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2019

2019 ISS and Glass Lewis updates to canadian proxy voting guidelines

Jan 22, 2019

On January 22, 2019, Bennett Jones LLP released a summary of the updates issued by Institutional Shareholder Services ("ISS") and Glass, Lewis & Co ("Glass Lewis") to their respective Canadian proxy voting guidelines for the 2019 proxy season. The ISS updates apply to shareholder meetings of publicly traded Canadian companies occurring on or after February 1, 2019, while Glass Lewis updates apply to meetings that are held on or after January 1, 2019.

Recommendations from proxy advisory firms such as ISS and Glass Lewis can have a significant impact on the outcome of business conducted at shareholder meetings, especially if institutional investors comprise a significant component of the company's shareholder base. Canadian public companies should review the updates with their legal counsel to determine the likely impact and take steps to mitigate any potential adverse voting recommendations from ISS or Glass Lewis.

The guideline includes an update to the ratification of the auditor: Glass Lewis has codified specific factors it will take into consideration when reviewing auditor ratification proposals. Specifically, Glass Lewis will assess an auditor's tenure, patterns of inaccurate audits, and any ongoing litigation or significant controversies that call into question an auditor's effectiveness. These factors may contribute to a negative voting recommendation against auditor ratification in limited circumstances.

Review the summary on Bennett Jones LLP's website.

AcSB Response – Canadian Securities Administrators (CSA) Notice and Request for Comment on Proposed National Instrument 52-112

Jan 24, 2019

On January 24, 2019, the Accounting Standards Board (AcSB) released its response to the CSA’s Request for Comment on Proposed National Instrument 52-112, which sets out disclosure requirements for non-GAAP financial measures and other financial measures when presented outside of an issuer’s financial statements.

Overall, the letter strongly supports global comparability in financial reporting. It also urges the CSA to weigh the benefits of leading in this area against increasing the regulatory disclosure burden on Canadian issuers beyond that of other jurisdictions. Accordingly, the letter encourages the CSA to:

  • closely consider the requirements of other global securities regulators to ensure that Canadian issuers are providing comparable information to issuers in other jurisdictions; and
  • work with regulators in other jurisdictions to ensure that Canadian issuers are not at a competitive disadvantage when compared to their international peers, as the result of the proposed increase in disclosure requirements.

Review the press release and comment letter on the AcSB's website.

Canadian securities regulators consult on regulatory framework for crypto-asset trading platforms

Mar 14, 2019

On March 14, 2019, the Canadian Securities Administrators (CSA) and Investment Industry Regulatory Organization of Canada (IIROC) published Joint Canadian Securities Administrators/Investment Industry Regulatory Organization of Canada Consultation Paper 21-402 Proposed Framework for Crypto-Asset Trading Platforms. The consultation paper seeks input from the fintech community, market participants, investors and other stakeholders on how regulatory requirements may be tailored for crypto-asset trading platforms (platforms) operating in Canada. Comment are requested by May 15, 2019.

Platforms, depending on how they operate and the crypto assets they make available for trading, may be subject to securities and/or derivatives regulation. Depending on their structure, they may also introduce novel features that create risks to investors and Canada’s capital markets that may not be fully addressed by the existing regulatory framework. Where securities legislation applies to platforms, the CSA and IIROC are considering a tailored regulatory framework to address these novel features and risks.

The consultation paper seeks input on a number of areas that will assist in determining appropriate requirements for platforms. These include how to address custody and verification of assets, price determination, market surveillance, systems and business continuity planning, conflicts of interest, crypto-asset insurance, and clearing and settlement. The CSA and IIROC continue to engage with international regulators about their approach to platforms, and welcome input on a variety of regulatory approaches that exist in this area.

Review the press release and consultation paper on the CSA members' website.

Canadian securities regulators release detailed data from review of women on boards and in executive officer positions

Feb 26, 2019

On February 26, 2019, the securities regulatory authorities in Manitoba, New Brunswick, Newfoundland and Labrador, Northwest Territories, Nova Scotia, Nunavut, Ontario, Québec, Saskatchewan and Yukon (the participating jurisdictions) published the underlying data used to prepare CSA Multilateral Staff Notice 58-310 "Report on Fourth Staff Review of Disclosure regarding Women on Boards and in Executive Officer Positions", which was published on September 27, 2018.

This was the fourth consecutive annual review of disclosure related to women on boards and in executive officer positions conducted by the participating jurisdictions.

The data was compiled from public documents filed on SEDAR and includes the name, industry and year-end of the 648 non-venture issuers who were included in the review sample. These issuers had year-ends between December 31, 2017 and March 31, 2018, and filed information circulars or annual information forms by July 31, 2018.

Review the press release on the the CSA's website and the Staff Notice on the OSC's website. 

Canadian securities regulators outline next steps on the development of an integrated information system

May 02, 2019

On May 2, 2019, the Canadian Securities Administrators (CSA) set out next steps for a new integrated national information and filing system (the Renewed System) for Canada’s capital markets. The Renewed System will replace the System for Electronic Document Analysis and Retrieval (SEDAR), the System for Electronic Disclosure by Insiders (SEDI), the National Registration Database (NRD), and various local records filing systems.

To lay the groundwork for the Renewed System, the CSA has published two notices for comment that propose a new system fee structure and filing requirements. The CSA is proposing to revise Multilateral Instrument 13-102 System Fees for SEDAR and NRD to implement a flat-fee model, rather than the current model where system fees are based on the number of jurisdictions where documents are filed. The model has been designed to reflect the costs of using the new system, allow for future enhancements, and reduce the administrative burden for market participants.

The CSA is also proposing a new rule, National Instrument 13-103 [System Replacement Rule], which would require filers to electronically transmit all documents to securities regulators through the new system, subject to certain exceptions. Those exceptions include documents delivered in connection with a hearing, compliance review or investigation, or certain documents that are filed infrequently. In addition, the proposed rule would not apply to certain documents that would be required to be filed or delivered in the Renewed System in future phases of the project, as outlined in the Appendix.

The Renewed System will be rolled out in phases. The first phase, with an expected launch in early 2021, will replace issuer-related systems and filings: SEDAR, the National Cease Trade Order Database, the Disciplined List, and certain filings made in paper format or in local electronic filing systems. Later phases will replace SEDI, NRD, the National Registration Search, and the remaining filings in local systems.

The CSA expects to propose further changes to National Instrument 13-103 [System Replacement Rule] in future phases of the Renewed System.

The notices can be found on the websites of participating jurisdictions, and comments for both must be submitted by July 31, 2019.

Review the press release on the OSC's website.

IOSCO issues good practices to assist audit committees in supporting audit quality

Jan 17, 2019

On January 17, 2019, the Board of the International Organization of Securities Commissions (IOSCO) published the "IOSCO Report on Good Practices for Audit Committees in Supporting Audit Quality", which seeks to assist audit committees in promoting and supporting audit quality.

The quality of a company's financial report, supported by an independent external audit, is key to market confidence and informed investors, and to the effective functioning of capital markets. While the auditor has primary responsibility for audit quality, the audit committee should promote and support audit quality and thereby contribute to greater confidence in the quality of information in the listed company’s financial reports. The good practices report can assist audit committees in considering ways in which they may be able to promote and support audit quality.

The report sets out good practices regarding the features that an audit committee should have to be more effective in its role, including matters such as the qualifications and experience of audit committee members.

Review the press release and report on the IOSCO's website.

OSC taking action to reduce regulatory burden for Ontario market participants

Jan 14, 2019

On January 14, 2019, the Ontario Securities Commission (OSC) published OSC Staff Notice 11-784: Burden Reduction, which outlines plans to broadly consult Ontario market participants on ways to further reduce regulatory burden and improve the investor experience.

Key areas of focus for the OSC’s consultation include but are not limited to: Operational changes, rules that may have become outdated or unnecessary, and opportunities to streamline and improve disclosure provided to investors, who ultimately bear the cost of unnecessary or outdated regulations.

The consultation follows the OSC’s November 2018 establishment of a Burden Reduction Task Force, which has a mandate to consider and act on suggestions to eliminate unnecessary rules and processes while protecting investors and the integrity of Ontario’s capital markets. This initiative also builds on the OSC’s efforts, since 2016, to reduce regulatory burden across the country through its ongoing work with the Canadian Securities Administrators on projects to reduce burden in public markets and in the investment fund space.

The OSC encourages interested stakeholders to submit written comments on new initiatives that it should consider to reduce regulatory burden by March 1, 2019.

Review the press release and Staff Notice on the OSC's website.

Overseeing the intersection of digital transformation and cybersecurity

Mar 21, 2019

On March 21, 2019, the National Association of Corporate Directors (NACD) published a blog by Tony Spinelli, CEO of S7 Advisors LLC. In his blog, he mentions how we’ve all heard the buzz word “digital,” and how he often gets asked questions about how to analyze and oversee the risks of enterprise-wide digital transformation.

While a possible nuisance to the person asking, his first answer tends to be a question: What do you believe it means for your enterprise to become digital?

Only once your company answers that question can the challenges and risks associated with a well-managed transformation be weighed. Invariably, the answers to this question are unique and divergent.

Review the full blog on NACD's website.

President Trump nominates new SEC commissioner

Apr 02, 2019

On April 2, 2019, President Donald Trump has announced the nomination of Allison Herren Lee to serve as SEC commissioner.

If confirmed by the Senate, Ms. Lee will succeed Kara Stein.

For more information, see the press release on the White House’s Web site.

Technology and Cyber Security Incident Reporting

Jan 30, 2019

In January 2019, the Office of the Superintendent of Financial Institutions (OSFI) released the advisory "Technology and Cyber Security Incident Reporting", which sets out OSFI’s expectations for federally regulated financial institutions (FRFIs) with respect to the reporting of technology and cyber security incidents affecting FRFI operations.

The advisory describes characteristics of incidents that should be reported to OSFI, in addition to initial notification and subsequent reporting requirements.

The advisory comes into effect on March 31, 2019.  In the meantime, FRFIs are expected to continue reporting any major incidents according to previous instructions communicated by their Lead Supervisors. Effective March 31, 2019, this Advisory supersedes any prior instructions for technology and cyber security incident reporting.

Review the press release and advisory on the OSFI's website.

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