Did You Know? Ten Securities Law Fun Facts

May 25, 2022

While these fun facts may not be the ones anyone would look forward to bringing up (or hearing) at a dinner party (remember those?), the following facts about securities law may include some you did not know (or remember). May it serve as food-for-thought and a way to strike up a conversation about securities regulation and capital markets.

SECURITIES LAW FUN FACTS

National Instrument 52-110 Audit Committees (NI 52-110) provides the criteria for a member of a public company board of directors qualifying as an independent director. The general test and “deeming provisions” are set out in section 1.4, but if an individual wants to be qualified as independent for purposes of sitting on the issuer’s audit committee, they must also consider the extra criteria in section 1.5. So are those individuals “super” independent?
- Sticking with NI 52-110, the criteria in section 1.4 must be considered relative to both the issuer itself, subsidiaries of the issuer and any parent of the issuer (e.g., is the director an employee of the issuer, any subsidiary of the issuer or any parent of the issuer – if so, they are not independent). However, “parent” is not defined (though presumably it is the inverse of the defined concept of “subsidiary entity”).
Unlike in the U.S., it is still the case in Canada that posting of material information to an issuer’s website “will not, by itself, be likely to satisfy the “generally disclosed requirement”, meaning that material information should always be first published by way of a press release issued over a newswire (which can be much more expensive than a posting on a company’s own website). Further to National Policy 51-201 Disclosure Standards, as currently drafted: “Investors' access to the Internet is not yet sufficiently widespread such that a Web site posting alone would be a means of dissemination ‘calculated to effectively reach the marketplace’” and “As technology evolves and as more investors gain access to the Internet, it may be that postings to certain companies' Web sites alone could satisfy the ‘generally disclosed’ requirement.”
Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions and the gender diversity disclosure provisions in Form 58-101F1 Corporate Governance Disclosure are not applicable in every province (and, with respect to the former, territory) in Canada.
National Instrument 13-101 System for Electronic Document Analysis and Retrieval (SEDAR) (NI 13-101) provides that SEDAR filings may only be made on a business day between the hours of 7:00 a.m. and 11:00 p.m. Eastern Standard Time or Eastern Daylight Savings Time, whichever is in effect in Toronto, Ontario.
- NI 13-101 also notes that if a SEDAR filing is completed after 5:00 p.m. local time in the city where the securities regulatory authority is located, the date of the filing (for purposes of a time period that begins on or immediately after the date of the filing) is the next business day.
Sticking with SEDAR, the current edition of the SEDAR Filing Manual provides that the body of a document filed on SEDAR “should be presented in type at least as large as 11 point type, except that, to the extent necessary for convenient presentation, financial statements and other statistical or tabular data and the notes thereto may be in smaller type.”
While National Instrument 51-102 Continuous Disclosure Obligations (NI 51-102) provides that annual/interim financial statements and accompanying “MD&A” of a non-venture issuer must be filed “on or before” the 90^th/45^th day after the end of its most recently completed financial year, respectively, if such date falls on a holiday/weekend, the Ontario Securities Commission provides for an automatic extension to the next business day (which is no longer “on or before” the deadline).
Pursuant to NI 51-102, an “executive officer” is defined as including an individual who is a chair (or vice-chair) of the public company. Such a determination is not impacted by the individual’s status as an independent director nor by whether they are serving in that capacity on a full or part-time basis. Accordingly, if the chair (or vice-chair) of the board receives greater total annual compensation than the third highest paid other executive officer (as calculated pursuant to 51-102F6), excluding the chief executive officer and chief financial officer, or if an issuer does not have three such further executive officers, then the chair (or vice-chair) must be included in the Summary Compensation Table as a “named executive officer.”
NI 51-102 also provides that if any requisite disclosure under Form 51-102F6 Statement of Executive Compensation (51-102F6) must be filed (typically by being included in the proxy circular for a shareholder meeting) by a non-venture issuer not later than 140 days after the end of the issuer’s most recently completed financial year. Accordingly, if an issuer’s applicable proxy circular has not been filed by such time, then a standalone filing of any requisite disclosure under 51-102F6 must be made.
Based on a review of 50 recent examples, the average Canadian long form initial public offering prospectus runs approximately 280 pages in English (approximately 309 pages in French).
The Ontario securities law compendium text colloquially known as the “blue book” weighed 4.0lbs in 2004, while the current edition weighs 7.8lbs. Also, while on the topic of “blue”, there is scientific evidence that, until modern times, humans did not actually see the colour blue, meaning that from an anthropocentric perspective, blue did not exist.