The “British Columbia Environmental Assessment Office” (EAO) has entered into a Memorandum of Understanding (MOA) on the Substitution of Environmental Assessments with the Canadian Environmental Assessment Agency.

Under the memorandum, the EAO will conduct the environmental assessment for specific projects, including the procedural aspects of Aboriginal consultation. Federal departments will contribute their expertise. At the conclusion of the substituted environmental assessment, the respective federal and provincial ministers will reach separate decisions on the significance of the project’s environmental effects and the adequacy of Aboriginal consultation, based on the environmental assessment report prepared by the EAO.

The EAO has submitted requests to the Canadian Environmental Assessment Agency, CEAA to conduct substituted environmental assessments on behalf of the federal government for two proposed coal projects. The provincial environmental assessments will meet all federal and provincial requirements.

The MOU sets out an administrative framework for the use of the substitution provisions in the Canadian Environmental Assessment Act, 2012 (CEAA 2012).

The MOU outlines how information exchange will occur, describes the roles and responsibilities of the British Columbia Environmental Assessment Office EAO establishes the conduct of a substituted process leading to the respective environmental assessment decisions of federal and provincial ministers.

The CEAA commits to timelines in considering substitution requests from British Columbia.

A copy of the MOU can be found at here.

Both Institutional Shareholder Services Inc. (“ISS”) and Glass Lewis & Co. (“GL”) released updates in November 2012 to their proxy voting recommendation guidelines for the 2013 shareholder meeting season. Below is a summary of the changes relevant to TSX and TSX-V listed companies.

Read full article here.

Introduction
Pursuant to recent amendments to the TSX Company Manual (the “Manual”), which will become effective on December 31, 2012, issuers listed on the Toronto Stock Exchange (the “TSX”) will be required to disclose whether they have adopted a “majority voting” policy in respect of director elections.

The TSX is currently seeking comments on a proposal for further amendments to the Manual, which would require TSX-listed issuers to elect directors by way of “majority voting” at uncontested meetings.

Majority Voting
Under Canadian corporate law, in the context of the election of directors, shareholders who vote by proxy have only two options: vote “for” or abstain from voting for each director nominee or slate of directors. Given that votes abstained do not count and that, in practice, most shareholders of Canadian public companies vote by proxy, a director nominee or slate of directors will generally need only one “for” vote to be elected. According to the Canadian Coalition for Good Governance (the “CCGG”), this system is not in the best interests of shareholders “as it does not permit [them] to vote against an underperforming director and allows an entrenched board to continue to be in charge of the company, even if they are opposed by a majority of the owners of the company”.

Under the proposed majority voting policy, votes abstained will be considered “against” votes and will be counted as part of the total votes cast. Consequently, a director who receives a majority of votes abstained is considered not to have received the support of the shareholders and would be required to tender his or her resignation. The CCGG notes that 61% of listed issuers on the S&P/TSX Composite Index have a majority voting policy.

Amendments
The main passage of the proposed amendments reads as follows:

“Listed issuers must have majority voting for the election of directors at uncontested [shareholder] meetings. In satisfaction of this requirement, a listed issuer may adopt a majority voting policy that requires a director that receives a majority of the total votes cast withheld from him or her to immediately tender his or her resignation to the board of directors, to be effective on acceptance by the board. The policy must also provide that the board shall consider the resignation and disclose by news release the board’s decision whether to accept that resignation and the reasons for its decision no later than 90 days after the date of the resignation.”

It should be noted that in order to avoid conflict with applicable corporate or securities law requirements, issuers will be able to adopt a non-binding majority voting policy (also called a “holdover rule”) in satisfaction of the amendments. Under such a policy, directors who receive a majority of votes abstained are still elected but resign at a later date so as to provide the board of directors with time to reconstitute and reorganize itself.

Rationale
The TSX asserts that the amendments will improve corporate governance standards by increasing the accountability of directors, enhancing dialogue between issuers, shareholders and stakeholders as well as improving transparency. Glass, Lewis & Co. and Institutional Shareholder Services, two important proxy advisory firms operating in Canada, have indicated that they generally support proposals calling for majority voting.

There are also negative aspects to majority voting. For example, more time and money may be spent on director elections through telephone solicitation, second mailings of proxy materials, etc. There is also a risk of “failed” elections (where one or more directors are not seated on the board), which can, however, be mitigated by a non-binding majority voting policy.

Comment Period
Please note that the comment period in respect of these amendments ends on November 5, 2012.

If you are interested in submitting comments, please feel free to contact a member of our National Securities | Corporate Finance Group or address them directly to the TSX following the instructions.

With Quebec’s economic protectionism on the rise, leader Jean Charest has advised voters that, if re-elected, he would establish a $1-billion fund to assist Quebec companies to make foreign takeovers and would table a law allowing a board of directors to block a foreign takeover, even if shareholders support it.

According to Ralph Shay, partner and head of the Toronto Securities Group at Fraser Milner Casgrain LLP (FMC), allowing directors to evade the desire of shareholders does not align with the policy of securities commissions across Canada, as a board of directors is generally compelled to allow any takeover bid to be presented to shareholders, even if the board does not believe it is in the best interest of the company. “The securities commissions have a policy statement that says directors should not interfere with the right of shareholders to decide on a takeover bid,” he tells BNN. “The securities commissions don’t see it that way [that directors have the final say]…they feel that shareholders should have the right to decide when there is a takeover bid.”

Mr. Shay also said that this law, if it should become a reality, could negatively impact the share price of Quebec-based companies, because it would be less likely for shareholders to obtain a premium over the market price that normally comes with a takeover bid.

For more information, please read Business News Network’s article, Quebec election proposals felt across the country (August 14, 2012) or watch the broadcast interview on BNN’s Business Day (August 14, 2012).

This article was prepared by Carole Turcotte and Michel Brunet of FMC LLP

Fraser Milner Casgrain LLP, KPMG LLP and its subsidiary SECOR Inc. have released today a study presenting an analytical framework for evaluating the different mining royalty regimes which are being used worldwide. The authors hope the study will provide a framework for informed debate regarding mining royalty regimes best adapted to Quebec’s economic and mining circumstances. The quest for such determination has been provoked by an important public debate that is currently ongoing in Quebec as a result of the recent launch of the Plan Nord.

The study analyzes four royalty schemes for a standard Quebec iron mine or gold mine: i) profit-based royalties, ii) ad valorem royalties, iii) West Australian style of royalties and iv) hybrid royalties. The study concludes that no scheme is universally superior to the others and that it must be adapted to the territory. Given the fact that Quebec’s mining sector is relatively marginal on an international scale (representing less than 1% of global production), and that Quebec has high production costs based on the fact that its variable climate, its mining deposits are generally less concentrated and that it is at a great distance from the emerging Asian market, the study focuses on the importance for Quebec to remain competitive.

A profit-based royalty, the current royalty regime in Quebec (at a rate of 16 %), adjusts to the profitability of the mining project. Thus, when prices are low and mines become marginal or not profitable, this regime does not compound the problem. This is particularly important in regions where production costs are higher. Avoiding a supplementary burden in such a situation can help mines pass through a depressed mining cycle, without having to stop production. When prices are high and profits are up, such a profit-based scheme gives governments a larger proportion of the extracted value. However, the royalty amounts collected by the government will experience greater fluctuations and there is a risk that they may be nil for some mines during certain years. The ad valorem royalty facilitates the collection of more constant royalty levels under various price variations. However, this royalty adds a significant cost burden to the mining companies when the prices are low and the mining projects are less profitable. This, in turn, adds a significant amount of risk to the project and reduces its net present value relative to the same project subject to a profit-based royalty. An ad valorem royalty imposes the payment of royalties even when profits are weak or non-existent. This could lead to the accelerated closure of mines when prices are low and the postponement of potential projects. Ad valorem royalties are much less complex to put in place and are more common in developing countries, where fiscal administration is not well established. The hybrid royalty and the West Australian style of royalty combine, to varying degrees, the advantages and disadvantages of the previous two schemes.

The study concludes that high mining royalties do not necessarily translate into revenues as future investment may be compromised. The study recommends a regime be calibrated to optimize the benefits for Quebecers in the development of mining potential with a view not only to government revenues, but to impacts on investor decisions and regional characteristics of the sector.

Importantly, the study notes Quebec’s other mining investment assets are the quality of the business environment (political, legal and fiscal), the availability of trained professionals and workforce, the quality of its geological database and the potential of a very large territory which has not yet been explored.

For further information please see the attached press release and study, or contact a member of the FMC mining team.

http://www.newswire.ca/en/story/1014421/an-analytical-framework-for-evaluating-mining-royalty-regimes

http://www.secorgroup.com/files/pdf2/SECOR-KPMG-FMC_Les-redevances_minieres_au_Quebec_Version_finale.pdf

On June 7, 2012, the Bolsa de Valores de Colombia (“BVC”), Toronto Stock Exchange (“TSX”), and TSX Venture Exchange (“TSX-V”) announced the execution of a Memorandum of Understanding (“MOU”) to promote cooperation among the securities markets in Colombia and Canada.

Under the MOU, the BVC, TSX and TSX-V will exchange certain information and undertake specific activities to facilitate the dual listing of companies in Colombia and Canada and assist one another in understanding the regime, process and rules for listing and trading securities in their respective jurisdictions.

Juan Pablo Cordoba, President of the BVC noted that the MOU “seeks to bring together Colombian and Canadian markets” while Ungad Chadda, Senior Vice President of the Toronto Stock Exchange remarked that “we are extremely pleased to add this MOU to our well-established commitment to the Latin American Region.”

As of April 30, 2012, five companies were dually listed on the TSX and the BVC. A total of 19 companies listed on the TSX and 43 companies listed on the TSX-V have operations in Colombia.

On June 7, 2012, the Ontario Securities Commission (the “OSC”) announced that it is broadening the scope of its exempt market review as a result of stakeholder feedback. The expanded review will consider whether the OSC should introduce new prospectus exemptions that may assist capital raising for business enterprises while protecting investors.

As discussed in a previous post, on November 10, 2011, the Canadian Securities Administrators published specific consultation questions with respect to its review of the $150,000 minimum amount and the accredited investor prospectus exemptions contained in National Instrument 45-106 – Prospectus and Registration Exemptions. As part of this consultation process, the OSC met with over 300 individuals and several interested stakeholder groups. Some stakeholders suggested that the OSC should consider prospectus exemptions based on a number of factors, such as the financial resources of a purchaser relative to the size of the investment and the availability of disclosure regarding the investment.

In addition to the introduction of new prospectus exemptions, the OSC will continue to assess whether the minimum amount and accredited investor prospectus exemptions are appropriate. The OSC will publish a second consultation note and seek further public feedback to determine whether new prospectus exemptions should be adopted, and if so, under what circumstances.

For more details, please see OSC Staff Notice 45-707.

 This article was prepared by David Hunter, Nalin Sahni and George McKibbon (McKibbon Wakefield Inc.)

The federal government has proposed a complete overhaul of federal environmental assessment in Canada as part of the federal budget. The repeal and re-enactment of the Canadian Environmental Assessment Act (“CEAA”) and amendments to other federal environmental legislation amounts to the most significant change in federal environmental assessment (“EA”) since the legislation was first created decades ago.

These amendments are clearly aimed at increasing investment in extractive industries by encouraging certainty, reducing regulatory duplication and shortening delays. The implications of these changes are vast and their full impact on the mining industry is not known. This is especially true in Ontario where miners will also have to deal with significant changes in aboriginal consultation under the Mining Act and the Far North Act as well as a new provincial Mining Class Environmental Assessment regime.

This is the second article in our series on the proposed changes to the federal environmental assessment regime and what that means for mining in Ontario. In our first article we provided a general overview of the changes. In this article we will discuss changes related to Aboriginal consultation. Future articles will deal with subjects including public participation, broad changes to the Fisheries Act, and harmonization with provincial environmental assessment processes.

While the proposed amendments to CEAA point to a reduced role for the federal government in assessing the environmental impacts from mines, the same cannot be said for Aboriginal consultation. The new CEAA strongly promotes Aboriginal involvement in the environmental assessment process through increased communication and co-operation and requires that environmental assessments address a range of effects on Aboriginal peoples.

Assessing Impacts on Aboriginal Peoples
CEAA continues to promote communication and cooperation with Aboriginal peoples as one of the enumerated purposes of environmental assessments. However, this purpose is given new force by an expanded list of environmental effects on Aboriginal peoples that must be taken into account.

The current CEAA requires the consideration of the impact of any change on “the current use of lands and resources for traditional purposes by Aboriginal Peoples.”¹  The proposed amendments to CEAA maintain this obligation but s. 5.1 also requires the consideration any effect in Canada on Aboriginal peoples’:

• health and socio-economic conditions;
• physical and cultural heritage; and
• structures of historical, archaeological, paleontological or architectural significance.

While each of these environmental effects is included in the current version of CEAA, assessment of their impact on Aboriginal peoples was not as explicitly required as under the proposed amendments. Community and Aboriginal traditional knowledge can also be taken into account in assessing environmental impacts. Unlike other classes of environmental effects, impacts on Aboriginal peoples are not limited to federal government land or jurisdiction. These broadly defined categories appear to apply to environmental effects throughout Canada and their precise definition will likely be the subject of litigation.

Interaction with Ontario Statutes
While these environmental effects on Aboriginal peoples must now be taken into account, a bigger question is how these requirements will interact with the new Ontario Aboriginal consultation regime. The Ministry of Northern Development and Mines is in the process of finalizing new regulations under the Mining Act that would require Aboriginal consultation for mining exploration and prospecting. The Far North Act also prohibits mining development in Ontario’s far north until community-based land use plans are developed. The content of many of these land use plans and whether they would satisfy some or all of the environmental assessment and Aboriginal consultation requirements under the new CEAA remains an open question.

Coordination between the federal and provincial governments is essential for the development of Mining in Ontario. At a minimum, this coordination (or harmonization) should include: the sharing and acceptance of information between federal and provincial authorities; allowing federal and provincial regulatory processes to run concurrently; and timely review by governments at both levels. The FMC Mining Group will prepare commentary entirely devoted to how the proposed amendments to CEAA interact with the new requirements in Ontario.

¹  Canadian Environmental Assessment Act, S.C. 1992, c.37 at s.2(1).

This article was written by Alan J. Hutchison

A recent Notice of Hearing issued by the British Columbia Securities Commission (“BCSC”) may require mineral exploration companies to re‐visit their continuous disclosure practices. On April 24, 2012 the BCSC issued a Notice of Hearing against four current and former directors of Canaco Resources Inc. (“Canaco”) alleging that they breached applicable securities laws in connection with the disclosure of drill results from Canaco’s Magambazi gold exploration project in Tanzania, as well as in connection with certain stock option grants around the same time. While none of these allegations have as yet been proven, certain facts have emerged from both the BCSC’s allegations and Canaco’s public response that merit discussion of common continuous disclosure practices by mineral exploration companies.

Background

In late November 2010 management of Canaco received assay results from eight holes from an ongoing drill program at Magambazi. The results were circulated to the directors and it appears that management and the board considered the assays to be good results. Canaco staged the announcement of the drill results over three news results over a two week period. The share price increased significantly following each news release, with one day increases of 10.9%,14.6% and 5.9%. The Company did not file a material change report following any of the news releases.

Between the time the management and board of Canaco became aware of the assay results and the date that the first news release was announced, the board of directors authorized the Company’s customary annual grant of stock options to directors, officers and consultants.

Following the increase in the share price following the release of the assay results, the TSX Venture Exchange required the Company to re‐price the stock options to the price of Canaco’s shares following the announcement of all of the assay results. It appears that Canaco and the option holders did this voluntarily and to the satisfaction of the TSXV, and the matter was resolved in March 2011.

The BCSC’s allegations are twofold: (1) that Canaco breached section 85 of the Securities Act (British Columbia) by failing to disclose all assay results immediately upon receipt, and (2) that the directors of Canaco acted inappropriately by granting stock options when in possession of material undisclosed information. The crux of Canaco’s defence is that the assay results were not material as the drill holes constituted infill drilling and simply confirmed the extent of mineralization previously demonstrated in earlier drilling. Canaco has sought expert opinions from third parties affirming this position, most notably from Micon International Ltd. Although not expressly stated in the BCSC’s Notice of Hearing, it is submitted that it is noteworthy that the Magambazi deposit did not have a resource estimate.

The intent of this article is not to question the facts or attempt to form a judgment on any of the matters set out in the BCSC’s Notice of Hearing. But even prior to a judgment being rendered, there are a number of lessons for exploration mining companies.

Timing of Announcements of Drilling Results

A frustrating reality for every mineral exploration company is that with the boom in mineral exploration over the past few years the turnaround time for assay results has lengthened considerably. What used to be a one or two week wait is now commonly eight weeks. Most companies prefer not to announce hole by hole results, as it can be more difficult to put results in proper context to properly disclose the geological ramifications for the project of the drill results. The result is that there is a considerable time lag between raising capital, expenditure on mineral exploration and announcement of results. The additional challenge for many companies is the reality that it is not easy to generate regular news flow necessary to keep shareholders engaged in the company’s story. Plus, the seemingly fickle attention span of the market compels companies to focus on key points and not to overwhelm the market with more information it can absorb. As a result, most companies do exactly what Canaco did in this situation – accumulate a cluster of assay results and then release them in stages over one or two weeks once the company can properly analyze the results and ensure that the company obtains the requisite internal and NI 43‐101 approvals for the news release. The BCSC’s allegations in this instance suggest that this practice is contrary to securities laws. It may be necessary for companies to announce the assay results immediately and then seek to provide analysis and context in a subsequent news release. Given the technical nature of the disclosure, presumably few companies would be interested in doing this voluntarily.

Hindsight is 20‐20

Continuous disclosure requirements imposed by Canadian securities laws and stock exchange rules require public companies to assess materiality for every change or development affecting the company. Usually materiality is assessed on a forward looking basis, namely as to whether the news or development would reasonably be likely to impact the value or market price of the company’s securities. This requires companies to assess not only the change or new development itself, but the asset or project to which it relates in the context of the company as a whole. What is material to one company is not necessarily material to another, so while general principles can be ascertained, management and directors must ultimately assess their companies on an individual basis.

It is apparent in the Canaco situation that the BCSC did not accept Canaco’s position that the assay results are not material. Certainly at first glance it appears that the market considered the assay results to be material, as all three news releases resulted in significant increases in Canaco’s share price. However, that does not preclude an argument that management, directors and consultants of Canaco considered the materiality of the assay results in good faith and determined prior to announcement that they were not material, even though the market reached a different conclusion.

Accepting Canaco’s defence at face value, the concerning aspect of this case is that in a regulatory proceeding materiality is often applied with the benefit of hindsight. As a result, public companies are reminded that it is better to err on the side of caution and adopt a conservative assessment of materiality. To draw on a couple of specific facts from the Canaco example, it is worth noting the following principles:

• Prior to the completion of a mineral resource estimate, which typically resets materiality for a mineral project, companies should consider that all drill results are material. Even if the geological knowledge of a project is not enhanced by a drill program, one should not consider such drill programs to be infill drilling per se until the stage of drilling to reduce spacing between drill holes to confirm or upgrade categories of mineral resources.

• Companies should avoid granting stock options or other share based compensation to insiders when in possession of undisclosed assay results. It is submitted that the grant of options prior to the dissemination of the news releases announcing the drill results was the principal factor that caused the BCSC to commence a proceeding in this case. Without that inciting factor it is doubtful that the Notice of Hearing would have proceeded. As Canaco notes in its defence, this may result in extremely narrow windows to grant stock options, and possibly several months after the customary timing for issuing options, but to do otherwise can result in regulatory problems.

Material Change Reports

Canadian securities laws require public companies to file material change reports within 10 days of the occurrence of a material change in its business or affairs. However, the material change report is probably the continuous disclosure requirement that is most inconsistently applied, especially by smaller issuers. It seems that companies either file material change reports for every news release in order to ensure compliance, or they hardly ever file material change reports at all. In almost every instance material change reports are given little attention or thought, but have become perfunctory compliance documents duplicating the company’s news release.

This is a good reminder that material change reports should not be overlooked as a continuous disclosure obligation. Applicable securities laws require public companies to assess the materiality of a particular occurrence or development to determine whether a material change report is required to be filed.

Multiple Layers of Securities Regulation

It is also worth noting that Canadian public companies have to deal with multiple layers of securities regulation. The provincial securities commissions, stock exchanges and self regulatory organizations (i.e. IIROC) all have a regulatory function that aims to preserve the integrity of the Canadian capital markets. While most of the time these organizations work together in an attempt to harmonize their rules and enforcement practices, that is not always the case. Over the past couple of years we have seen some noteworthy differences of opinion between securities commissions and the TSX. The facts here suggest that the TSXV questioned Canaco about the grant of stock options almost immediately following the announcement of the assay results. It appears that there was a significant dialogue between the TSXV and Canaco, which culminated in the re‐pricing of the stock options. There is no indication that the TSXV challenged the conduct of the directors of Canaco to the extent that the BCSC is doing now. This is a good reminder that securities regulators can take different perspectives on an investigation and can reach different views on what constitutes an appropriate resolution.

Contact Us

For further information, please contact a member of our National Mining Group.

On May 10, 2012, the Investment Industry Regulatory Organization of Canada (IIROC) released a request for comments on approaches to the establishment and operation of price and volume thresholds or volatility controls by each marketplace in Canada. IIROC has proposed the following two guiding principles: (i) that marketplace thresholds should operate to generally preclude the execution of orders at prices that would otherwise, on execution, require regulatory intervention by IIROC on the triggering of a single-stock circuit breaker or the application of IIROC’s policies and procedures for the variation and cancellation of trades; and (ii) that the volatility control mechanism used by a marketplace should have the least amount of impact on the market-wide operation of the price discovery and access to tradable liquidity.

The release is the first step in the public consultation process which may lead to IIROC making a formal proposal on the establishment of price and volume thresholds to be adopted by marketplaces. While the release discusses existing marketplace controls, IIROC specifically issued guidance or request for comments with respect to single-stock circuit breakers, regulatory intervention for the cancellation or variation of trades and market-wide circuit breakers. IIROC notes, however, that currently none of these mechanisms are triggered by the volume of an order, but instead are based on price impact.

Comments are being accepted until August 8, 2012.

This article was written by David Hunter, Nalin Sahni and George McKibbon (McKibbon Wakefield Inc.).

As part of the federal budget, the government has proposed a complete overhaul of federal environmental assessment in Canada. The repeal and re-enactment of the Canadian Environmental Assessment Act (“CEAA”) and amendments to other federal environmental legislation amounts to the most significant change in federal environmental assessment (“EA”) since the legislation was first created decades ago.

These amendments are clearly aimed increasing investment in extractive industries by encouraging certainty, reducing regulatory duplication and shortening delays. The implications of these changes are vast and their full impact on the mining industry, particularly in Ontario, will not be known for years to come.

Over the next few weeks, the FMC Mining Group will analyze and comment on the proposed amendments and their impact on environmental assessments related to mining in Ontario. These commentaries will of course take into consideration the recent changes to Ontario’s Mining Act, Far North Act and Aboriginal consultation requirements.

Though complex, the amendments will have three major impacts:

1. Federal EAs will be more limited in scope and will apply to fewer projects.
2. More discretion for the Minister of the Environment and Cabinet in the EA process.
3. Huge transfer of EA responsibilities to the provinces.

In this first article, we provide a general overview of the proposed amendments relevant to miners. Future articles, will discuss particular subjects in detail including public participation, Aboriginal consultation, broad changes to the Fisheries Act, and harmonization with provincial environmental assessment processes.

Projects Requiring an Environmental Assessment

The former list of federal actions that trigger a formal environmental assessment (usually a permit) has been eliminated. EAs are only required if the project is designated by regulation. This change should make it much clearer which projects require an environmental assessment. However, this may also be a basis of future risk since any subsequent government could amend the list of projects requiring an EA without seeking Parliamentary approval.

Activities that are “incidental” to designated projects (possibly road access, transmission lines, air strips, etc.) must also be covered by the EA. Since what is “incidental” to a project is not defined by CEAA, this may become the subject of much debate in the future.

Who Conducts the Environmental Assessment?

If mining projects are included in the list of projects designated as requiring a federal EA, conducting the EA will be the responsibility of the Canadian Environmental Assessment Agency or a review panel established by the Minister of the Environment (the “Minister”). The exception here would be uranium mining projects. The Canadian Nuclear Safety Commission will continue to have lead responsibility for environmental assessment of uranium mines.

Types of Environmental Assessments and Timelines

The CEAA amendments will eliminate the concept of comprehensive study reports. There will now be only two levels of federal environmental assessment – “standard EA’s” (similar to current screening level studies) and EA’s performed by review panels. Standard EAs must be completed within 365 days, and review panels must complete their assessment within 24 months of receiving a complete environmental impact report from the proponent. Note that these times lines are not fixed but can be extended up to 3 months at the discretion of the Minister or indefinitely by Cabinet.

Public participation in a review panel hearing will be limited to those “directly affected” or who have relevant expertise. Non-governmental organizations seeking to intervene in EAs may find it difficult to obtain standing to participate in review panel proceedings. This could substantially shorten EA timelines.

Harmonization with Provincial Environmental Assessments

The new CEAA is trying to move towards a “one project, one review” system. The federal EA process for standard EAs can be replaced by a provincial EA if the Minister is of the opinion that the provincial environmental assessment act would be an “appropriate substitute” and the province requests the substitution. Panel reviews cannot be substituted by a provincial process but the new CEAA continues to allow for a joint federal-provincial panel review.

The provincial EA process does not have to match the rigor of the federal assessment though, at a minimum, the same factors must be considered. The Minister can also approve the substitution of a provincial EA after a provincial EA has been completed. It would appear that all current federal-provincial harmonization agreements will have to be rewritten from scratch. Given that these agreements have typically taken years to negotiate, achieving a true a “one project, one review” system may take a considerable period of time. Eventually, however, these changes could remove unnecessary duplication in EAs.

Scope of Environmental Assessments

The purpose of CEAA has been significantly altered. Formerly, the purpose was to ensure that projects did not have significant adverse environmental effects that could not be justified. This purpose has been reduced such that projects should not have significant adverse environmental effects only upon the components of the environment within federal jurisdiction. This could generate debate and uncertainty in the process as to the types of effects covered by federal EAs.

Further, only enumerated environmental effects need to be taken into account. Cabinet alone can add or remove a component of the natural environmental that must be assessed. Coupled with the changes to the Fisheries Act to focus on the protection of commercial, recreational and Aboriginal fisheries, this means that many mining projects may no longer require federal EAs and may be primarily governed by provincial EA processes. The definition of what constitutes a commercial, recreation or Aboriginal fishery should also be expected to be the subject of future debate.

While the scope and purpose of federal assessments has generally been narrowed, the assessment of environmental effects on Aboriginal peoples has been given increased focus. These amendments may be especially significant when combined with the proposed amendments to Ontario’s Mining Act regulations and the new requirements under the Far North Act. FMC will prepare a commentary devoted entirely to this subject.

On April 30, 2012, the Canadian Securities Administrators (the “CSA”) announced the official designation of DBRS Limited, Fitch, Inc., Moody’s Canada Inc. and Standard & Poor’s Rating Services (Canada) as Designated Rating Organizations (“DROs”) under National Instrument NI 25-101 Designated Rating Organizations (“NI 25-101”).

NI 25-101, which came into force on April 20, 2012, established a regulatory framework for the oversight of credit rating organizations by permitting them to apply for DRO status. The CSA designation orders make each of the DROs subject to regulation under applicable Canadian securities laws.

On May 10, 2010, the Canadian Securities Administrators (except Ontario) (the “CSA”) announced the adoption of Multilateral Instrument 51-105 Issuers Quoted in the U.S. Over-the-Counter Markets (the “OTC Rule”). The OTC Rule establishes certain disclosure obligations for issuers with securities quoted on the U.S. OTC market if those issuers are found to have a significant connection to Canada. According to the CSA, the rule discourages the manufacture and sale in a Canadian jurisdiction of U.S. OTC quoted shell companies that can be used for abusive purposes.

Under the OTC Rule, certain Canadian continuous disclosure requirements would apply to OTC issuers if the issuer falls into one or more of the following categories: (i) the issuer’s business has been directed or administered in or from Canada; (ii) promotional activities have been carried on in or form Canada; or (iii) the issuer distributed a security to a person resident in Canada before obtaining a ticker symbol, and that security becomes an OTC-quoted security.

An OTC issuer subject to this rule would be required to comply with the continuous disclosure obligations applicable to venture issuers. In addition, OTC issuers subject to the rule will be required to file annual information forms.

The OTC Rule will come into effect on July 31, 2012.

On April 26, 2012, the Canadian Securities Administrators (“CSA”) published two staff notices addressing disclosure requirements related to the prospectus exemptions found under National Instrument 45-106 – Prospectus and Registration Exemptions (“NI 45-106”). The notices are aimed at improving compliance by issuers, underwriters and their advisors and assisting market participants in avoiding deficiencies in their NI 45-106-related filings.

In CSA Staff Notice 45-308 – Guidance for Preparing and Filing Reports of Exempt Distribution, the CSA provides guidance relating to reports of exempt distribution filed in accordance with Form 45-106F1. Specifically, the notice highlights a number of issues observed by the CSA and clarifies requirements in respect of such topics as filing deadlines, filing fees, improper reliance on unavailable exemptions, failure to include a complete list of purchasers and failure to disclose all commissions and finder’s fees.

In Multilateral CSA Staff Notice 45-309 – Guidance for Preparing and Filing an Offering Memorandum, the CSA addresses compliance with the rules relating to offering memoranda (“OM”). The CSA highlights that issuers must ensure that an OM is in the correct form, does not contain any misrepresentations and provides sufficient information to enable a prospective purchaser to make an informed investment decision. Issues identified by the CSA include the failure to update the OM when distributions are ongoing, using an incorrect form of update and inadequately disclosing the issuer’s business. While the OM exemption is not available in Ontario, the guidance in Staff Notice 45-309 applies to Ontario-based issuers distributing securities in other jurisdictions under the OM exemption.

Each Notice confirms that responsibility for compliance with NI 45-106 rests with the issuer, that the use of a prospectus exemption under NI 45-106 is subject to regulatory oversight and monitoring and that identified non-compliance may result in corrective action where appropriate.

On March 20, 2012, TMX Group announced its support for, and cooperation with, OSC’s review of emerging market (“EM”) issuers. In addition, the Toronto Stock Exchange and TSX Venture Exchange initiated parallel consultations with various market participants, issuers and other market stakeholders over the last number of months. Based on this review and consultation, TMX Group prepared and is expected to provide additional guidance to EM issuers, to complement existing rules and working practices. Such guidance may be subject to further regulatory consultation and review by securities commissions.

Kevan Cowan, President, TSX Markets and Group Head of Equities, TMX, said:

“While provincial securities regulators are the primary authority overseeing reporting issuers, TMX Group takes its responsibility and public interest mandate very seriously. With the growth of emerging market economies, issuers and investors from these markets are expected to increasingly seek opportunity in Canada and other developed economies around the world. The work currently being conducted by TMX Group is part of our ongoing efforts to enhance the quality and integrity of Canada’s capital markets, a key competitive advantage both for us and for Canada.”

On March 20, 2012 the Ontario Securities Commission (“OSC” or the “Commission”) released a staff notice summarizing the findings of the Commission’s review of emerging market (“EM”) issuers. With the growing importance of EM issuers to the Ontario economy, OSC’s review was prompted by recent concerns involving certain high profile EM issuers. In summary, the review articulated four main areas of concern:

 (1) Concerns regarding issuer governance and related disclosure: OSC’s review yielded recommendations for improved corporate governance practices and better disclosure regarding corporate structure and risk factors. The OSC also recommended that EM issuers maintain appropriate books and records in Canada, and consider both minimum local language competency and Canadian director residency;

(2) Concerns regarding the audit function for an EM issuer’s annual financial statements: The Commission’s recommendations included, among others, facilitating access to audit working papers of Ontario reporting issuers, and examining whether suitability standards for auditors should be developed;

(3) Concerns regarding adequacy of the due diligence process conducted by underwriters in offerings of securities by EM issuers: OSC review recommended that a transparent set of requirements and best practices for the conduct of due diligence by underwriters be established; and

(4) Concerns regarding the exchange listing process. The Commission’s review recommended that exchanges review their current listing and approval requirements with a view to determine whether more stringent listing requirements would be appropriate for EM issuers.

CSA issues prospectus disclosure guidance for issuers with short-term liquidity concerns or raising insufficient proceeds

On March 2, 2012, the Canadian Securities Administrators (CSA) issued a notice setting out the CSA’s approach regarding disclosure of the financial condition of an issuer and the sufficiency of proceeds in the context of a prospectus offering.

The notice is intended for issuers that have filed a prospectus and either (i) it appears that the prospectus inadequately discloses the issuer’s financial condition and going concern risk or (ii) there is adequate disclosure about the issuer’s financial condition, but it appears that the proceeds from the proposed offering may be insufficient to accomplish the stated purpose of the offering. In these circumstances, a receipt for a prospectus may not be issued.

The CSA identified five areas in which the staff may raise comments where it identifies concerns in respect to an issuer’s financial condition and/or sufficiency of proceeds: (i) missing information regarding offering amount and pricing, (ii) offering structure, (iii) use of proceeds disclosure, (iv) risk factors disclosure and (v) representations to support ability to continue operations. For each of these areas, the notice identifies disclosure that will likely be required before the issuer receives a receipt for a final prospectus. However, for issuers with real short-term liquidity concerns, it is possible that a receipt may not be issued, regardless of disclosure.

The notice does not set out a specific test to determine under what circumstances the proceeds will be considered insufficient or when an issuer will be deemed to not have sufficient funds to continue as a going concern. As a practical matter, it would appear that the determination as to the sufficiency of proceeds to achieve the purposes identified in the prospectus will often be clear. In respect of issuer with liquidity concerns, the notice provides general guidance based on the type of issuer in question:

• Exploration stage issuer:  Sufficient to reach completion of next phase of a project
• Development stage issuer:  Sufficient to achieve the issuer’s next significant milestone
• Research & Development issuer:  Sufficient to achieve progress on the development of a key product
• Issuer with active operations:  Ability to continue operations for the short term

A copy of the notice is available here.

On March 7, 2012, the Ontario Securities Commission, the Quebec’s Authorité des Marches Financiers and the British Columbia Securities Commission entered into a Supervisory Memorandum of Understanding (Supervisory MOU) with the European Security Markets Authority (ESMA) concerning the regulatory cooperation in the supervision of credit rating agencies that operate in both the European Union and Canada. The Supervisory MOU is subject to the approval of the Minister of Finance and if approved, it will become effective April 20, 2012.

Since 2006, the Government has been working to streamline the review process for major economic projects so that projects proceed in a timely fashion while protecting the environment. For example, in 2010 the Government amended the Canadian Environmental Assessment Act to allow assessments to start sooner and reduce duplication, and created participant funding programs to ensure meaningful public engagement in the review process.

These steps have made a difference, but more needs to be done. Currently, companies undertaking major economic projects must navigate a complex maze of regulatory requirements and processes. Approval processes can be long and unpredictable. Delays and red tape often plague projects with few environmental risks. Under the current system, thousands of smaller projects with little or no risk to the environment are caught up in the federal environmental review process. The types of small projects that can be needlessly subjected to lengthy reviews include construction of a new pumping house for the expansion of a maple syrup plant, and the replacement of an existing culvert under a causeway. By forcing these thousands of low-risk projects to go through the review process, the current system draws resources away from projects that have the greatest impact on the environment. This approach is not economically sound or environmentally beneficial.

Read Full Article

On February 29, 2012, the Ontario Securities Commission (“OSC”) released a Strategic Plan detailing how the OSC intends to “stay ahead of the evolving, complex and dynamic environment of today’s global capital markets.”

The OSC Strategic Plan includes six key initiatives, as follows: (i) expanding the OSC’s research and analytic capability to be able to respond to and keep pace with market developments and investor concerns and to support policy-making by creating a dedicated Research and Analysis Group; (ii) engaging investors more effectively by creating an Office of the Investor to strengthen the OSC’s focus on investor engagement; (iii) improving internal policy coordination and priority setting by establishing an internal Policy Coordination Committee; (iv) aligning all operations and programs with defined OSC goals and priorities and developing and reporting on key performance indicators; (v) improving risk identification and management by establishing an Emerging Risk; and (vi) delivering excellence in the execution of operations.

A copy of the OSC’s Strategic Plan can be found here.

Effective February 29, 2012, the TSX Venture Exchange (“TSXV”) has amended Policies 1.1 and 3.2 for the purposes of addressing certain inconsistencies with applicable securities laws and enhancing the clarity of existing policy requirements.

Of particular interest are the changes to the definition of “Exchange Hold Period” to more properly reflect the circumstances in which a TSXV hold period and the corresponding TSXV legend are applicable to a security. The amendments to Policy 3.2 also clarify that if the securities are issued into a direct registration or book-entry system (such as CDS) or the purchaser of the securities does not otherwise receive a physical certificate representing the securities, the Issuer must ensure that the purchaser receives a written notice containing the applicable TSXV legend. The amendments also clarify the applicable “Exchange Hold Period” in respect of securities which are convertible, exercisable or exchangeable into shares listed on the TSXV.

On February 3, 2012, the TSX announced the adoption of amendments to Parts I, IV and VI as well as Appendix H of the TSX Company Manual (the “Amendments”). As discussed in a previous post, the Amendments introduce a Due Bill initiative which will help “improve the accuracy and timeliness of the valuation reporting of clients’ holdings when securities undergo certain material corporate events”.

The TSX did not receive any comments in response to its Request for Comments issued on December 22, 2011 and has not made any changes since that publication. The Ontario Securities Commission has approved the Amendments.

Although the Amendments became effective on February 3, 2012, Due Bills will not be used by the TSX until the Due Bill process is implemented by CDS. A public notice will be issued at that time.

Effective January 27, 2012, the United States Securities and Exchange Commission (“SEC”) has adopted new rules outlining how publicly traded mining companies must disclose in their quarterly and annual reports the mine safety information required by the Dodd-Frank Wall Street Reform and Consumer Protection Act.

The new rule is applicable to foreign private issuers and to Canadian issuers reporting under the US-Canadian multijurisdictional disclosure system. The disclosure, however, only applies in respect of mines located in the United States.

The information required by the new SEC rules, which is required to be disclosed on a mine-by-mine basis, includes:

• Significant and substantial violations of mandatory health or safety standards under the Federal Mine Safety and Health Act of 1977 (“Mine Act”) for which the operator received a citation from the Mine Safety and Health Administration (“MSHA”).
• Information regarding citations and orders for unwarrantable failure of the mine operator to comply with the Mine Act.
• Imminent danger orders issued under the Mine Act.
• The dollar value of proposed assessments from the MSHA.
• Notices from the MSHA of a pattern of violations or potential to have a pattern of violations under the Mine Act.
• Pending legal actions before the Federal Mine Safety and Health Review Commission.
• Mining-related fatalities.

Additional information can be found here. For a copy of the new SEC rule please visit http://www.sec.gov/rules/final/2011/33-9286.pdf

On January 27, 2012, the Investment Industry Regulatory Organization of Canada (IIROC) issued Notice 12-0029, providing guidance in connection with the processes that must be followed to obtain exemption from, or an interpretation of, a provision of the Universal Market Integrity Rules (UMIR). IIROC guidelines state that such requests may be sought by electronic means, through email, and by telephone. A request must generally be accompanied by certain contextual information, including facts giving rise to same. IIROC staff will follow up with a written ruling in cases where an exemption request has been allowed or denied. The notice also provides guidance as to circumstances under which IIROC may grant an exemption with respect to requests that a dealer be able to act as principal or agent in respect of an “off-marketplace” trade. Generally, the granting of such exemptions depends on whether the execution of the trade on a marketplace would be disruptive of a fair and orderly market or impractical.

Effective October 3, 2011, the British Columbia Securities Commission adopted a new form for reports of exempt distribution, Form 45-106F6 British Columbia Report of Exempt Distribution. An issuer distributing securities in British Columbia under certain prospectus exemptions is required to use the new Form 45-106F6 for distributions occurring on or after October 3, 2011. On December 9, 2011, the Commission ordered, under BC Instrument BCI 45-533 Exemptions from Form 45-106F6 requirements, that certain issuers and underwriters are exempt from Form 45-106F6 requirements. Certain of these exemptions allow certain issuers and underwriters to file the old Form 45-106F1 Report of Exempt Distribution, while others relieve issuers and underwriters from the insider information requirements in item 4 of Form 45-106F6.

Exemptions in BCI 45-533 include:

• investment funds;
• non-reporting issuers, provided that the distribution is made only to permitted clients;
• foreign public issuers, subsidiaries of foreign public issuers and subsidiaries of reporting issuers; and
• non-reporting issuers (re: certain insider information, provided they complete the table in item 4 of Form 45-106F6 for each director, executive officer, control person and promoter of the issuer).

Some of the above exemptions are also available to underwriters distributing securities of non-reporting issuers. Issuers or underwriters wanting to rely on any such exemptions must ensure that they comply with the specific terms and conditions set out in the particular exemption.

The Ontario Securities Commission (OSC) today published information regarding the OSC’s authority to impose monetary sanctions and an update on how the collection of those sanctions has proceeded.

The OSC has the authority to impose a range of sanctions on individuals and companies for violations of securities law or conduct that is contrary to the public interest in Ontario. Sanctions are imposed either at the conclusion of a contested proceeding or as part of a settlement reached between the respondent and OSC staff and approved by the OSC.

The purpose of the Commission’s sanction powers is to deter future wrongdoing in the capital markets. One of the OSC’s powers is to impose monetary sanctions for breaches of Ontario securities law and the OSC has exercised this authority since 2005. Monetary sanctions include administrative penalties and disgorgement orders. In imposing administrative penalties, the OSC may order a person or company found to have breached securities law to pay up to $1 million for each failure to comply.

Further details may be found here.

The United States Securities and Exchange Commission (“SEC”) has recently adopted amendments to the accredited investor standards in the rules under the Securities Act of 1933 (“U.S. Securities Act”) in order to conform to the requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Effective February 27, 2012, the definition of “accredited investor” in the rules under the U.S. Securities Act will exclude the value of a person’s primary residence for purposes of determining whether the person qualifies as an “accredited investor” on the basis of having a net worth in excess of US$1 million.

The accredited investor exemption in Canada may also be subject to amendment in the near future. As discussed in a previous post, the Canadian Securities Administrators (“CSA”) are in the process of reviewing certain prospectus exemptions, including the accredited investor exemption and the $150,000 minimum amount exemption. In connection with the CSA’s review, the Ontario Securities Commission (“OSC”) has announced three upcoming roundtable discussions to obtain input from investors, issuers, registrants and professional advisors as to whether any changes to the prospectus exemptions may be appropriate. The roundtable discussions will take place on February 2, February 8 and February 13, 2012.

The Ontario Securities Commission (“OSC”) is currently considering two significant policy initiatives affecting mergers & acquisition transactions in Canada. As discussed in a previous post, the first initiative relates to a possible standalone rule in respect of poison pills. The second policy initiative discussed in the recent OSC panel discussion held at the Toronto Board of Trade would amend the existing rules governing related party transactions in order to address current “process defects” in conflict management and to provide additional protections for minority shareholders.

Under the draft proposal, an issuer contemplating a related party transaction would be required to establish a special committee of independent directors, which committee would be required to negotiate or supervise the negotiation of the transaction terms and evaluate the fairness of the transaction. The special committee would be required to either (i) recommend that the board support and that shareholders vote in favour of the transaction, or (ii) deem the transaction to be fair to shareholders notwithstanding that the special committee does not make a recommendation in favour of the transaction. The determination by the special committee would be supported by full disclosure regarding the committee’s procedure and reasoning. The new regime would also lower the transaction value triggering a shareholder vote from the current threshold of 25% of market capitalization of the issuer to 10% of market capitalization of the issuer.

According to Mr. Naizam Kanji, Deputy Director of Corporate Finance at the OSC, the proposal could also include a clarification and broadening of the scope of the definition of related party transactions.

In a recent panel discussion at the Toronto Board of Trade, Naizam Kanji, Deputy Director of Corporate Finance at the Ontario Securities Commission (the “OSC”) stated that the OSC is currently considering the implementation of a standalone rule in respect of poison pills.

Currently, poison pills are reviewed on a case by case basis, an approach which Mr. Kanji described as “problematic”. Under the new regime, poison pills would be removed from the current defensive tactics policy (NP 62-202) and companies would be permitted to use poison pills to block unsolicited bids provided that the poison pills were approved by shareholders at the most recent annual general meeting or in the face of an unsolicited bid. The new regime would allow poison pills to remain unchallenged provided that the necessary shareholder approval had been obtained and shareholders would be permitted to remove poison pills on a vote in favour of doing so.

On December 23, 2011, the Ontario Securities Commission (the “OSC”) announced that the Minister of Finance approved the Memorandum of Understanding (the “MOU”) between the OSC and the United States Financial Industry Regulatory Authority, Inc. (“FINRA”) pursuant to section 143.10 of the Securities Act (Ontario). As discussed in a previous post, the MOU is intended to facilitate the exchange of information between the OSC and FINRA on firms and individuals that are under their common supervision, with a focus on enforcement-related matters.

The MOU came into effect in Ontario on December 13, 2011.

The Toronto Stock Exchange has published proposed changes to Parts I, IV and VI of the TSX Company Manual (the “Manual”), and in Appendix H of the Manual (the “Amendments”). The Amendments are being published for a 30-day comment period. Comments should be in writing and delivered by January 23, 2012 to the TSX. The Amendments are to primarily put a Due Bill Tracking System into practice for TSX listed companies.

A Due Bill process is being introduced in Canada to help improve the accuracy and timeliness of the valuation reporting of clients’ holdings when securities undergo certain material corporate events. Due Bills are entitlements which attach to listed securities undergoing certain material corporate events. Due Bills attach to such securities between the second trading day prior to the record date and payment date, for trading purposes, to allow listed securities to carry their appropriate value until the entitlement has been paid. Further details are available at the TSX website.

Issuers will begin filing their first IFRS-compliant annual financial statements in the first quarter of 2012. In order to help with the transition, the OSC released a list of key elements required under the new regime, along with helpful tips on making the reporting transition.

The list includes tips in regards to deadlines, required disclosure and changes in accounting policies.

On December 22, 2011, the Supreme Court of Canada released a ruling on the proposed federal Securities Act, and by extension, the formation of a national securities regime. The ruling comes after the Government of Canada has sought an advisory opinion from the Court as to whether the proposed federal Securities Act falls within the legislative authority of the Parliament of Canada. The Supreme Court ruled that the proposed Act as presently drafted is not valid under the general branch of the federal power to regulate trade and commerce under s. 91(2) of the Constitution Act, 1867.

Further to its Notice of Proposed Changes of October 14, 2011, the TSX and the TMX have proposed the implementation of a “Cancel on Disconnect” functionality to allow for the automated cancellation of orders in the event of involuntary loss of connectivity between the TMX and the client site. According to the TSX and TMX, this functionality, which will be available for all gateway sessions connecting to TSX, TSXV and TMX Select, will assist traders in mitigating risks associated with having open orders exposed in their books that cannot be managed when there is an involuntary loss of connectivity.

The TSX and TMX received no comments on its October 14, 2011 proposal and have announced that they are expected to publish a notice indicating the intended implementation date of the proposed functionality.

On December 8, 2011, the United States Securities and Exchange Commission (the “SEC”) announced a new policy to the effect that, subject to certain exceptions discussed below, foreign private will no longer be able to submit initial registration statements to the SEC on a confidential basis.

Under the prior policy, foreign private issuers had the ability to submit registration statements (and amendments) to the SEC on a non-public basis in connection with their first time registration, permitting the SEC to review and comment on disclosure, and the issuer to respond to the SEC’s comments before making a public filing through the Electronic Data Gathering, Analysis and Retrieval (EDGAR) system.

As of December 8, 2011, the SEC will review initial registration statements submitted by foreign private issuers on a confidential basis only if the foreign private issuer is either:

• a foreign government registering its securities;

• listed or concurrently listing on a non-U.S. securities exchange;

• being privatized by a foreign government; or

• a foreign private issuer that can demonstrate that the public filing of an initial registration statement would conflict with the law of an applicable foreign jurisdiction.

The SEC will continue to assess use of this procedure and will make changes in the future.

In its November 2011 Issuer Update Newsletter (the “Newsletter”), the Toronto Stock Exchange (the “Exchange”) provides guidance to issuers regarding the news release process and approvals for material and non-material news releases, as outlined in the timely disclosure policy found in sections 406 to 423.4 of the TSX Company Manual.

Specifically, the Exchange clarifies that issuers must send a copy of all news releases to the Investment Industry Regulatory Organization of Canada – Market Surveillance (“IIROC”) via SecureFile or by fax, regardless of whether the news release contains material information or non-material information. However, the need to obtain pre-approval of the issuer’s news release from IIROC depends on both whether the news release contains material information and on the intended time of dissemination of the news release. The following chart, reproduced from the Newsletter, sets out the various disclosure requirements:

The Exchange will provide guidance regarding the slightly different disclosure requirements applicable to TSX Venture Exchange issuers in its next Issuer Update.

On December 8, 2011, the Ontario Securities Commission (the “Commission”) issued a Notice of Approval (the “Notice”) recognizing each of Alpha Trading Systems Limited Partnership (“Alpha LP”) and Alpha Exchange Inc. (“Alpha Exchange”, and together with Alpha LP, “Alpha”) as an exchange. Alpha currently operates as an alternative trading system, facilitating the trading of equity securities listed on the Toronto Stock Exchange and the TSX Venture Exchange through a transparent, continuous matching platform.

The Notice references an application by the Maple Group Acquisition Corporation (“Maple”) for recognition as an exchange in connection with its proposal to acquire TMX Group Inc. and create an integrated group of businesses that provide trading, clearing, settlement and depository services (which proposal is summarized in an earlier post). Following the proposed acquisition of TMX Group Inc., Maple intends to acquire Alpha LP and Alpha Trading Systems Inc. and maintain multiple trading platforms.

The recognition of each of Alpha LP and Alpha Exchange as an exchange is effective as at the later of February 1, 2012 and the date on which the operations of Alpha ATS Limited Partnership have been legally transferred to Alpha Exchange. The Commission will publish a notice confirming the effective date.

The British Columbia Court of Appeal (the “Court”) has ruled that the British Columbia Securities Commission (the “BCSC”) has the jurisdiction to adjudicate enforcement proceedings against a person who trades on the TSX Venture Exchange (the “Exchange”) regardless of their location. This decision provides an appellate level court precedent upholding a broad approach to the jurisdictional scope of the BCSC’s enforcement activities and could have wide ranging impacts on extraterritorial securities regulatory enforcement actions in Canada.

READ FULL ARTICLE

On October 31, 2011, various amendments to Form 51-102F6 – Statement of Executive Compensation (“Form 51-102F6”) applying to financial years ending on or after October 31, 2011, came into force. The amendments are intended to improve the information issuers provide investors relating to key risks, governance and compensation matters.

This article highlights three of the material amendments to the compensation discussion and analysis disclosure required by Form 51-102F6.

READ FULL ARTICLE

On October 21, 2011, the Ontario Securities Commission (“OSC”) published OSC Staff Notice 15-704 (the “Notice”) requesting comments on proposed enforcement initiatives aimed at resolving enforcement matters more efficiently and effectively. Such initiatives include, among other things, a new program for explicit No-Enforcement Action Agreements with respect to market participants who self-report and remediate immediately, a new No-Contest Settlement Program wherein a cooperating market participant may resolve their enforcement matter without admitting facts or non-compliance, a clarified process for self-reporting which would ensure that all parties are informed on how best to self-report and the remedial options available to those who do self-report, and the establishment of a system for enhanced disclosure of credit granted for cooperation.

The Notice summarizes, among other things, each of the planned enforcement initiatives, discusses the need for an incentive based process that will encourage self-reporting among market participants, highlights the concern of concurrent civil litigation among persons and companies contacted during an investigation for documents and testimony, and provides further information about the comment process.

The comment period is open until December 20, 2011.

The Canadian Securities Administrators have published for comment significant proposed changes to their rules and policies governing the pre-marketing and marketing of prospectus offerings, other than mutual fund offerings. The changes, if enacted, would loosen some of the current restrictions that limit the marketing activities of investment dealers involved in public offerings and clarify the positions of the regulators in certain areas.

A summary of the main proposals is set out below. Reference should be made to this link for further details:

http://www.osc.gov.on.ca/en/SecuritiesLaw_rule_20111125_41-101_rfc-pro-amd-pre-marketing.htm

“Testing of the Waters” Pre-marketing Exemption for IPO Issuers

Investment dealers would be allowed to communicate with “permitted institutional investors” to determine interest in a potential initial public offering, subject to certain conditions related to confidentiality and record keeping. The definition of a “permitted institutional investor” would include a number of the types of institutional investors that are “accredited investors” for purposes of prospectus exemptions under Canadian securities laws. The new accommodation would not be available for issuers that are already public companies in a foreign jurisdiction.

Bought Deal Exemption Changes and Clarifications

An issuer and underwriter would be permitted to amend their bought deal agreement to increase the size of the offering under certain conditions. The increase would be limited to a specified percentage of the original size of the offering, but that percentage has not been determined by the regulators yet. The preliminary prospectus would still have to be filed and receipted within four business days of the original agreement, and the enlarged offering would have to be at the same price as the original offering. It is also proposed that additional underwriters would be allowed to join the bought deal syndicate under specified conditions and that the pre-marketing exemption for bought deals would not be available if the bought deal agreement contained a market-out clause.

Additional Guidance on When a Distribution Commences

It is proposed that additional guidance will be provided as to when the securities regulators consider a distribution of securities to have commenced, triggering the marketing restrictions. In particular, the current policy’s concept of discussions of “sufficient specificity” between an underwriter and an issuer would be expanded upon with examples.

Term Sheet for Bought Deals Before Filing of Preliminary Prospectus

Investment dealers would be permitted to provide a term sheet to permitted institutional investors between the time of the announcement of a bought deal and time of the filing of the preliminary prospectus if the term sheet contained only information that was in the bought deal press release or the issuer’s continuous disclosure record, and certain other conditions were met. The term sheet would have to be filed with the securities regulators before its use but would not be made public on SEDAR until the preliminary prospectus was receipted.

Term Sheet During Waiting Period

Investment dealers would be permitted to provide a term sheet to prospective purchasers during the period between the issuance of the preliminary and final prospectus receipts (the “waiting period”) to provide for a greater range of marketing communications. This term sheet would be required to contain only information that was also in the preliminary prospectus, and there would be additional conditions to its use. The term sheet would have to be filed on SEDAR before its use.

Green Sheets

Investment dealers would continue to be permitted to provide traditional green sheets to their registered representatives during the waiting period, but green sheets distributed to the public would be considered “term sheets” and would be subject to the prescribed conditions to the use of term sheets.

Road Shows

Specific requirements would be prescribed for road shows held during the waiting period. All information in a road show would have to be contained in the preliminary prospectus, except for comparables (information that compares the issuer to other issuers) in the case of a road show confined to permitted institutional investors. Written materials distributed to prospective purchasers at a road show would be subject to the same rules that would apply to term sheets, except for comparables in the case of a road show confined to permitted institutional investors. Among other things, this would mean that the materials would have to be filed on SEDAR before they were distributed.

Marketing after the Final Prospectus Receipt

Term sheets and road shows following the issuance of a receipt for the final prospectus would be subject to requirements similar to those that applied during the waiting period.

The Canadian Securities Administrators will accept comments on the proposals until February 23, 2012.

On November 10, 2011, the Canadian Securities Administrators (the “CSA”) announced that they are reviewing the $150,000 minimum amount prospectus exemption and the accredited investor prospectus exemption.

The review has been initiated as a result of the global financial crisis and recent international regulatory developments. The CSA is engaging in the consultation to identify any issues that stakeholders may have about the use of the exemptions and to obtain information that will assist in deciding whether changes to the exemptions are necessary or appropriate.

READ FULL ARTICLE

Mushkegowuk Grand Council Chief Stan Louttit stated, at a Mining Ready Conference on October 26, 2011, that mining companies must go beyond consultation and obtain consent before work can proceed on the James Bay Treaty lands.

The James Bay Treaty – Treaty Number 9 was negotiated in 1905 and 1906. The Adhesions were negotiated in 1929 and 1930. The Treaty and the Adhesions were notable because they were negotiated and signed by the Province of Ontario and the Federal Government . The Treaty and the Adhesions cover those lands from the height of land – north of Thunder Bay to the Artic and from James Bay to the Manitoba border. Historically the Province of Ontario has absolutely controlled and regulated mining and forestry in this area. Subject to recent Supreme Court decisions both the federal and provincial governments are required to consult with First Nations before issuing any permits e.g. under the Mining Act for exploration and advanced activities. There have been numerous altercations and Court appearances of these matters – usually driven by the duty to consult. Another set of concerns will emerge driven by Nishnawbe Aski Nation and the Tribal Councils. Essentially the First Nations have begun to assert that the Treaty Number 9 and the Adhesions were not properly signed.

It should be expected that the First Nations will seek to ” re negotiate ” the Treaty and assert that there should be limited if any government regulation in the James Bay Treaty area and that there must be prior approval from the First Nations before provincial approvals, if any.

http://www.thesudburystar.com/ArticleDisplay.aspx?archive=true&e=3348600

http://www.timminspress.com/ArticleDisplay.aspx?archive=true&e=3347769

Yesterday the TMX Group confirmed that, as of September 30, TSX and TSXV together had more new listings in 2011 than any other exchange group in the world. To September 30, 2011, the TSX and TSXV saw 318 new listings, including 32 graduates from TSXV to TSX. This makes a “three-peat” for the TMX as they have led the world in new listings for three consecutive years.

The TMX Group ranked ahead of second place Shenzhen Stock Exchange, with 201 new listings, and Deutsche Börse at third, with 176 new listings.

We are pleased to pass along our congratulations to the TSX and TSXV and to our newly listed clients!

For the full story please see http://exchange.tmx.com/2011/11/08/leading-the-world-in-new-listings/

As part of the Government of Canada’s plan to regulate carbon emissions, sector by sector, the Government of Canada recently released the Draft Reduction of Carbon Dioxide Emissions from Coal‐Fired Generation of Electricity Regulations (the “Draft Regulations”). In summary, the Draft Regulations aim to phase out the use of coal‐fired generation units, unless such units are associated with carbon capture storage systems (“CCS”) that enable such generation units to meet the intensity limits set by the Draft Regulations. This raises issues for domestic coal producers that supply coal‐fired electrical energy generation units.

The Draft Regulations
The Draft Regulations apply to coal‐fired electricity generation units that have been characterized as either (i) old, (ii) new, or (iii) existing:
• “Old unit” means a unit that has reached the end of its useful life but continues to produce electricity. Generally speaking, end of useful life is defined as the later of 45 years from the commission date or the end of their power purchase agreement applying to that unit.
• “New unit” means a unit, other than an old unit, whose commissioning date is on or after July 1, 2015.
• “Existing unit” means a unit that is not an old unit (so has not reached the end of its useful life) and is not a new unit (so had a commissioning date before July 1, 2015).

To read the complete article click here.

On October 7, 2011, the Ontario Securities Commission (“OSC”) published a Notice and Request for Comment (the “Notice”) on the Application by Maple Group Acquisition Corporation (“Maple”), a consortium of Canadian investment dealers, pension funds and other institutional investors, to acquire TMX Group Inc., Alpha Trading Systems Limited Partnership, Alpha Trading Systems Inc., the Canadian Depository for Securities Limited and, indirectly, CDS Clearing and Depository Services Inc. Maple is proposing to create an integrated group of businesses that provide trading, clearing, settlement and depository services for a broad array of financial instruments. The Alberta and B.C. Securities Commissions have also published a Joint Notice and Request for Comment seeking input on the Application.

The Notice summarizes the Maple proposal, highlights key issues that may arise from the proposed acquisition and provides information about the comment process.

The comment period is open until November 7, 2011. The OSC intends to hold a policy hearing in December 2011 to give members of the public who have submitted written comments an opportunity to clarify or expand on their written submissions.

On September 13, 2011, the securities regulators in Alberta, Ontario, Québec, Nova Scotia, New Brunswick and the Northwest Territories published Multilateral Staff Notice 51-336 (the “Notice”) identifying concerns regarding issuers who use mass advertising through various media, including television, social media, internet, radio and print.

Specifically, the Notice highlights a practice, primarily by junior issuers, of using brief television advertisements that highlight positive aspects of the issuer’s business or its prospects and the issuer’s stock symbol (or in the case of unlisted issuers, contact information for investment enquiries). The Notice sets out the view of securities regulators that mass advertisements for the purpose of promoting interest in an issuer’s securities may be contrary to securities legislation and/or be misleading to investors, as well as the concern that such advertisements do not reflect positively on the Canadian capital markets.

The Notice confirms that securities regulators will continue to monitor advertisements by issuers and may take regulatory action where appropriate.

On September 28, 2011, the Canadian Securities Administrators (“CSA”) published Staff Notice 31-329 (the “Notice”) issuing orders from several CSA members to provide relief from certain provisions in respect of National Instrument 31-103 – Registration Requirements, Exemptions and Ongoing Registrant Obligations (“NI 31-103”).

Since NI 31-103 came into force, the CSA received applications for exemptive relief of certain provisions of NI 31-103. The Notice outlines orders issued or extended by certain CSA members related to the following:

• the requirement to register when trading in short-term debt instruments;
• the restrictions on the registration exemptions for international dealers and international advisers in sections 8.18 [international dealer] and 8.26 [international adviser] of NI 31-103; and
• the requirement in section 14.2(1) of NI 31-103 to provide relationship disclosure information.

The Notice summarizes the orders and related staff positions that have been issued by CSA members in connection with NI 31-103. The Notice also outlines the staff positions of certain CSA members who did not issue similar orders in connection with the above noted provisions of NI 31-103.

On September 29, 2011, the Canadian Securities Administrators published Staff Notice 41-306 (the “Notice”) in response to inquiries about the financial information that must be included in a prospectus during the time of an issuer’s transition to IFRS. The purpose of the Notice is to outline the requirements with respect to Q1 IFRS transition information – being the opening statement of financial position as at the date of transition to IFRS, including IFRS 1 reconciliations for the date of transition to the most recent annual period.

The Notice provides insight on the differences between the financial disclosure requirements for Q1 IFRS transition information in an initial public offering (“IPO”) prospectus as opposed to a short form or non-IPO long form prospectus.

Specifically, the Notice confirms that Q1 IFRS transition information is required to be included in all IPO prospectuses but not in short form prospectuses or non-IPO long form prospectuses. As such, an issuer filing an IPO prospectus with Q2 or Q3 interim financials is still required to include either Q1 IFRS transition information or the entire Q1 IFRS financial report. The Notice also discusses accounting principles for financial statements in prospectuses filed in the first year after transition.

On October 5th, 2011, the Australian Securities Exchange (“ASX”) issued a consultation paper in respect of requirements for public reporting of exploration information, Mineral Resources, Ore Reserves and production targets for listed mining companies. The review seeks to enhance the quality of, and confidence in, reported information and promote thorough, balanced and consistent disclosure. The ASX is seeking comments by January 27, 2012.

The resource industry continues to be a significant factor on the ASX and in the Australian marketplace with

• approximately 45% of the number of listed ASX companies being involved in mining and oil and gas,
• a market capitalization of $365 billion and $78 billion, in the mining and oil and gas sectors respectively, as at August 31, 2011, and
• more than 400 new junior resource company floats during the past 5 years.

The British Columbia Securities Commission (the “BCSC”) has adopted amendments (the “Amendments”) to National Instrument 45-106 – Prospectus and Registration Exemption (NI 45-106), which will take effect on October 3, 2011. Among the implemented changes, the Amendments will introduce the following:

• Form 45-106F6 British Columbia Report of Exempt Distribution (the “New BC Form”). The New BC Form will replace the existing form, Form 45-106F1 Report of Exempt Distribution (“Form 45-106F1”);
• amendments to National Instrument 45-106 Prospectus and Registration Exemptions (the rule amendments);
• amendments to Companion Policy 45-106CP (the policy amendments); and
• consequential amendments to BC Companion Policy 13-502CP Electronic filing of reports of exempt distribution.

The BC Form will distinguish British Columbia from other Canadian jurisdictions, which will continue to use Form 45-106F1, thereby requiring an issuer or underwriter to file a separate form in British Columbia for exempt distributions that take place in British Columbia and one or more other jurisdictions of Canada.

However, pursuant to two concurrent orders from the BCSC published on September 23, 2011, certain exemptions to the Amendments have been adopted including:

• an exemption from the New BC Form for investment funds and foreign issuers; and
• an exemption for use of information by representatives of the media.

A copy of the New BC Form is available on the BCSC website.

Copies of the two BCSC orders referenced above are available on the BCSC website:

45-533 Exemption from Form 45-106F6 requirements for investment funds and foreign public issuers

45-532 Exemption for use of information by representatives of the media

Effective September 9, 2011, the TSX Venture Exchange (“TSXV”) has implemented a new Form 2A Personal Information Form (the “New PIF”) and Form 2C1 Declaration (the “New Declaration”) which, subject to a transition period, will replace the existing Form 2A (the “Old PIF”) and Form 2C1 (the “Old Declaration”). The New PIF and New Declaration have been harmonized with the Toronto Stock Exchange’s (“TSX”) new form of Personal Information Form (TSX Form 4) and Declaration (TSX Form 4B), which are also being implemented effective September 9, 2011.

The TSXV will continue to accept the Old PIF and Old Declaration from filers until December 31, 2011.

The New PIF and New Declaration are available on the TSXV’s website.

The Canadian Securities Administrators (CSA) have adopted amendments to Form 51-102F6 – Statement of Executive Compensation which will apply in respect of financial years ending on or after October 31, 2011. The amendments come largely as a result of CSA Staff’s targeted compliance review of executive compensation disclosure and recent international developments in the area of executive compensation. The amendments range from drafting changes to clarify existing disclosure requirements to new substantive requirements. The substantive amendments to Form 51-102F6 include:

• requiring a company that relies on the exemption from disclosing performance goals or similar conditions in its Compensation Discussion and Analysis (CD&A) on the basis that disclosure would “seriously prejudice the interests of the company” to explicitly state that it is relying on the exemption and explain why disclosing the relevant performance goals or similar conditions would seriously prejudice the company’s interests;
• requiring companies to disclose whether the board of directors has considered the implications of the risks associated with the company’s compensation policies and practices;
• requiring companies to disclose whether any named executive officer (NEO) or director is permitted to purchase financial instruments that are designed to hedge or offset a decrease in the market value of equity securities granted as compensation or held, directly or indirectly, by the NEO or director;
• requiring increased disclosure of information about compensation advisors retained by the company, including a description of the advisor’s mandate, any other work performed for the company and a breakdown of all fees paid to compensation advisors for each service provided; and
• requiring companies to disclose the methodology used to calculate grant date fair value of all equity-based awards, including key assumptions and estimates used for each calculation and why the company chose that methodology, regardless of whether there are any differences with the accounting fair value.

On September 19, 2011, the UK Takeover Panel implemented significant amendments to the UK Takeover Code. While the amendments sought to give increased power to the boards of target companies, some commentators have criticized the new rules for making UK M&A less appealing.

Key changes to the Code include:

• requiring a target company to name a potential bidder with whom it is in talks or from which a takeover approach has been received by making a “possible offer” announcement;
• the imposition of a shortened “put up or shut up” timetable which requires the announcement of a fully financed firm offer (or a statement that no offer will be made) by a potential bidder within 28 days from the “possible offer” announcement identifying that bidder; and
• the banning of common deal protection measures, including break fees.

The new amendments to the Code contrast starkly with the Canadian takeover market, in which confidentiality is commonly maintained until the announcement of a definitive business combination agreement and deal protection measures are utilized in almost all negotiated transactions.

The full text of the Code can be found on the UK Takeover Panel’s website.