Financial Crime World

Insider Trading Laws in Canada: Special Relationships and Reporting Obligations

Insider Trading laws in Canada, outlined under Part XXI of the Ontario Securities Act (OSA), are essential for maintaining a level playing field in the securities trading market. These laws, coupled with reporting obligations, serve to prevent insider trading activities and cover various situations, such as undisclosed changes, tipping, transactions, and recommendations.

Unlawful Trading and Special Relationships

Under the OSA, insider trading refers to purchasing or selling securities of an issuer while knowing of a material fact or material change that is not publicly disclosed. Persons or companies in special relationships with issuers, including:

  • Directors
  • Officers
  • Significant investors

are prohibited from tipping off others about non-public material information.

Reporting Obligations for Substantial Acquisitions and Mergers

Individuals or companies planning substantial acquisitions of an issuer or contemplating takeover bids or mergers are restricted from sharing undisclosed material facts before public disclosure, except in specific business contexts.

Defences and Reporting Requirements

A defence is available if a person or company can prove that they reasonably believed the material fact or material change had been publicly disclosed. These reporting requirements can help detect potential breaches of Section 76 of the OSA concerning issuers.

The Broad Definition of Special Relationships

The term “person or company in a special relationship with an issuer” is comprehensive and includes various entities, such as:

  • Those considering or evaluating prospective business activities
  • Entities involved in mergers or acquiring substantial portions of an issuer’s property
  • Directors
  • Officers
  • Employees
  • Individuals or companies who learn of material facts from these individuals or companies

Expansion of the OSA

Legislation like Bill 91 expanded the OSA’s scope, making insider trading laws applicable to all issuers, effective June 4, 2015. Similar provisions exist in other Canadian jurisdictions regarding reporting issuers.

Maintaining Integrity of the Canadian Securities Market

These regulations are significant for upholding the integrity of the Canadian securities market and allowing investors to make informed decisions based on publicly available information.