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Women on boards: Review and discussion of new “comply or explain” disclosure requirements

As noted in the September 1, 2015 posting below, recent rule changes have required senior Canadian public companies to disclose their policies and record on the appointment of women as directors and executive officers. Our recent Insight summarizes the initial results of and response to these new disclosure rules, and indicates what further changes may lie ahead. See our Dentons Insight.

Women on boards: Review and discussion of new “comply or explain” disclosure requirements

BC Environmental Assessment Office Fees

The Province of British Columbia approved an Order in Council dated April 11, 2014 to establish environmental assessment fees in British Columbia for the review of environmental assessment applications, orders and enforcement fees.

The fee structure became effective on April 14, 2014.

There are three categories of fees: 1. pre-certificate fees; 2. transitional assessment fees; and 3. post-certificate fees.

Pre-certificate Fees

There is an exemption fee of $10,000 payable when a party seeks an exemption from the requirement for an environmental assessment certificate. The first installment for an assessment fee ranges from “simple” at $25,000 to “typical” at $75,000 and the assessment fee for the second installment ranges from $25,000 to $75,000.

Transitional Assessment Fees

Transitional assessment fees range from “simple” at $37,500 to “complex” at $112,500.

Post-certificate Fees

Post certificate fees for an extension range from $2,000 to $10,000 and an amendment fee ranges from $2,000 to $50,000. In addition, there are inspection fees imposed and the timelines for the payment of the fees are as set out in the regulations. There are a number of factors that are used to determine the fees and these are set out in the materials available on the government website at http://www.eao.gov.bc.ca/fees.html.

BC Environmental Assessment Office Fees

TSX-V Extends Temporary Relief Measures for Private Placements

As recently announced in a Corporate Finance Bulletin and Notice to Issuers (the “Bulletin”), the TSX Venture Exchange (“TSX-V”) has extended until April 30, 2013 three temporary measures (the “Relief Measures”) designed to provide relief to issuers from certain pricing requirements relating to private placement financings. The Relief Measures, originally implemented in August 2012, are as follows:

1) Allowing a share/unit offering with an offering price below $0.05.

2) Allowing a debenture offering with a debenture conversion price below $0.10.

3) Allowing offerings involving a warrant with an exercise price below $0.10.

In order to rely on the Relief Measures, an issuer must demonstrate that it is subject to immediate or imminent financial hardship and that it does not have the time or resources to undertake a share consolidation before closing the financing. In addition, the principal use of proceeds of the financing must be to maintain or preserve the existing business of the issuer and none of the proceeds may be used to compensate or satisfy obligations to related parties of the issuer.

The Bulletin includes an amendment to the originally-implemented Relief Measures by introducing the concept of an “Excluded Amount” with respect to financings with a share/unit offering price below $0.05 or a debenture conversion price below $0.10. The amended Relief Measures provide that up to $50,000 of the gross proceeds raised in a financing in reliance on the Relief Measures can be used for general working capital purposes and is not subject to the “Maintain/Preserve Existing Business” and “No Payments to Related Parties” conditions noted above.

Specifics of the requirements and conditions associated with use of the Relief Measures are detailed in the Bulletin.

TSX-V Extends Temporary Relief Measures for Private Placements

2012 Mining Report British Columbia Securities Commission

On January 24, 2013, the BC Securities Commission issued a report (the “2012 Mining Report”) with respect to disclosure and interpretive issues under National Instrument 43 101, which is referenced as “the Mining Rule” in the report. Any questions or comments on the 2012 Mining Report can be submitted to Robert Holland or Ian McCartney of the B.C.S.C.

The report identifies a number of weaknesses in the disclosure of mining companies and provides a useful checklist for compliance measures in Appendix “A” which you can download by clicking ”Download PDF”, and a summary of the mining technical reviews disclosing the common compliance elves on the different disclosures which is also attached to this memo.

The report identifies the following common deficiencies encountered in reviewing technical reports including:

  • Missing or altered statements in certificates and consents of the Qualified Persons;
  • Not dated, signed, or addressed to the company;
  • Non compliant disclaimers of responsibility or statements of reliance;
  • Does not provide a summary of all material technical and scientific information for the entire property;
  • Non compliant disclosure of historical estimates, exploration targets, or MRMR;
  • Does not provide adequate or sufficiently transparent information on the key assumptions, parameters, and methodologies used in mineral resource estimates.

In addition, the report also references the CIM December 15, 2009 publication “Additional Guidance – Reasonable Prospects for Economic Extraction”.

The CIM statement emphasizes that the use of the words “reasonable prospects for economic extraction” in addressing mineral resources are:

  • the responsibility of the Qualified Person;
  • judgment based on the Qualified Person’s experience; and
  • the methods used and assumptions made to determine if the project has “reasonable prospects” which must be presented explicitly in both public and technical reports.

Note that this clarification applies not only to measured and indicated resources, but also inferred reso 2012 Mining Report British Columbia Securities Commission urces and a copy is attached to this memo for reference.

To read Appendix A, click here.

2012 Mining Report British Columbia Securities Commission

Amendments to the TSX Company Manual and Amendments to the TSX Rule Book

Ara Basmadjian, articling student, assisted in the preparation of this article.

On October 11, 2012, the Toronto Stock Exchange (“TSX”) issued a request for comments on proposed amendments (the “Amendments”) to the TSX Company Manual (the “Company Manual”) and the TSX Rule Book (the “TSX Rules”). The Amendments provide clarification to the process of appeal with respect to listing-related decisions. Furthermore, the Amendments offer consistency between the appeal rules under the Company Manual and those under the TSX Rules.

The Amendments, which will become effective upon approval by the Ontario Securities Commission (“OSC”), include the following:

(1) changes to the composition of the appeal panel. An appeal will be heard by at least one and up to three senior TSX executives;

(2) codification of the common practice of submitting written requests for appeals and written submissions;

(3) clarification of the decision making responsibilities that are delegated to listing managers;

(4) clarification of the timeline to appeal delisting decisions; and

(5) revision and clarification of the rules relating to the suspension and termination of participating organizations.

The TSX will publish the Amendments for a 30-day comment period. Written comments are accepted until November 12, 2012.

Amendments to the TSX Company Manual and Amendments to the TSX Rule Book

TSX Requests Comments on Majority Voting Policy – Proposed Amendments to Part IV of the Company Manual

On October 4, 2012, the Toronto Stock Exchange (“TSX”) released a request for comments on proposed amendments to Part IV of the TSX Company Manual (the “Proposed Amendments”). The Proposed Amendments would require issuers listed on the TSX to have majority voting when electing directors at uncontested security holder meetings. As currently proposed, issuers may adopt a majority voting policy to comply with the requirement.

Under mandatory majority voting, security holders vote “for” or “against” each individual board nominee and only those directors who receive a majority of votes in their favour remain on the board. Typically, a majority voting policy provides that a director who receives a majority of “against” votes must immediately tender his/her resignation to the board of directors. The Proposed Amendments would require the board of directors to issue a news release disclosing: (i) the detailed results of the votes received for the election of each director; and, where applicable, (ii) whether a resignation was accepted and the board’s reasons for the decision.

As indicated by the Canadian Coalition for Good Governance, 39% of the listed issuers in the S&P/TSX Composite Index do not have majority voting. The TSX asserts that the Proposed Amendments will improve corporate governance standards, strengthening Canada’s international reputation.

Comments on the Proposed Amendments are being accepted until November 5, 2012. The TSX anticipates that the Proposed Amendments could become effective as of December 31, 2013.

TSX Requests Comments on Majority Voting Policy – Proposed Amendments to Part IV of the Company Manual

The Canadian Securities Administrators (CSA) have published CSA Notice of Republication and Request for Comment Regarding Proposed National Instrument 51-103 Ongoing Governance and Disclosure Requirements for Venture Issuers

On July 29, 2011, the Canadian Securities Administrators (“CSA”) published for comment a proposed rule and rule amendments (collectively, the “Original Proposals”) proposing a new tailored regulatory regime for venture issuers. After reviewing the comments received and further consideration, the CSA is proposing various changes to the Original Proposals. Consequently, on September 13, 2012, the CSA republished the proposed rule and rule amendments for a second public comment period.

Consistent with the Original Proposals, the CSA is proposing the adoption of a single new national instrument, National Instrument 51-103 – Ongoing Governance and Disclosure Requirements for Venture Issuers (“NI 51-103”) that, for venture issuers, will mandate most of their substantive continuous disclosure and governance obligations.

NI 51-103 introduces a proposed new tailored regulatory regime for venture issuers that are intended to streamline venture issuer disclosure to reflect the needs and expectations of venture issuer investors. The regime also aims to make the disclosure requirements more suitable and more manageable for venture issuers at this stage of their development. NI 51-103 replaces the disclosure obligations set out for venture issuers in National Instrument 51-102 – Continuous Disclosure Obligations, National Instrument 52-109 – Certification of Disclosure in Issuers’ Annual and Interim Filings, National Instrument 52-110 – Audit Committees, National Instrument 58-101 – Disclosure of Corporate Governance Practices and National Policy 58-201 – Corporate Governance Guidelines.

Further details can be found here.

The Canadian Securities Administrators (CSA) have published CSA Notice of Republication and Request for Comment Regarding Proposed National Instrument 51-103 Ongoing Governance and Disclosure Requirements for Venture Issuers

Definition of Preliminary Economic Assessments Clarified

The Canadian Securities Administrators (“CSA”) published Staff Notice 43-307 Mining Technical Reports – Preliminary Economic Assessments, which is intended to clarify the definition of “preliminary economic assessment” (“PEA”) in National Instrument 43-101 Standards of Disclosure for Mineral Projects (“NI 43-101”). NI 43-101 defines a PEA as “a study, other than a pre-feasibility study or feasibility study, which includes an economic analysis of the potential viability of mineral resources”. The terms pre-feasibility study (“PFS”) and feasibility study (“FS”) have the meanings ascribed by the CIM Definition Standards for Mineral Resources and Mineral Reserves, as amended. The CSA notes that certain issues have been identified in monitoring PEA disclosure since June 2011 when this definition was included in NI 43-101.

The Notice emphasizes to issuers that a PEA is to be kept separate and distinct from both PFS and FS, which indicate more comprehensive studies, and provides further guidance to issuers on other aspects of PEA preparation and disclosure to address the issues that have arisen. The CSA notes that the definition of PEA has two elements that distinguish it from other studies, namely that, by definition it cannot be a PFS or FS and it can only demonstrate the potential viability of mineral resources, not the technical or economic viability of a project. The Notice provides guidance to issuers regarding how to properly identify and disclose a PEA and avoid the staff challenging the study or taking the position that the issuer is treating the PEA as a PFS.

Definition of Preliminary Economic Assessments Clarified

OSC Focuses on Improvements to the Director Election Process in its 2012 Annual Report

Shaira Nanji, articling student, assisted in the preparation of this article.

The Ontario Securities Commission (OSC) recently released its 2012 annual report (“Report”) which provides an update on the OSC’s intentions concerning potential reforms to the regulation of director elections. The Report discusses how to strengthen “shareholder democracy” and shareholder voting rights with regards to the uncontested director-elections process. The Report supports an earlier proposal made by the Toronto Stock Exchange (TSX) in September 2011 which suggested that:

• directors of listed issuers are elected individually and not by slate voting;

• listed issuers disclose the voting results from shareholders meetings (even if the vote was done by raising hands); and

• listed issuers disclose if they have a majority-voting policy when electing directors.

The TSX proposal also focuses on majority voting for director elections and includes a “comply or explain” disclosure-based regime. Since shareholder voting rights have a “significant impact on confidence in the capital markets,” the Report notes that these proposed initiatives will result in greater transparency and accountability of boards of directors. The OSC plans to work closely with the TSX to improve the director-elections process.

OSC Focuses on Improvements to the Director Election Process in its 2012 Annual Report

The Canadian Securities Administrators (CSA) have published CSA Notice 45-310 Update on CSA Staff Consultation Note 45-401 Review of Minimum Amount and Accredited Investor Exemptions

On November 10, 2011, CSA staff published CSA Staff Consultation Note 45-401 Review of Minimum Amount and Accredited Investor Exemptions (the consultation note). The consultation note provided information about the two exemptions under review and set out 31 consultation questions. The comment period closed on February 29, 2012.

On June 7, 2012 CSA staff published CSA Staff Notice 45-310 which updates market participants on the status of the consultation.

With respect to the Accredited Investor Exemption, some commenters supported retaining the accredited investor exemption and the definition of accredited investor in its current form while others suggested that the CSA could broaden the exemption to increase access to capital by businesses and opportunities to invest in the exempt market for more people.

With respect to the minimum amount exemption, many stated that the minimum amount is a flawed basis to measure investor sophistication or ability to withstand loss and operates to discourage diversification or appropriate investment strategies. Many recommended that the CSA repeal the exemption because of these concerns. Others recommended that the CSA keep the exemption at its current threshold despite these concerns. Their reasons for keeping the minimum amount exemption included: its usefulness as an alternative exemption when no other is available; its simplicity where investors are not willing to complete paperwork; and, the reasonable assumption that an investor would exercise care and caution before making such a large investment

Given the number of comments and the diversity of the feedback provided, the CSA indicated they would need further time to complete their review and consider the feedback. The CSA have indicated that they will finalize their review and publicly report on their conclusions later this year. A copy of the notice can be found here.

The Canadian Securities Administrators (CSA) have published CSA Notice 45-310 Update on CSA Staff Consultation Note 45-401 Review of Minimum Amount and Accredited Investor Exemptions

TSX Provides Guidance on Normal Course Issuer Bids

On June 8, 2012, the Toronto Stock Exchange (“TSX”) published a staff notice (the “Notice”) aimed at providing guidance to issuers and capital market participants on the use of block purchase exemptions and securities purchased in error under a normal course issuer bid (“NCIB”).

Subsection 629(l)(7) of the TSX Company Manual (the “Manual”) sets out what is commonly referred to as the “block purchase exemption”, which allows an issuer to make one purchase per calendar week which exceeds the daily repurchase restriction. In the Notice, TSX staff raise concerns about the practice by some dealers of bundling pre-existing blocks to sell into one purchase order under an NCIB. In the view of TSX staff, the combination of pre-existing blocks is considered inappropriate and inconsistent with the exception, as such practice allows an issuer to exceed the “one block per week” limitation. The Notice reminds issuers that the block purchase exception was created to allow an issuer to repurchase a large naturally-occurring block on the market, particularly in the case of illiquid securities.

The Notice also confirms that securities purchased in error under an NCIB which are taken into inventory by the buying broker firm may not be resold into an NCIB, as such trades would be considered to be pre-arranged trades, contrary to subsection 629(l)(2) of the Manual. The Notice suggests that one way for dealers to ensure that such securities are not resold into an NCIB is to temporarily cease purchases under an NCIB during resale of such securities.

 

TSX Provides Guidance on Normal Course Issuer Bids

TSX, TSX-V and BVC Execute Memorandum of Understanding

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.

TSX, TSX-V and BVC Execute Memorandum of Understanding

Changes to the Mineral Tenure Act Regulation

On July 1, 2012, changes to the Mineral Tenure Act Regulation will come into effect in British Columbia.

The good news is that many of the current registration fees will be eliminated including fees for registration of exploration and development work, registration of payment of cash in lieu of work, registration of portable assessment credits, amalgamations, reduction of cell claims and transfer of ownership.

The number of cells per claim that can be selected will be increased from 25 to 100 per acquisition. The fees, however, will increase for registration of mineral claims from $.0.40 per hectare to $1.75 and from $2.00 per hectare to $5.00 per hectare for placer claims.

In addition, the new assessment requirements will increase from the present $4.00 per hectare in each of the first three years and $8.00 per hectare thereafter to $5.00 per hectare for years one and two, $10.00 per hectare for years three and four, $15.00 per hectare for years five and six and $28.00 per hectare for each subsequent year.

The assessment work for placer claims will increase from $10.00 per hectare to $20.00 per hectare per year.

The result is that new assessment work being filed on claims will create, in effect, new anniversary dates such that new assessment filings will commence with the new process starting with the first year in which the new assessment would apply. As an example, if a claim is good until 2015 and new assessment work is filed in 2012, the assessment work for 2016 and 2017 would be $5.00 per hectare commencing in 2016.

Payments by cash in lieu will double for each of the time periods and the new minimum time frame for filing cash in lieu will be six months rather than the current one day.

Mineral lease rentals will also increase from $10.00 per hectare to $20.00 per hectare and placer lease rentals will increase from $5.00 per hectare to $20.00 per hectare.

It will also be possible to subdivide claims consisting in two or more cells. Any assessment work on such claims would be divided among the number of cells.

Changes to the Mineral Tenure Act Regulation

IIROC requests comments on marketplace thresholds

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.

IIROC requests comments on marketplace thresholds

CSA designates rating organizations

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.

CSA designates rating organizations

CSA Provides Guidance on Disclosure Requirements related to Prospectus Exemptions

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.

CSA Provides Guidance on Disclosure Requirements related to Prospectus Exemptions

OSC Releases Strategic Plan for 2012-2015

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.

OSC Releases Strategic Plan for 2012-2015

Court Confirms IIROC’S Jurisdiction Over Investment Dealer Members

This article was written by Mark Evans and Michael Beeforth.

Introduction

The Ontario Divisional Court’s recent decision in Deeb v IIROC, 2012 ONSC 1014 (CanLII) will be of interest to securities law practitioners with clients operating in Ontario, as it speaks to the ability (or inability) of respondents to circumvent the disciplinary process of the Investment Industry Regulatory Organisation of Canada (IIROC) by means of an application for judicial review. Deeb confirms that, in line with previous decisions, IIROC derives its authority from the contractual relationships with its members and not from statute, and that when an individual or firm contractually submits to IIROC’s jurisdiction, it is bound by that commitment and will be unable to bypass IIROC’s disciplinary procedures by proceeding directly to the civil courts.

Background

IIROC is a self-regulatory organisation that regulates investment dealers in Canada. IIROC is recognised as a self-regulatory organisation by the Ontario Securities Commission (OSC) pursuant to the Ontario Securities Act (RSO 1990, c S.5), which allows persons or companies affected by a direction, decision, order or ruling made by IIROC to apply to the OSC for a hearing and review of the relevant direction, decision, order or ruling. Despite being recognised by the OSC, IIROC is an independent body and receives its funding from its members.

Hampton Securities Limited is a dealer member of IIROC. Peter Michael Deeb, the president and chief executive officer of Hampton, is registered as an ‘approved person’ with IIROC. Both agreed to be bound by IIROC’s rules and bylaws and submitted to IIROC’s jurisdiction. Specifically, in its April 2008 membership application, Hampton stated that it “submits to the jurisdiction of IIROC”, and that it “agrees that IIROC is entitled to exercise such jurisdiction over the applicant and its approved persons with respect to any matter, facts, actions or circumstances existing or arising prior to, as at, or after the date” on which it became a member.

In late 2009 IIROC commenced an investigation into both Deeb and Hampton on the basis of three anonymous complaint letters received by IIROC, which were shown but not produced to them. The investigation led to a business conduct review of Hampton in 2010, which resulted in a business conduct report describing three matters relating to Hampton’s conduct.

Subsequent to the release of the business conduct report, on September 1 2011 IIROC issued a notice of hearing pursuant to its rules naming Deeb as a respondent in a disciplinary hearing. An alert concerning the notice of hearing was posted on the IIROC’s website and distributed to its members. Hampton and Deeb alleged that they experienced several deleterious consequences as a result, including loss of business to Hampton, loss of Hampton’s staff and the inability of Deeb to open a bank account.

On November 3 2011 the applicants commenced an application in the Ontario Divisional Court under the Judicial Review Procedure Act (RSO 1990, c J.1), seeking an order quashing IIROC’s notice of hearing and compelling it to retract its business conduct report, produce the three anonymous complaint letters and set aside the close supervision by IIROC to which Deeb had previously consented. IIROC subsequently moved to quash the application for judicial review.

Decision to quash application for judicial review

The test on a motion to quash an application for judicial review in Ontario is whether it is plain and obvious that the application cannot succeed or, alternatively, that it is beyond doubt that the application will fail. On its motion, IIROC submitted that the application should be quashed for two reasons:

• There was no jurisdiction for the court to hear the application under the Judicial Review Procedure Act; and

• The application was premature as the applicants had proceeded directly to the divisional court without pursuing relief before an IIROC hearing panel.

In granting IIROC’s motion and quashing the application, Justice Pepall held that IIROC had met the plain and obvious test on both issues.

Lack of jurisdiction

Section 2(1) of the Judicial Review Procedure Act provides that an application for judicial review may request any relief that the applicant would be entitled to in any:

• proceedings by way of application for an order in the nature of mandamus, prohibition or certiorari; or

• proceedings by way of an action for a declaration or for an injunction, or both, in relation to the exercise, refusal to exercise or proposed or purported exercise of a statutory power.

The plain language of the act indicates that the judicial review jurisdiction under the second category is limited to exercises of ‘statutory power’, while case law has established that the jurisdiction under the first category is limited to exercises of ‘state power’.

In accepting IIROC’s submission that its disciplinary jurisdiction over the applicants flowed from the contractual commitments made by its members, the court held that IIROC was not created by and derived no authority from statute, and that it did not exercise any state power other than narrow delegated powers that were not engaged in the current case. Accordingly, disciplinary investigations or steps initiated by IIROC were properly overseen by IIROC and were not the subject of judicial review under the act.

The court also rejected the applicants’ argument that IIROC derived its regulatory authority from the OSC’s recognition order, referring to the Ontario Court of Appeal’s decision in Taub v Investment Dealers Association of Canada, 2009 ONCA 628 (CanLII), which specifically confirmed that “[IIROC’s] duties are not determined by statute and… recognition by the OSC does not transform [IIROC] into a government actor”.

Prematurity

The court agreed with IIROC’s second submission, holding that in the event that its decision concerning jurisdiction was incorrect, the application was nonetheless premature as there were ongoing proceedings before a properly constituted IIROC hearing panel. The hearing panel was properly the decision maker of first instance in the context of IIROC’s disciplinary proceedings and should decide the merits of any requests made by parties to those proceedings. Finally, the court held that there were no exceptional or extraordinary circumstances that justified the exercise of its discretion to permit the application to be heard despite the ongoing IIROC proceedings.

Comment

The divisional court’s decision in Deeb follows the Ontario Court of Appeal’s ruling in Taub that IIROC’s jurisdiction over its members is grounded in contract and not in either statute or in IIROC’s recognition as a self-regulatory organisation by the province’s securities commission. Accordingly, one should expect that the courts in Ontario will continue to respect IIROC’s jurisdiction in regards to disciplinary proceedings over its members (and former members) and, absent extraordinary circumstances, will not intervene in such proceedings at the preliminary stages through applications for judicial review.

Court Confirms IIROC’S Jurisdiction Over Investment Dealer Members

Toronto Stock Exchange (“TSX”) Adopts Amendments to TSX Company Manual

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.

Toronto Stock Exchange (“TSX”) Adopts Amendments to TSX Company Manual

Amendments to The Toronto Stock Exchange ("TSX") Company Manual

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 オンライン カジノ 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.

Amendments to The Toronto Stock Exchange ("TSX") Company Manual