Firm News


Another op-ed published in the Globe and Mail

For the second time in just over a year, the Globe and Mail's Report on Business (ROB) published an opinion piece co-authored by the firm's principal, Robert Keller, and Michael Motala, as one of the lead articles on the ROB "Opinion" page. Entitled "For crowdfunding to succeed, we must level the playing field", the piece identifies a significant discrepancy in the regulation of different kinds of crowdfunding in Canada, on the first anniversary of the equity crowdfunding rules, and argues that harmonization is the best way forward, both for industry stakeholders and for investors. Read the full piece by clicking here.


Op-ed published in the Globe and Mail

An opinion piece co-authored by the firm's principal, Robert Keller, and Michael Motala, entitled "Regulators need to heed the rise of crowdfunded ‘techquity’ markets", was published today as the lead article in the Globe and Mail's Report on Business - Comment & Analysis section. The piece argues that the intersection of digital platforms and tech entrepreneurship is leading to new models of capital formation for which existing regulations may not quite be adequate. Read the full piece by clicking here.












Industry News


IIROC announces effective date for "Plain Language" version of Dealer Member Rules

The Investment Industry Regulatory Organization of Canada ("IIROC") today announced that the final version of its "Plain Language" Dealer Member Rules will go into effect on June 1, 2020 (except for certain sections for which implementation is being delayed to allow Dealer Members additional time to make any necessary operational adjustments, as noted in the OSC approval notice also published today). The "Plain Language" rule rewrite project, which began in 2009, following the 2008 merger that created IIROC (combining the Investment Dealers Association and Market Regulation Services Inc.), for now omits the incorporation of the Universal Market Integrity Rules, which shall continue as a standalone rulebook. The final "Plain Language" version of the Dealer Member Rules--which shall now be known as the "IIROC Rules"--may be viewed on the IIROC website here.



Omega subject to a possible suspension by the OSC​
The Financial Post reported on November 14, 2017 that Ontario Securities Commission staff had filed an Application on November 13 (made public on November 14) with the Commission requesting a temporary suspension of all operations of Omega Securities Inc., a Canadian registered investment dealer (marketplace) that operates two alternative trading systems, Omega ATS and Lynx ATS. OSC staff are alleging  serious violations of Ontario securities laws. A hearing before the Commission is scheduled to take place at OSC headquarters in Toronto at 10 am on Friday, November 17. Pursuant to a notice issued by OSC staff, Canadian marketplaces and marketplace participants were reminded that they may declare "self-help" in the current circumstances, pursuant to, respectively,  subsection 6.2(a) and paragraph 6.4(a)(i) of National Instrument 23-101 Trading Rules, and sources say that several marketplaces have done so. The outcome of this hearing could have a significant impact on the Canadian marketplace landscape, so stay tuned for developments.


Decision of the OSC in the Finkelstein insider trading case is upheld in part, reversed in part on appeal
In a decision dated December 2, 2016, the Ontario Divisional Court upheld certain 2015 findings of a panel of the Ontario Securities Commission (OSC), which had held a former Bay Street lawyer, Mitchell Finkelstein, responsible for illegal tipping with regard to certain significant Canadian capital markets transactions, in violation of section 76 of the Ontario Securities Act. The court also upheld certain findings of the OSC regarding other respondents, who had been held liable by the OSC panel for insider trading, in violation of section 76 of the Act, and actions contrary to the public interest, in violation of section 127 of the Act. The court, however, reversed the OSC's findings with regard to one respondent, Man Kin (aka Francis) Cheng. According to the court, "The [OSC] Panel made a number of factual errors in its analysis of the evidence against Cheng ... [which]  undermine the foundation upon which the Panel concluded that Cheng ought to have known that he was receiving inside information." Finkelstein v. Ontario (Securities Commission), 2016 ONSC 7508 at para. 132. On these grounds, the court found that Cheng had not violated the Securities Act by engaging in trades concerning the single security with respect to which he had allegedly been tipped, and it therefore granted Cheng's appeal. To read the full decision, click here.


IIROC's CEO calls for legislative changes to improve fine collection

On April 1st, the Globe and Mail published an op-ed authored by IIROC's CEO, Andrew Kriegler, in which Mr. Kriegler calls for changes to provincial securities law that would expressly enable IIROC to collect unpaid fines levied as part of regulatory penalties ordered by hearing panels against individuals found liable for IIROC Rule violations. He also announced efforts to set up formal agreements with other regulatory bodies to ensure that information about rule violators is shared. Read the full article here.



OSC takes note of restrictions on resales to activist shareholders1.2


IIROC announces expedited approval for rule amendments to shorten quiet periods for research reports

On September 24, 2015, the Investment Industry Regulatory Organization of Canada (IIROC) announced immediate implementation of a rule amendment that was hotly anticipated by the Canadian securities industry: a change to Requirement 14 of IIROC Dealer Member Rule 3400 to bring Canadian quiet periods for research reports into line with recently amended U.S. regulations. Specifically, IIROC's rule amendments reduce the 40-day quiet period for initial public offerings to 10 days and the 10-day quiet period for secondary offerings to 3 days. IIROC published twin Rules Notices (IIROC Rules Notices 15-0216 and 15-0217) announcing that its Board and its Recognizing Regulators had approved the amendments for implementation effective September 25, 2015--the same date on which the equivalent amendments to the corresponding U.S. regulation (FINRA Rule 2241) became effective. IIROC requested public comments, as it normally does for a substantive rule amendment such as this, but its twin Rules Notices make clear that the amendments have already gone into effect. IIROC justified its unusual decision to carry out implementation prior to the normal public comment period on the grounds that it was necessary to "create a regulatory framework that ensures a level playing field for research report dissemination in the context of cross-border transactions between Canada and the United States" and to "prevent a substantial risk of material harm to [Canadian] investors, market participants and Dealer Members by harmonizing with requirements in the US." IIROC Rules Notice 15-0217 at 1. This will no doubt be a relief to Canadian securities dealers, particularly those dealing with cross-border offerings.



SEC approves new FINRA rule shortening quiet periods for research reports

The Financial Industry Regulatory Authority (FINRA) announced on August 15, 2015 that the U.S. Securities and Exchange Commission had approved new consolidated FINRA Rule 2241, which, among other things, shortens the applicable quiet periods for research reports issued by FINRA-regulated securities dealers from 40 days (or in some cases, 25 days) to 10 days following an initial public offering (IPO) and from 10 days to 3 days following a secondary offering, where the dealer has participated as an underwriter or dealer in the IPO or as a manager or comanager of the secondary offering, respectively. See FINRA Regulatory Notice 15-30. The new quiet periods for U.S. securities dealers become effective on September 25, 2015. This will create a discrepancy between the rules applicable to U.S. dealers and those applicable to Canadian dealers under current IIROC Dealer Member Rule 3400, which for the moment, will continue to require Canadian securities dealers to observe the 40-day and 10-day quiet periods in similar circumstances. See IIROC Dealer Member Rule 3400, Requirement 14. This discrepancy is of particular concern to Canadian securities dealers that provide research coverage of securities also covered by U.S. dealers, as Canadian firms will be operating on an unlevel playing field so long as the Canadian regulations continue to impose a stricter standard on Canadian firms. It also creates a potential disadvantage for Canadian investors, as pointed out by the Investment Industry Association of Canada in a letter to IIROC dated April 24, 2015, since Canadian investors will not be privy to the same research information at the same time as U.S. investors, unless they deliberately seek it out from U.S. dealers, which could create additional regulatory headaches for U.S. securities dealers that have Canadian affiliates. IIROC may be considering an amendment to its quiet period requirements to harmonize them with the new FINRA rule, but so far, IIROC has made no official public statement on the issue. Stay tuned for further developments.

​​​​© 2020 by Robert Keller


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