unless otherwise exempt. A prospectus is a comprehensive disclosure document providing detailed information on the issuer's business and the securities being offered. It must contain "full, true and plain disclosure of all material facts" related to the issuer's business and the securities being offered. It must also include three years of audited financial statements prepared in accordance with International Financial Reporting Standards (IFRS) or U.S. Generally Accepted Accounting Principles (GAAP) with a reconciliation to IFRS (or two years for companies intending to list on the TSX-V or CSE).
The prospectus rules include rules governing the pre-marketing and marketing of the public distribution of securities, including marketing materials and road shows. An issuer planning a public offering in multiple Canadian jurisdictions will generally rely on the "passport" system. Under this system, a preliminary prospectus filed and cleared with the issuer's principal regulator is automatically accepted by the other provincial regulators.
There are certain instances where securities may be offered without a prospectus, sometimes referred to as private placements or exempt distributions. Most exemptions from the prospectus requirement are set out in National Instrument 45-106 Prospectus and Registration Exemptions. The OSC reviews prospectus filings to ensure compliance with Ontario securities law.
Reporting issuers in all Canadian jurisdictions have liability to investors under Canadian securities legislation for damages for misrepresentations in a publicly disclosed communication or failure to make timely disclosure. Plaintiffs are deemed to have relied on either the misrepresentation or on the reporting issuer having complied with its disclosure obligations. However, provincial securities laws do set limits on liability and provide for defences.
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Reporting issuers and liability
Canada does not have a federal securities regulator, unlike other major capital markets. Instead, each province and territory has its own securities regulator and its own set of laws, regulations, rules, and policies. There are 13 provincial and territorial securities regulators in total, and they work together to harmonize regulation across the country through rules known as "national instruments". Issuers can also rely on a "passport" system, which allows them to deal directly with only one or two regulators.
A reporting issuer is an entity that has filed and issued securities under a securities exchange takeover bid circular in relation to the acquisition of securities of another reporting issuer. An issuer can also become a reporting issuer by exchanging its securities with another issuer or the security holders of another issuer in connection with an amalgamation, merger, reorganization, or similar transaction, provided that one of the parties involved was already a reporting issuer. Additionally, an OTC issuer may become a reporting issuer under certain circumstances outlined in Multilateral Instrument 51-105, which has been adopted by most Canadian provinces and territories.
Reporting issuers in all Canadian jurisdictions have liability to investors under Canadian securities legislation for damages resulting from misrepresentations in publicly disclosed communications or failure to make timely disclosures. This includes information circulars and public oral statements. Plaintiffs are deemed to have relied on either the misrepresentation or on the reporting issuer complying with its disclosure obligations. In addition to the reporting issuer, its directors and officers, as well as other persons who knowingly influence the release of a misrepresentation, also have liability to investors under Canadian securities legislation. However, provincial securities laws do set limits on liability and provide for defences. Leave of the court is required for an action to proceed, and court approval is also necessary for settlements. Costs are awarded to the prevailing party as determined by the court.
A person who acquires 10% of the voting or equity securities of a reporting issuer, including convertible securities and rights to acquire voting or equity securities, must comply with the "early warning" provisions of Canadian securities law. This includes issuing a press release and filing an early warning report to disclose to the market that a particular investor holds a significant ownership stake in the reporting issuer. A further report and press release are required for each increase or decrease in ownership of at least 2% and for changes in material facts. Relaxed early warning reporting requirements are available to certain eligible institutional investors who do not intend to acquire more than 20% of an issue.
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Mergers and acquisitions
An acquisition of a "reporting issuer" in Canada, or an entity with public reporting obligations, triggers securities laws. In this context, take-over bid rules apply when an offer is made to acquire outstanding voting or equity securities resulting in the bidder holding 20% or more of that class. This constitutes a take-over bid for Canadian securities law purposes. Unless exempt, the offer must be made to all security holders of that class in Canada on the same terms. Shareholder rights plans, or "poison pills", can prevent acquisitions of 20% or more without a bid to all shareholders.
There are several common deal structures for mergers and acquisitions in Canada. Amalgamations and plans of arrangement are the primary merger structures for private companies, with amalgamations being more common. These require a shareholders' meeting and supermajority approval of two-thirds of votes cast. Plans of arrangement are more common for public companies and also require court supervision. They are a flexible way to structure an acquisition, dealing with complex tax issues and outstanding securities. They are also used when a non-Canadian buyer wants to use its own securities as consideration, providing an exemption from SEC registration requirements.
Canada has a mandatory pre-merger control regime, requiring transactions that meet certain criteria to be notified to the relevant authority and cleared before completion. A non-Canadian investor acquiring control of a Canadian business exceeding the review threshold must gain approval under the Investment Canada Act. The government can review any investment by a non-Canadian on national security grounds.
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Securities laws in British Columbia
Canada does not have a federal securities regulator, unlike other major capital markets. Instead, each province and territory has its own securities regulator and its own set of laws, regulations, rules, and policies. There are 13 provincial and territorial securities regulators in total, and they work together to harmonise regulation across the country through rules known as "national instruments". Issuers can also rely on a "passport" system, which allows them to deal with only one or two regulators.
British Columbia's securities laws include the Securities Act, regulations, and rules made under the Securities Act. Most of the rules of the British Columbia Securities Commission (BCSC) are harmonised with other Canadian securities regulators and are referred to as National Instruments. Other rules made by the BCSC are Securities Rules or BC Instruments. The BCSC may also provide interpretive guidance about British Columbia securities laws in the form of a notice or policy. Some of these notices and policies are issued on a harmonised basis with other Canadian securities regulators, while others are only issued in British Columbia.
The scope of Canadian provincial/territorial securities laws is very broad and extends to matters beyond public offering or issuance of securities. These laws generally apply to all issuances and transfers of securities within or to persons within a jurisdiction. In several provinces, distributions of securities by an issuer based in the province are subject to that province's securities laws, even if the securities are only issued to persons outside the province.
In the context of mergers and acquisitions, securities regulators may selectively review takeover bid circulars or information circulars to monitor compliance with applicable disclosure or other requirements. This may be initiated due to objections made by competing prospective acquirors or in the case of a hostile takeover bid.
Reporting issuers in all Canadian jurisdictions have liability to investors under Canadian securities legislation for damages caused by misrepresentations in publicly disclosed communications or failures to make timely disclosures. Plaintiffs are deemed to have relied on either the misrepresentation or on the reporting issuer having complied with its disclosure obligations. Provincial securities laws do set limits on liability and provide for defences.
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Frequently asked questions
Securities law in Canada is a set of regulations that govern the trade of securities within the country. Each province and territory has its own securities regulator and its own set of laws, regulations, rules, and policies.
Securities regulators in Canada are responsible for overseeing the distribution of securities, reviewing prospectuses, and ensuring compliance with disclosure requirements. They also provide interpretive guidance and handle matters related to acquisitions, mergers, and investor protection.
A prospectus is a comprehensive document that provides detailed information about the issuer's business and the securities being offered. It is required to be filed before distributing securities in Canada to protect investors and ensure transparency.
Issuers of securities in Canada are subject to continuous disclosure requirements, including information about the representation of "designated groups" (women, Aboriginal peoples, persons with disabilities, and members of visible minorities) on their boards and in senior management. These requirements use a comply or explain model to promote transparency and renew opportunities for diverse candidates.
Reporting issuers and their directors, officers, and influencers are liable to investors for damages if they make misrepresentations or fail to disclose information in a timely manner. Plaintiffs can take legal action with court approval, and settlements require court approval as well. The provincial securities laws set limits on liability and provide defences for such cases.
