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Q: Do I have to report trades before becoming a director?

A: Yes, in certain situations, you may need to report trades that occurred before you became a director. This is due to the look-back rules in subsections 1.2(2) and 1.2(3) and section 3.5 of NI 55-104. These rules may require you to file an insider report on SEDI for certain historical transactions. This applies if an issuer becomes an insider of a reporting issuer, in which case the CEO, CFO, COO, and every director of the first issuer must file insider reports for transactions relating to securities and related financial instruments of the second issuer that occurred in the previous six months or for such shorter period that the individual was a CEO, CFO, COO, or director of the first issuer.


CSA Staff Notice 55-316 Questions and Answers on Insider Reporting and SEDI
4 Insider Information
4.1 General
Section 4.1.10

Do I Need To Report For a Period Before I Was a Director, CEO, CFO or COO of the Relevant Reporting Issuer?

Yes. In certain situations, the “look-back” rules in subsections 1.2(2) and 1.2(3) and section 3.5 of NI 55-104 may require you to file an insider report on SEDI in relation to certain historical transactions.

Issuer as insider of reporting issuer – If an issuer (the first issuer) becomes an insider of a reporting issuer (the second issuer), the CEO, CFO, COO and every director of the first issuer must file insider reports in respect of transactions relating to securities and related financial instruments of the second issuer that occurred in the previous six months or for such shorter period that the individual was a CEO, CFO, COO or director of the first issuer.

Reporting issuer as insider of other issuer – If a reporting issuer (the first issuer) becomes an insider of another issuer (the second issuer), the CEO, CFO, COO and every director of the second issuer must file insider reports in respect of transactions relating to securities and related financial instruments of the first issuer that occurred in the previous six months or for such shorter period that the individual was a CEO, CFO, COO or director of the second issuer.

Example – If a reporting issuer (A Co) owns 5% of the common shares of another reporting issuer (B Co), and then acquires, on June 30, 2011, an additional 25% of B Co’s common shares through an exempt take-over bid, A Co will have become an “insider” (as defined in securities legislation) of B Co on June 30, 2011 because A Co has become a “significant shareholder” (as defined in NI 55-104) of B Co as of that date.

As a result of the special designation/determination provisions in subsections 1.2(2) and (3) of NI 55-104, the CEO, CFO, COO and every director of A Co are designated or determined to be insiders of B Co and the CEO, CFO, COO and every director of B Co are designated or determined to be insiders of A Co. (Section 1.2 of NI 55-104 uses the terms “designated” and “determined” to reflect the different terms used in securities legislation across Canada. They mean the same thing.)

Note that the CEO, CFO, COO and every director of A Co will also be insiders and reporting insiders of B Co under the ordinary definition of “insider” and “reporting insider”. However, the CEO, CFO, COO and every director of B Co would not normally be insiders and reporting insiders of A Co (unless they were insiders and reporting insiders in another capacity) since B Co would not be a “subsidiary” of A Co.

There are special reporting rules that apply to the period that precedes a take-over bid or similar acquisition. The purpose of these provisions is to address concerns over directors and officers of a company proposing to acquire a significant interest in another company by unlawfully “frontrunning” the acquisition through personal purchases of shares of the second company.

Section 3.5 of NI 55-104 requires the CEO, CFO, COO and every director of A Co to file insider reports in respect of transactions relating to securities and related financial instruments of B Co that occurred in the previous six months or for such shorter period that the individual was a CEO, CFO, COO or director of A Co. Similarly, the CEO, CFO, COO and every director of B Co must file insider reports in respect of transactions relating to securities and related financial instruments of A Co that occurred in the previous six months or for such shorter period that the individual was a CEO, CFO, COO or director of B Co. When filing these transactions, we recommend that you select relationship code 8 on your insider profile.


National Instrument 55-104 Insider Reporting Requirements and Exemptions
Part 3 Primary Insider Reporting Requirement
Section 3.5

Report by certain designated insiders for certain historical transactions

A CEO, CFO, COO or director of an issuer (the first issuer) who is designated or determined to be an insider of another issuer (the second issuer) under subsection 1.2(2) or 1.2(3) must file, within 10 days of being designated or determined to be an insider of the second issuer, the insider reports that a reporting insider of the second issuer would have been required to file under Part 3 and Part 4 for all transactions involving securities of the second issuer or related financial instruments involving securities of the second issuer, that occurred in the previous six months or for such shorter period that the individual was a CEO, CFO, COO or director of the first issuer.


National Instrument 55-104 Insider Reporting Requirements and Exemptions
Part 6 Exemption for Certain Issuer Grants
Section 6.4

Alternative reporting requirement

(1) A director or officer is exempt under section 6.2 from the insider reporting requirement if the insider files an insider report within the time period described in subsection (2) disclosing, on a transaction-by-transaction basis or in acceptable summary form, each acquisition and each specified disposition of a security under a compensation arrangement that has not previously been disclosed by or on behalf of the director or officer.

(2) The deadline for filing the insider report under subsection (1) is

(a) in the case of any security acquired under the compensation arrangement that has been disposed of or transferred, other than a security that has been disposed of or transferred as part of a specified disposition of a security, within five days of the disposition or transfer; and

(b) in the case of any security acquired under the compensation arrangement during a calendar year that has not been disposed of or transferred, and any security that has been disposed of or transferred as part of a specified disposition of a security, on or before March 31 of the next calendar year.

(3) Subsection (1) does not apply to a director or officer if, at the time the insider report described in subsection (1) is due,

(a) the director or officer is not a reporting insider; or

(b) the director or officer is exempt from the insider reporting requirement.


National Instrument 55-104 Insider Reporting Requirements and Exemptions
Part 6 Exemption for Certain Issuer Grants
Section 6.2

Reporting exemption

The insider reporting requirement does not apply to a director or officer for the acquisition of a security of the reporting issuer, or a specified disposition of a security of the reporting issuer, under a compensation arrangement established by the reporting issuer or by a subsidiary of the reporting issuer, if

(a) the reporting issuer has previously disclosed the existence and material terms of the compensation arrangement in an information circular or other public document filed on SEDAR;

(b) in the case of an acquisition of securities, the reporting issuer has previously filed in respect of the acquisition an issuer grant report on SEDI in accordance with section 6.3; and

(c) the director or officer complies with the alternative reporting requirement in section 6.4.


National Instrument 55-104 Insider Reporting Requirements and Exemptions
Part 6 Exemption for Certain Issuer Grants
Section 6.1

Interpretation

(1) In this Part, a reference to a director or officer means a director or officer who is

(a) a director or officer of a reporting issuer and a reporting insider of the reporting issuer, or

(b) a director or officer of a subsidiary of a reporting issuer and a reporting insider of the reporting issuer.

(2) In this Part, a reference to a security of a reporting issuer includes a related financial instrument involving a security of the reporting issuer.

(3) In this Part, a disposition or transfer of a security acquired under a compensation arrangement is a specified disposition of a security if

(a) the disposition or transfer is incidental to the operation of the compensation arrangement and does not involve a discrete investment decision by the director or officer; or

(b) the disposition or transfer is made to satisfy a tax withholding obligation arising from the distribution of a security under the compensation arrangement and either

(i) the director or officer has elected that the tax withholding obligation will be satisfied through a disposition of securities, has communicated this election to the reporting issuer or the administrator of the compensation arrangement at least 30 days before the disposition and this election is irrevocable as of the 30th day before the disposition; or

(ii) the director or officer has not communicated an election to the reporting issuer or the administrator of the compensation arrangement and, in accordance with the terms of the arrangement, the reporting issuer or the administrator is required to sell securities automatically to satisfy the tax withholding obligation.


National Instrument 55-104 Insider Reporting Requirements and Exemptions
Part 9 General Exemptions
Section 9.3

Reporting exemption (certain insiders of investment issuers)

The insider reporting requirement does not apply to a director or officer of a significant shareholder, or a director or officer of a subsidiary of a significant shareholder, in respect of securities of an investment issuer or a related financial instrument involving a security of the investment issuer if the director or officer

(a) does not in the ordinary course receive or have access to information as to material facts or material changes concerning the investment issuer before the material facts or material changes are generally disclosed; and

(b) is not a reporting insider of the investment issuer in any capacity other than as a director or officer of the significant shareholder or a subsidiary of the significant shareholder.


National Instrument 55-104 Insider Reporting Requirements and Exemptions
Part 5 Exemption for Automatic Securities Purchase Plans
Section 5.4

Alternative reporting requirement

(1) A director or officer is exempt under section 5.2 from the insider reporting requirement if the insider files an insider report within the time period described in subsection (2) disclosing, on a transaction-by-transaction basis or in acceptable summary form, each acquisition and each specified disposition of a security under an automatic securities purchase plan that has not previously been disclosed by or on behalf of the director or officer.

(2) The Deadline for filing the insider report under subsection (1) is,

(a) in the case of any securities acquired under the automatic securities purchase plan that have been disposed of or transferred, other than securities that have been disposed of or transferred as part of a specified disposition of securities, within five days of the disposition or transfer; and

(b) in the case of any securities acquired under the automatic securities purchase plan during a calendar year that have not been disposed of or transferred, and any securities that have been disposed of or transferred as part of a specified disposition of securities, on or before March 31 of the next calendar year.

(3) Subsection (1) does not apply to a director or officer if, at the time the insider report described in subsection (1) is due,

(a) the director or officer is not a reporting insider; or

(b) the director or officer is exempt from the insider reporting requirement.


Ontario Securities Act
Part XXI Insider Trading and Self-Dealing
Section 107

Insider Reporting

(1) Within 10 days of becoming an insider or within such other time period as may be prescribed, a person or company who becomes an insider of a reporting issuer, other than a mutual fund, shall file a report disclosing, in the prescribed manner and form, any direct or indirect beneficial ownership of or control or direction over securities of the reporting issuer and any interest in, or right or obligation associated with, a related financial instrument and the insider shall make such other disclosure as may be required by the regulations

(2) Within 10 days, or within such other time period as may be prescribed, of any change in the direct or indirect beneficial ownership of, or control or direction over, securities of the reporting issuer or any interest in, or right or obligation associated with, a related financial instrument, an insider of a reporting issuer, other than a mutual fund, shall file a report disclosing, in the prescribed manner and form, such change and the insider shall make such other disclosure as may be required by the regulations


CSA Staff Notice 55-312 Insider Reporting Guidelines for Certain Derivative Transactions (Equity Monetization)
Examples

Example 1

On March 1, 2011, John enters into a forward contract with InvestBank under which John agrees to sell, and InvestBank agrees to purchase, 10 shares of ABC Inc. at a price of $109.50 per share. [FN 2] The sale will take place on March 1, 2016. The parties may settle their obligations under the forward contract on a cash settlement basis or by physical delivery of 10 ABC Inc. shares. This contract may be settled at an earlier date, subject to an adjustment to the settlement price. InvestBank hedges its risk under the forward contract through a hedging strategy involving short sales into the secondary market.

Insider Reporting Requirement: John is required to file an insider report within five (calendar) days of March 1, 2011. (See Part 3 of NI 55-104.) For an example of how this transaction would be reported, see below. Unless InvestBank is also a reporting insider of ABC Inc., InvestBank is not required to file an insider report.

Instructions for Example 1

Note: John has accessed the SEDI website at www.sedi.ca, selected “English” as his language of preference, selected “login” at the “Welcome to SEDI” screen, and has logged in by entering his SEDI user ID and his password. John will now see the following screen: “Insider home page”.

1. Enter your insider access key and click Next.

SCREEN: Insider activities

2. Click Insider report (at the top of the screen).

SCREEN: Introduction to insider report activities (Form 55-102F2)

3. Click File insider report (on the navigation bar at the left of the screen)

SCREEN: File insider report (Form 55-102F2) – Select issuer

4. Select and highlight “ABC Inc.” in the list of issuers from the insider profile.

5. Click File insider report.

SCREEN: File insider report – Select security designation 

6. Click on Add insider-defined security (at the bottom of the screen).

Note: Since the forward contract is not a class of security defined by the issuer in its issuer profile supplement, it will be necessary for John to create a new insider-defined security designation for the forward contract.

Note: In SEDI, third-party derivative arrangements are considered to be “securities”. Such arrangements may or may not be considered “securities” under securities law generally, depending upon the facts and circumstances of the arrangement in question. To the extent derivative instruments do not, as a matter of law, constitute securities, they will generally be related financial instruments. See commentary in subsection 1.4(6) of 55-104CP. For insider reporting purposes, it is not necessary to determine whether a derivative instrument is a security or a related financial instrument since both are subject to insider reporting requirements under Part 3 of NI 55-104.

SCREEN: Pop-up warning

Note: At this point, a warning pop-up box should appear: “Warning: You are about to specify an insider-defined security. You must ensure that the security is not already listed.”

7. Click OK.

SCREEN: File insider report – Add insider-defined security designation

8. Use the drop-down menu under the heading Security category, select and highlight Third Party Derivatives.

9. Under the heading Security designation, in the drop-down menu under the subheading Security name, select and highlight Forward Sale.

10. Then, for the Additional description, briefly describe. For example, “10 common shares – settlement date March 2016”.

Note: This adds the security designation “Forward sale (10 common shares – settlement date March 2016)” to your list of insider-defined securities.

Note: Not all of this text will currently be visible in the Additional description box. (The box will only show a limited number of characters at any one time.) However, the full text in this example will be accepted, and will be visible at later stages of the filing process.

11. Under the heading Underlying security designation, in the drop-down menu under the subheading Security category, select and highlight Equity.

12. Then, in the drop-down menu under the subheading Security name, select and highlight Common Shares.

Note: In the context of a forward sale, the underlying security is the security that is the subject of the forward sale.

13. Click Next.

SCREEN: File insider report – Select ownership type

14. In the drop-down menu Ownership type, select and highlight Direct Ownership and click Next.

SCREEN: File insider report – opening balance on initial SEDI report

Note: SEDI requires an opening balance for each type of security. This has to be entered before a report can be filed about a transaction in the security. If the reporting insider has never filed a report about this specific type of security, the reporting insider must enter 0 (zero) as the opening balance. If John has previously entered into another forward contract that has different terms (e.g., a different settlement date or price) from the present forward contract, the present contract would be considered a separate type of security.

15. In the field Opening balance of securities or contracts held, enter 0.

16. In the field Opening balance of equivalent number or value of underlying securities, enter 0.

Note: This screen contains additional fields: General remarks and Private remarks to securities regulatory authorities. In this example, it is not necessary to include any information here.

17. Click Next (at the bottom of the screen).

SCREEN: File insider report – Final review

18. Click Certify.

SCREEN: Certification

19. Click OK to Accept.

SCREEN: File insider report – Completed

Note: John has now filed his opening balance for the security designated “Forward sale (10 common shares – settlement date March 2016)”. It is now necessary to file a report about the transaction involving this security entered into on March 1, 2011.

20. At the prompt “File another transaction?” click Yes.

SCREEN: File insider report – Select a transaction option

Note: Make sure “Same security & holder” is selected.

SCREEN: File insider report – Enter transaction information

21. In the Date of transaction field, select March 1, 2011.

Note: Since John entered into the forward contract on March 1, 2011, enter this date. Do not enter the date of the anticipated settlement (i.e., March 1, 2016) here.

22. In the drop-down menu Nature of transaction, select and highlight the appropriate code. Since John has acquired rights and obligations under a derivative contract, select “70 – Acquisition or disposition (writing) of third party derivative”.

Note: For information about “nature of transaction” codes, see the online help function on SEDI.

23. Enter a number in the Number or value of securities or contracts acquired field. Enter 1 here.

Note: Since John has acquired rights and obligations under a derivative contract, enter 1 after the field Number or value of securities or contracts acquired. Leave the Number or value of securities or contracts disposed of field blank.

Note: Since John has specified a derivative as the security, there are additional fields in which to enter the equivalent number or value of the underlying securities to which the derivative relates.

24. Enter a number in the Equivalent number or value of underlying securities disposed of field. Enter 10 here.

25. Next to the field Unit price or exercise price, click the Not Applicable box.

26. In the field Conversion or exercise price, enter 109.50.

Note: Since John has not paid any consideration (in this example) for the forward contract, he would click the Not Applicable box next to the field Unit price or exercise price. Since the forward contract obliges John to sell 10 ABC Inc. shares at $109.50 per share on March 1, 2016, John would enter 109.50 in the field Conversion or exercise price.

27. In the Date of expiry or maturity field, select March 1, 2016.

Note: Since the anticipated date of settlement is March 1, 2016, this will be the date of expiry or maturity.

28. Enter the following information in the General remarks field:

Forward contract to sell 10 shares at $109.50 per share on March 1, 2016. Contract may be settled by cash or by delivery of 10 shares. Contract may be settled at earlier date, subject to price adjustment.

Note: If it is not possible to adequately describe a transaction or to include all of the material terms of a transaction in the space provided, consider making reference to a public document (e.g., a news release issued by the issuer) that further describes the transaction. Alternatively, this information may be included in a schedule that may be filed in paper format by facsimile in accordance with the provisions of Part 3 of NI 55-102. Fax the schedule to the facsimile number of the securities commission set out on Form 55-102F6. We recommend that you make reference to this filing by facsimile in the General remarks field on SEDI. Staff will make this schedule available to the public on request.

29. Enter additional information, as necessary, in the Private remarks to securities regulatory authorities field.

Note: This is an optional field. These remarks will only be accessible by securities regulatory authorities. Leave this field blank if no remarks are necessary.

SUMMARY – The information should appear as follows:

30. Click Next.

SCREEN: File insider report – Final review

31. Ensure that the details of your report are complete and accurate.

32. Click Certify (at the bottom of the screen).

SCREEN: Certification Pop-Up

33. Review the certification information carefully.

34. Click OK to accept.

SCREEN: File insider report -Completed

35. At the prompt “File another transaction?” click No.

36. Logout

John has now completed the filing of his insider report relating to the forward contract. This report will normally be publicly available on SEDI within five minutes of filing.

Note: Generally, where a reporting insider files an insider report in respect of a third-party derivative such as a forward contract, the reporting insider will be required to file a second report at the time the derivative is settled, matures or otherwise closed out. For example, John in this example will be required to file an insider report within five days of March 1, 2016 (assuming that the contract settles on that date and that John is still a reporting insider on that date). The report will show i) a disposition of the forward contract, and ii) a disposition of the underlying common shares.

FN 2 In this example, $90 is assumed to represent the present value of $109.50 on March 1, 2016. Assuming an annual compounding of 4%, John and InvestBank are in the same position (absent any consideration of taxes) whether they proceed by way of a sale today at $90 or a sale five years from today at $109.50. In the case of a sale today, John receives $90, which he may then invest at 4%. Assuming an annual compounding return of 4%, at the end of five years, John will have received cash in the amount of $109.50. In the case of the forward sale at the end of five years, John will have received cash in the amount of $109.50.


National Policy 51-201 Disclosure Standards
Part VI Best Disclosure Practices
Section 6.10

Insider Trading Policies and Blackout Periods

Adopt an insider trading policy that provides for a senior officer to approve and monitor the trading activity of all your insiders, officers, and senior employees. Your insider trading policy should prohibit purchases and sales at any time by insiders and employees who are in possession of material nonpublic information. Your policy should also provide for trading “blackout periods” when trading by insiders, officers and employees may typically not take place (for example a blackout period which surrounds regularly scheduled earnings announcements). However, insiders, officers and employees should have the opportunity to apply to the company’s trading officer for approval to trade the company’s securities during the blackout period. A company’s blackout period may mirror the quiet period* described above.

*Lexata note: The quiet period is discussed in section 6.9 and relates to heightened confidentiality of company information when quarterly results are soon to be announced. Section 6.9, which will be added to Lexata’s database in the Continuous Disclosure module, states in part as follows: “Some companies adopt a quiet period beginning at the start of the third month of the quarter, and ending upon issuance of the earnings release. Other companies wait until two weeks before the end of the quarter or even the first day of the month following the end of the quarter to start the quiet period.”


National Instrument 55-104 Insider Reporting Requirements and Exemptions
Part 4 Supplemental Insider Reporting Requirement
Section 4.2

Report of prior agreements, arrangements or understandings

A reporting insider must, within 10 days of becoming a reporting insider of a reporting issuer, file an insider report in accordance with section 4.3 in respect of the reporting issuer if

(a) the reporting insider, prior to the date the reporting insider most recently became a reporting insider, entered into an agreement, arrangement or understanding in respect of which the reporting insider would have been required to file an insider report under section 4.1 if the agreement, arrangement or understanding had been entered into on or after the date the reporting insider most recently became a reporting insider, and

(b) the agreement, arrangement or understanding remains in effect on or after the date the reporting insider most recently became a reporting insider.


CSA Staff Notice 55-316 Questions and Answers on Insider Reporting and SEDI
1. General
Section 1.8

What If I File My Report Late, It Is Inaccurate, or I Do Not File It At All?

Reporting insiders and all other persons required under securities legislation to file insider reports in respect of a SEDI issuer are responsible for the filing of complete, accurate and timely insider reports. This is the case whether or not an insider is reporting the information directly or through an agent, or in the case of an issuer that is a reporting insider, through an issuer representative.

The information provided by insiders is published as filed on the SEDI website (www.SEDI.ca).

Under securities legislation, it is an offence to fail to file an insider report in accordance with the requirements and filing deadlines prescribed by NI 55-104 or to submit information in an insider report that, in a material respect and at the time and in the light of the circumstance in which it is submitted, is misleading or untrue. Failure to file an insider report in a timely manner or the filing of an insider report that contains information that is materially misleading may result in one or more of the following:

  • in some jurisdictions, a late filing fee;
  • the reporting insider being identified as a late filer on a public database of late filers maintained by certain securities regulators;
  • the issuance of a cease trade order that prohibits the reporting insider from directly or indirectly trading in or acquiring securities or related financial instruments of the applicable reporting issuer or any reporting issuer until the failure to file is corrected or a specific period of time has elapsed; or
  • in appropriate circumstances, enforcement proceedings.

Securities regulators may also consider information relating to wilful, or repeated, noncompliance by directors and executive officers of a reporting issuer with their insider reporting obligations in the context of a prospectus review or continuous disclosure review. This is because this information may raise questions relating to the integrity of the insiders and the adequacy of the issuer’s policies and procedures relating to insider reporting and insider trading.

For details on late filing fees, and other consequences for late filing, please refer to the factsheet on Late Filing available from the SEDI online help or on the website of the securities regulatory authorities that publish information on SEDI. Also, see Part 10 of Companion Policy 55-104CP.


Ontario Securities Act
Part XXI Insider Trading and Self-Dealing
Section 117

Filing by management companies

(1) Every management company shall, in respect of each investment fund to which it provides services or advice, file a report prepared in accordance with the regulations of any of the following within 30 days after the end of the month in which it occurs:

1. Every transaction of purchase or sale of securities between the investment fund and any related person or company.

2. Every loan received by the investment fund from, or made by the investment fund to, any of its related persons or companies.

3. Every purchase or sale effected by the investment fund through any related person or company with respect to which the related person or company received a fee either from the investment fund or from the other party to the transaction or from both.

4. Any transaction in which, by arrangement other than an arrangement relating to insider trading in portfolio securities, the investment fund is a joint participant with one or more of its related persons or companies.

Relieving orders

(2) The Commission may, on the application of the management company of an investment fund and where it is of the opinion that it would not be prejudicial to the public interest to do so, order, subject to such terms and conditions as it may impose, that subsection (1) does not apply to any transaction or class of transactions.


CSA Staff Notice 55-315 Frequently Asked Questions about National Instrument 55-104 Insider Reporting Requirements and Exemptions
Question 1

Do Existing Insiders Have To File A New Initial Report Within 10 Days Of April 30, 2010?

Background

1. ABC Inc. (the Issuer) is a reporting issuer in all provinces and territories.

2. On January 1, 2009, I became the CEO of the Issuer. I am therefore an “insider” of the Issuer under Canadian securities legislation. I have filed all required insider reports since becoming CEO.

3. On April 30, 2010, NI 55-104 came into force.

4. NI 55-104 contains a new definition of “reporting insider”. The definition of “reporting insider” includes a CEO of a reporting issuer. I am therefore a “reporting insider” for this Issuer under NI 55-104.

5. Section 3.2 of NI 55-104 states that a reporting insider must file an insider report in respect of a reporting issuer, “within 10 days of becoming a reporting insider”, disclosing certain prescribed information.

Question

1. Do I have to file a new initial report under section 3.2 within 10 days of April 30, 2010? (In other words, have I “become” a reporting insider as a result of NI 55-104 coming into force?) I do not otherwise have any transactions involving securities or related financial instruments to report.

Response

1. No, you do not have to file a new initial report. The term “reporting insider” is simply intended to refer to a defined class of insiders who have reporting obligations. A person is determined to be an insider by operation of the statutory definition of “insider”. A person is a reporting insider for the purposes of the insider reporting requirements in NI 55-104 if the person has a position or function, such as CEO or director, or has a particular type of relationship to a reporting issuer, described in the definition of “reporting insider”. We do not consider you to have “become” a reporting insider simply through the introduction of this term in NI 55-104.


CSA Staff Notice 55-312 Insider Reporting Guidelines for Certain Derivative Transactions (Equity Monetization)
Examples

Example 5

On March 1, 2011, John enters into a swap agreement with InvestBank whereby he agrees to pay InvestBank, on March 1, 2016, an amount equal to dividends paid on the 10 shares of ABC Inc. plus any appreciation in value over $100 per share. In return, InvestBank agrees to pay John the London interbank offered rate (LIBOR) on a notional principal amount of $1,000 (i.e., the FMV of the 10 ABC Inc. shares) plus any depreciation in the value of the shares below $100 per share. InvestBank hedges its risk under the contract through a hedging strategy involving short sales into the secondary market.

Insider Reporting Requirement: John is required to file an insider report within five (calendar) days of March 1, 2011. (See Part 3 of NI 55-104.) For an example of how to report this transaction, see below. Unless InvestBank is also a reporting insider of ABC Inc., InvestBank is not required to file an insider report.

Instructions for Example 5

  • Repeat steps 1 to 8, inclusive, under example no. 1.

SCREEN: File insider report – Add insider-defined security designation

9. Under the heading Security designation, in the drop-down menu under the subheading Security name, select and highlight Equity Swap Short Position.

10. Then, for the Additional description, briefly describe. For example, “10 common shares -expires March 2016”.

Note: John is considered to have the short position on the equity swap since John has swapped the cash flows associated with ownership (i.e., a long position) for cash flows generated by another instrument, a notional investment of $1,000 at the LIBOR rate.

Note: This adds the security designation “Equity SwapShort Position (10 common shares -expires March 2016)” to your list of insider-defined securities.

Note: Not all of this text will currently be visible in the Additional description box. (The box will only show a limited number of characters at any one time.) However, the full text in this example will be accepted, and will be visible at later stages of the filing process.

  • Repeat steps 11 to 24, inclusive, under example no. 1, with necessary changes.

25. Under the field Unit price or exercise price, enter 0.

26. Under the field Conversion or exercise price, enter 0.

27. In the Date of expiry or maturity field, select March 1, 2016.

Note: Since the anticipated date of settlement is March 1, 2016, this will be the date of expiry or maturity.

Note: If the terms of a derivative cannot easily be expressed in the fields noted above, or if a description is necessary to clarify ambiguity, include additional information in the General remarks field.

28. Enter the following information in the General remarks field:

Equity swap involving exchange of payments on March 1, 2016: an amount equal to dividends paid on 10 shares of ABC Inc. plus any appreciation in value over $100 per share, for LIBOR rate on $1,000 notional principal amount plus any depreciation in value below $100 per share.

Note: If it is not possible to adequately describe a transaction or to include all of the material terms of a transaction in the space provided, consider making reference to a public document (e.g., a news release issued by the issuer) that further describes the transaction. Alternatively, this information may be included in a schedule that may be filed in paper format by facsimile in accordance with the provisions of Part 3 of NI 55-102. Fax the schedule to the facsimile number of the securities commission set out on Form 55-102F6. We recommend that you refer to this filing by facsimile in the General remarks field on SEDI. Staff will make this schedule available to the public on request. 

  • Repeat steps 29 to 36, inclusive, under example no. 1, with necessary changes.

CSA Staff Notice 55-316 Questions and Answers on Insider Reporting and SEDI
2 Registration
2.2 Agents
Section 2.2.8

Do I, As The Agent For A Reporting Insider, Have To File A Power Of Attorney For Insider Reports Filed On SEDI?

No. However, if you, as an agent, are filing an insider report in paper format in certain circumstances (see question 4.3.7), you still need to file with the relevant securities regulatory authority a power of attorney. However, an agent does not need to file a power of attorney for an insider report of an individual that is filed in paper format under the temporary hardship exemption.


National Instrument 55-104 Insider Reporting Requirements and Exemptions
Part 5 Exemption for Automatic Securities Purchase Plans
Section 5.2

Reporting exemption

(1) The insider reporting requirement does not apply to a director or officer for an acquisition or disposition of securities described in subsection (2) if the director or officer complies with the alternative reporting requirement in section 5.4.

(2) The exemption in subsection (1) applies to

(a) an acquisition of securities of the reporting issuer under an automatic securities purchase plan, other than an acquisition of securities under a lump-sum provision of the plan; or

(b) a specified disposition of securities of the reporting issuer under an automatic securities purchase plan.


CSA Staff Notice 55-316 Questions and Answers on Insider Reporting and SEDI
4 Insider Information
4.1 General
Section 4.1.5

Do I Need To Do Anything On SEDI Before Using SEDI To Report My Transactions?

To use SEDI to file your own insider reports, you first need to register as a SEDI user. To register, complete the SEDI User Registration Form (Form 55-102F5), sign a printed copy and send it to the SEDI operator. The SEDI operator will review your registration request and, once validated, will activate a SEDI user account for you on SEDI. You cannot file insider reports until the registration process is completed. Please refer to Part 2 Registration.

You do not need to register or file insider reports on SEDI yourself. You can use an agent to file for you. The agent must be an individual who is already registered as a SEDI user.


National Instrument 55-104 Insider Reporting Requirements and Exemptions
Part 5 Exemption for Automatic Securities Purchase Plans
Section 5.1

Interpretation

(1) In this Part, a reference to a director or officer means a director or officer who is

(a) a director or officer of a reporting issuer and a reporting insider of the reporting issuer, or

(b) a director or officer of a subsidiary of a reporting issuer and a reporting insider of the reporting issuer.

(2) In this Part, a reference to a security of a reporting issuer includes a related financial instrument involving a security of the reporting issuer.

(3) In this Part, a disposition or transfer of securities acquired under an automatic securities purchase plan is a specified disposition of securities if

(a) the disposition or transfer is incidental to the operation of the automatic securities purchase plan and does not involve a discrete investment decision by the director or officer; or

(b) the disposition or transfer is made to satisfy a tax withholding obligation arising from the distribution of securities under the automatic securities purchase plan and either

(i) the director or officer has elected that the tax withholding obligation will be satisfied through a disposition of securities, has communicated this election to the reporting issuer or the plan administrator at least 30 days before the disposition and this election is irrevocable as of the 30th day before the disposition; or

(ii) the director or officer has not communicated an election to the reporting issuer or the plan administrator and, in accordance with the terms of the plan, the reporting issuer or the plan administrator is required to sell securities automatically to satisfy the tax withholding obligation.


CSA Staff Notice 55-316 Questions and Answers on Insider Reporting and SEDI
4 Insider Information
4.3 Insider Report
Section 4.3.2

When Do I File My Insider Report On SEDI?

If you already own or control, directly or indirectly, securities or related financial instruments relating to a SEDI issuer, you need to file your insider profile and opening balance reports within 10 calendar days of becoming a reporting insider. You need to file a report of any changes to your holdings within five calendar days [FN 10] of the change.

Note that if you enter into a reportable transaction within 10 calendar days of becoming a reporting insider, this may have the effect of accelerating your requirement to file an insider profile and opening balance report, since you need to take these steps before you can file a report about the reportable transaction. See the example in question 4.2.2. Certain exemptions may allow you to report changes in your holdings later, for example, changes resulting from an automatic share purchase plan. See question 4.5.2.

FN 10 Prior to November 1, 2010, within 10 calendar days.


National Instrument 55-104 Insider Reporting Requirements and Exemptions
Part 3 Primary Insider Reporting Requirement
Section 3.2

Initial report

A reporting insider must file an insider report in respect of a reporting issuer, within 10 days of becoming a reporting insider, disclosing the reporting insider’s

(a) beneficial ownership of, or control or direction over, whether direct or indirect, securities of the reporting issuer, and

(b) interest in, or right or obligation associated with, a related financial instrument involving a security of the reporting issuer.


National Instrument 55-104 Insider Reporting Requirements and Exemptions
Part 6 Exemption for Certain Issuer Grants
Section 6.3

Issuer grant report

An issuer grant report filed under this Part in respect of a compensation arrangement must include

(a) the date the option or other security was issued or granted;

(b) the number of options or other securities issued or granted to each director or officer;

(c) the price at which the option or other security was issued or granted and the exercise price;

(d) the number and type of securities issuable on the exercise of the option or other security; and

(e) any other material terms that have not been previously disclosed or filed in a public filing on SEDAR.


Companion Policy 51-102CP Continuous Disclosure Obligations
Part 4 Disclosure and Presentation of Financial Information
Section 4.1

Disclosure of Financial Information

(1) Subsection 4.5(1) of the Instrument requires that annual financial statements be approved by the board of directors before filing. Subsections 4.5(2) and 4.5(3) of the Instrument require that each interim financial report be approved by the board of directors or by the company’s audit committee before filing. We believe that extracting information from financial statements that have not been approved as required by those provisions and releasing that information to the marketplace in a news release is inconsistent with the prior approval requirement. Also see National Policy 51-201 Disclosure Standards.

(2) Reporting issuers that intend to disclose financial information to the marketplace in a news release should consult National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards. We believe that disclosing financial information in a news release without disclosing the accounting principles used is inconsistent with the requirement in National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards to identify the accounting principles used in the financial statements.


CSA Staff Notice 55-312 Insider Reporting Guidelines for Certain Derivative Transactions (Equity Monetization)
Examples

Example 2

On March 1, 2011, John purchases a put option from InvestBank which gives John the right, but not the obligation, to sell to InvestBank, at any time between March 1, 2011 and March 1, 2016, 10 shares of ABC Inc. at a price of $90 per share. [FN 3] The put option is not transferable. John pays $10 to InvestBank in consideration for the put option. InvestBank hedges its risk under the contract through a hedging strategy involving short sales into the secondary market.

Insider Reporting Requirement: John is required to file an insider report within five (calendar) days of March 1, 2011. (See Part 3 of NI 55-104.) For an example of how to report this transaction, see below. Unless InvestBank is also a reporting insider of ABC Inc., InvestBank is not required to file an insider report.

Instructions for Example 2

  • Repeat steps 1 to 8, inclusive, under example no. 1.

SCREEN: File insider report – Add insider-defined security designation

9. Under the heading Security designation, in the drop-down menu under the subheading Security name, select and highlight OTC Puts (including Private Options to Sell).

10. Then, for the Additional description, briefly describe. For example, “10 common shares -expires March 2016”.

Note: This adds the security designation “OTC Puts (10 common shares -expires March 2016)” to your list of insider-defined securities.

Note: Not all of this text will currently be visible in the Additional description box. (The box will only show a limited number of characters at any one time.) However, the full text in this example will be accepted, and will be visible at later stages of the filing process.

  • Repeat steps 11 to 24, inclusive, under example no. 1 (substituting references to “OTC Put” for references to “Forward sale” in the text of the example).

25. Under the field Unit price or exercise price, enter 10.

26. Under the field Conversion or exercise price, enter 90.

Note: Under the put option, John has the right, but not the obligation, to sell to InvestBank 10 ABC Inc. shares at $90 per share at any time up to March 1, 2016. Since John paid $10 in consideration (in this example) for the put option, he would enter 10 in the field Unit price or exercise price. Since the put option exercise price is $90 per share, John would enter 90 in the field Conversion or exercise price.

27. In the Date of expiry or maturity field, select March 1, 2016.

Note: Since the anticipated date of settlement is March 1, 2016, this will be the date of expiry or maturity.

28. Enter the following information in the General remarks field:

Private option contract to sell 10 shares of ABC Inc. at a price of $90 per share at any time between March 1, 2011 and March 1, 2016. Consideration paid for option was $10.

Note: If it is not possible to adequately describe a transaction or to include all of the material terms of a transaction in the space provided, consider making reference to a public document (e.g., a news release issued by the issuer) that further describes the transaction. Alternatively, this information may be included in a schedule that may be filed in paper format by facsimile in accordance with the provisions of Part 3 of NI 55-102. Fax the schedule to the facsimile number of the securities commission set out on Form 55-102F6. We recommend that you refer to this filing by facsimile in the General remarks field on SEDI. Staff will make this schedule available to the public on request.

  • Repeat steps 29 to 36, inclusive, under example no. 1, with necessary changes (i.e., substituting references to “OTC Puts” for references to “forward sale” in the text of the example).

FN 3 This example and the subsequent examples assume a fixed exercise price of $90 per share for the sake of simplicity. If the exercise price is based upon a formula, a note to this effect can be included in the General remarks field.


CSA Staff Notice 55-316 Questions and Answers on Insider Reporting and SEDI
4 Insider Information
4.1 General
Section 4.1.12

What If I Already Have An Insider Profile And Need To Add New Reportable Securities Or Related Financial Instruments?

We recommend that you file an opening balance for the new reportable security or related financial instrument and add a note in the general remarks field to explain that the balance reflects what you held on a specific date (e.g. April 30, 2010, the date NI 55-104 came into effect) rather than what you held on the date you became an insider.


National Instrument 55-104 Insider Reporting Requirements and Exemptions
Part 7 Exemptions for Normal Course Issuer Bids and Publicly Disclosed Transactions
Section 7.3

General exemption for other transactions that have been otherwise disclosed

The insider reporting requirement does not apply to an issuer in connection with a transaction, other than a normal course issuer bid, involving a security of its own issue if the existence and material terms of the transaction have been generally disclosed in a public filing on SEDAR.


CSA Staff Notice 55-316 Questions and Answers on Insider Reporting and SEDI
4 Insider Information
4.5 Reporting Transactions
Section 4.5.8

For What Issuer Events Do I Need To Report Changes In My Securities Holdings?

You need to report changes in your holdings in securities of a reporting issuer resulting from such events as a stock dividend, stock split, consolidation, amalgamation, reorganization or other similar event that affects all holdings of a class of securities of an issuer in the same manner, on a per share basis.


CSA Staff Notice 55-316 Questions and Answers on Insider Reporting and SEDI
4 Insider Information
4.1 General
Section 4.1.11

As A Reporting Insider, Do I Need To Report Securities And Related Financial Instruments That My Spouse Owns Or Controls?

As a reporting insider of a SEDI issuer, you need to report any securities and any related financial instruments of that SEDI issuer that your spouse (or any other person) owns if you have or share control or direction, whether direct or indirect, over those securities or related financial instruments.

A person will generally have or share control or direction over securities if the person directly or indirectly through any contract, arrangement, understanding or relationship or otherwise has or shares

  • voting power, which includes the power to vote, or to direct the voting of, such securities and/or
  • investment power, which includes the power to acquire or dispose, or to direct the acquisition or disposition of such securities.

Ontario Securities Act
Part XXI Insider Trading and Self-Dealing
Section 121

Filing in other jurisdiction

(1) Where the laws of the jurisdiction in which the reporting issuer is incorporated, organized or continued require substantially the same reports in that jurisdiction as are required by this Part, the filing requirements of this Part may be compiled with by filing the reports required by the laws of such jurisdiction manually signed or certified in accordance with the regulations.

Exemptions by order of Commission

(2) Subject to subsection (1), the Commission may,

(a) upon the application of an interested person or company,

(i) if a requirement of this Part conflicts with a requirement of the laws of the jurisdiction under which the reporting issuer is incorporated, organized or continued, or

(ii) if otherwise satisfied in the circumstances of the particular case that there is adequate justification for so doing; or

(b) of its own motion,

make an order on such terms and conditions as seem to the Commission just and expedient, exempting in whole or in part, a person or company from the requirements of this Part.


CSA Staff Notice 55-316 Questions and Answers on Insider Reporting and SEDI
4 Insider Information
4.3 Insider Report
Section 4.3.18

Do I Have To Report All My Holdings Of Securities And Related Financial Instruments Of The SEDI Issuer Or Just The Securities And Related Financial Instruments In Respect Of Which My Ownership Or Control Has Changed?

The first time you file on SEDI, you must report all of your holdings of securities and related financial instruments of the SEDI issuer. Subsequently, you only need to report changes in interests in, or new interests in securities and related financial instruments, or changes in control or direction over, securities and related financial instruments of the SEDI issuer.


CSA Staff Notice 55-315 Frequently Asked Questions about National Instrument 55-104 Insider Reporting Requirements and Exemptions
Question 4

How Do I Report A Grant of Related Financial Instruments Made Prior to April 30, 2010?

Background

1. ABC Inc. (the Issuer) is a reporting issuer in all provinces and territories.

2. I am the CEO of the Issuer and therefore a “reporting insider” for this Issuer under NI 55-104. I did not hold any deferred share units (DSUs) when I became an insider of the Issuer.

3. On March 15, 2010, I received a grant of 100 DSUs.

4. The redemption value of a DSU is equal to the market value of a common share of the Issuer at the time of redemption, in accordance with the DSU Plan. The DSUs are cash-settled and do not provide for or permit settlement in securities of the Issuer. The DSUs do not entitle the holder to voting or other shareholder rights. The DSUs cannot be redeemed for cash until the holder has ceased to be a director, officer or employee of the Issuer.

5. At the time of the grant, I confirmed that the DSUs do not, as a matter of law, constitute securities and are therefore not subject to the ordinary insider reporting requirements applicable to securities. I also confirmed that the Issuer has disclosed the existence and material terms of the DSU Plan in its circular and that I was therefore eligible for the reporting exemption in s. 2.2(b) of Multilateral Instrument 55-103 Insider Reporting for Certain Derivative Transactions (Equity Monetization) (MI 55-103) and, in British Columbia, Part 3 of BCI 55-506 Exemption from insider reporting requirements for certain derivative transactions (BCI 55-506).

6. Accordingly, I did not file an insider report to report the grant of 100 DSUs on March 15, 2010.

7. On April 30, 2010, NI 55-104 came into force.

8. On May 15, 2010, I received a further grant of 100 DSUs.

9. The Issuer has not filed an issuer grant report about this grant.

Questions

1. Do I need to file a report about the March grant of DSUs? If yes, when do I need to file it by? (For example, do I need to file it within 10 days of April 30, 2010?)

2. Do I need to file a report about the May grant of DSUs? If yes, when do I need to file it by?

3. If I need to file a report about the May grant, do I show a balance of 100 or 200 DSUs?

Responses

1. Assuming the DSUs are not securities, and the March grant was properly covered by the exemptions in MI 55-103 and BCI 55-506, you do not need to file an insider report about the March grant. Accordingly, there is no requirement to file a report about the March grant within 10 days of April 30, 2010. However, the next time there is a change in your holdings of DSUs (i.e., the May 15 grant), before you can report this change, you will first need to take a step to reflect the March grant in your holdings. We have set out below two methods for doing this. Either method is acceptable so long as you explain in the General Remarks section which method you are using.

2. Assuming the DSUs are not securities, they would likely be considered “related financial instruments” under NI 55-104. Accordingly, you are required to file an insider report about the May grant within 10 days of the grant, or by May 25, 2010.

Note: If the issuer files an issuer grant report about this grant on or before May 25, 2010, the deadline for the insider report is March 31, 2011. When filing this report, use nature of transaction code 56 – grant of rights. See Part 6 of NI 55-104 for more information.

Note: SEDI does not use the term “related financial instrument”. For the purposes of filing on SEDI, the term “security” applies to both securities and related financial instruments.

3. Before you can file a report about the May 15 grant of 100 DSUs, you will need to reflect the March 15 grant in your holdings. There are two methods for doing this. These are described below.

In order to file an insider report about a grant of securities or related financial instruments, it is first necessary

a. to confirm that the Issuer has created a security designation for this type of instrument, and

b. record an Opening Balance on Initial Report for the DSUs.

If the Issuer has not created a security designation for DSUs, you should contact the Issuer and request the Issuer to add the security designation to its issuer profile supplement. If the Issuer is unable to comply in a timely manner, you should contact the securities regulatory authority that is the principal regulator for the Issuer (generally, the securities regulatory authority in the jurisdiction where the Issuer’s head office is located).

Method 1 – filing an opening balance that shows the March grant

4. Under this method, you can reflect the March grant in your opening balance. (If there are other prior grants of the same type of DSU, aggregate all such grants.)

5. When you record an Opening Balance for the DSUs, you should include a remark in the General Remarks section to explain that you are using method 1. Failure to do this may result in the filing being misleading. For example,

“Opening balance for DSUs reflects grant of 100 DSUs on March 15, 2010. At the time of the grant, the grant was exempt from reporting requirements under Part 2 of MI 55-103 and Part 3 of BCI 55-506”.

Note: Ordinarily, the Opening Balance is intended to reflect the insider’s holdings as of the date the insider became an insider. In this case, if the individual first became an insider on January 1, 2009, but did not receive any DSUs until the March 15, 2010 grant, then the record will be potentially misleading unless the insider also includes a comment in the general remarks section to explain that opening balance for DSUs reflects the grant of 100 DSUs on March 15, 2010.

6. When filing the insider report about the May 15, 2010 grant of DSUs, report the number of DSUs awarded and the equivalent number of underlying common shares. Use nature of transaction code 56 – grant of rights.

For more information, please refer to the section “Insider Report for Deferred Share Units (DSU) or Restricted Share Awards” in the online SEDI help.

Method 2 – notional adjusting transaction

7. Under this method, you would first file an opening balance of “0” for the DSUs.

8. Then, prior to filing an insider report to reflect the May 15 grant of 100 DSUs, you would file a report to show a notional acquisition of the 100 DSUs that were granted on March 15, 2010. (If there are other prior grants of the same type of DSU, aggregate all such grants.)

9. If this method is used, you should use the date of filing as the date of the notional acquisition, and not the actual date of acquisition (i.e., March 15, 2010) for the transaction date.

Note: If you use the actual date of acquisition, or March 15, 2010, this may generate a late filing invoice. If this occurs, contact CSA staff in the jurisdiction which acts as principal regulator for the Issuer for assistance.

10. When you file the report about the notional acquisition, you should include a remark in the General Remarks section to explain that you are using method 2. Failure to do this may result in the filing being misleading. For example,

“Notional transaction to reflect grant of 100 DSUs on March 15, 2010. At the time of the grant, the grant was exempt from reporting requirements under Part 2 of MI 55-103 and Part 3 of BCI 55-506”.

Note: If you do not include an explanation in the general remarks section, this may suggest there was an actual acquisition of 100 DSUs on the date of filing (in addition to the grant of 100 DSUs granted on May 15, 2010). This may result in the public record being misleading. In addition, if the DSU exercise price is based on the share price on the actual date of grant (i.e., March 15, 2010), but the filing date is used as the transaction date without explanation in the general remarks section, this may suggest that DSUs have not been granted in accordance with the DSU plan.


CSA Staff Notice 55-316 Questions and Answers on Insider Reporting and SEDI
4 Insider Information
4.5 Reporting Transactions
Section 4.5.3

If I Acquire Securities Through An Employee Share Ownership Plan (Esop) Or A Dividend Reinvestment Plan (Drip), Do I Hold These Securities Directly Or Indirectly (Do I Indicate The “Registered Owner” On My Report)?

Whether or not you should indicate the ESOP or DRIP as the “registered owner” depends on whether the ESOP or DRIP is the “beneficial owner” of, or has control over, the securities. The answer may be different depending on the terms of the particular plan. If you have the right to vote or sell securities held in a plan, you would normally be considered to hold these securities directly. You should speak to your employer to find out whether the ESOP or DRIP is the registered owner, or whether you hold these securities directly.


CSA Staff Notice 55-316 Questions and Answers on Insider Reporting and SEDI
4 Insider Information
4.2 Insider Profile
Section 4.2.2

When Do I File An Insider Profile?

You need to file your insider profile and opening balance reports within 10 calendar days of becoming a reporting insider if you beneficially own, or have or share direct or indirect control or direction over, securities or related financial instruments of the issuer of which you are a reporting insider.

Note that if you enter into a reportable transaction within 10 calendar days of becoming a reporting insider, this may have the effect of accelerating your requirement to file an insider profile and opening balance report, since you need to take these steps before you can file a report about the reportable transaction. See example below.

If you are a reporting insider or otherwise required by securities legislation to file insider reports in respect of a SEDI issuer, but do not own or control securities or related financial instruments relating to that SEDI issuer, you do not need to file an insider profile until an insider report is required. However, if you wait until you are required to file an insider report, you must file your insider profile at the same time.

Alternatively, you can set up and file your insider profile with a zero opening balance report (for each security, ownership type and registered holder combination) after you or your agent are registered as a SEDI user, but before any of your insider reports are due.

Example: New Reporting Insider

Question

1. On November 1, 2010, I became a director of ABC Inc. and therefore a “reporting insider” for this issuer under NI 55-104.

2. I understand that, in accordance with section 3.2 of NI 55-104, I am required to file my initial report within 10 calendar days of becoming a reporting insider. Accordingly, my initial report would appear to be due on November 10, 2010.

3. On November 3, 2010, I purchased 100 common shares of ABC Inc. in a market transaction.

4. According to section 3.3 of NI 55-104, I am required to file an insider report within five calendar days of any change in my ownership or control of securities or interests in or rights or obligations associated with a related financial instrument. Accordingly, my insider report for this transaction would appear to be due on November 8, 2010.

5. What is my deadline for the initial report? What is my deadline for reporting the purchase of 100 shares?

Response

1. The deadline for filing the initial report would ordinarily be November 10, 2010. However, as a result of the purchase of 100 shares on November 3, 2010, the deadline for filing the initial report has effectively been accelerated to November 8, 2010. This is because, in order to be able to file an insider report about the purchase of 100 shares by the required due date of November 8, 2010, it will first be necessary to file the initial report.

2. The deadline for filing the report about the purchase of 100 shares is, in this example, November 8, 2010.


Companion Policy to NI 55-104 Insider Reporting Requirements and Exemptions
Part 7 Exemptions For Normal Course Issuer Bids and Publicly Disclosed Transactions
Section 7.2

General exemption for transactions that have been generally disclosed

Section 7.3 of the Instrument provides that the insider reporting requirement does not apply to an issuer in connection with a transaction, other than a normal course issuer bid, involving securities of its own issue if the existence and material terms of the transaction have been generally disclosed in a public filing made on SEDAR. Because of this exemption and the exemption for normal course issuer bids in section 7.1, a reporting issuer that is an insider of itself will not generally need to file insider reports under Part 3 or Part 4 provided the issuer complies with the alternative reporting requirement in section 7.2 of the Instrument.


National Instrument 51-102 Continuous Disclosure Obligations
Part 4 Financial Statements
Section 4.5

Approval of Financial Statements

(1) The annual financial statements a reporting issuer is required to file under section 4.1 must be approved by the board of directors before the statements are filed.

(2) The interim financial report a reporting issuer is required to file under section 4.3 must be approved by the board of directors before the report is filed.

(3) In fulfilling the requirement in subsection (2), the board of directors may delegate the approval of the interim financial report to the audit committee of the board of directors.


National Instrument 55-104 Insider Reporting Requirements and Exemptions
Part 8 Exemption for Certain Issuer Events
Section 8.2

Reporting requirement

A reporting insider who relies on the exemption in section 8.1 in respect of a reporting issuer must file an insider report, disclosing all changes in beneficial ownership of, or control or direction over, whether direct or indirect, a security of the reporting issuer as a result of an issuer event if those changes have not previously been reported by or on behalf of the insider, within the time required by securities legislation for the insider to report any other subsequent change in beneficial ownership of, or control or direction over, whether direct or indirect, a security of the reporting issuer.


National Instrument 55-104 Insider Reporting Requirements and Exemptions
Part 3 Primary Insider Reporting Requirement
Section 3.3

Subsequent report

A reporting insider must within five days of any of the following changes file an insider report in respect of a reporting issuer disclosing a change in the reporting insider’s

(a) beneficial ownership of, or control or direction over, whether direct or indirect, securities of the reporting issuer, or

(b) interest in, or right or obligation associated with, a related financial instrument involving a security of the reporting issuer.


CSA Staff Notice 55-316 Questions and Answers on Insider Reporting and SEDI
2 Registration
2.1 General
Section 2.1.5

When Should I Register as an Insider?

If you are a reporting insider, you should register as an insider if you will be filing an insider profile and insider reports only for yourself and no one else.

If you are filing insider profiles and insider reports for one or more reporting insiders (other than yourself), or information for several issuers you should register as an agent (see question 2.1.7), and not as an insider.


National Instrument 55-104 Insider Reporting Requirements and Exemptions
Part 3 Primary Insider Reporting Requirement
Section 3.4

Reporting requirements in connection with convertible or exchangeable securities

For greater certainty, a reporting insider who exercises an option, warrant or other convertible or exchangeable security must file, within five days of the exercise, separate insider reports in accordance with section 3.3 disclosing the resulting change in the reporting insider’s beneficial ownership of, or control or direction over, whether direct or indirect, each of

(a) the option, warrant or other convertible or exchangeable security, and

(b) the common shares or other underlying securities.


CSA Staff Notice 55-316 Questions and Answers on Insider Reporting and SEDI
4 Insider Information
4.3 Insider Report
Section 4.3.4

What Type Of Report Do I File When I First Become A Reporting Insider Of A SEDI Issuer And Own Securities Or Related Financial Instruments Of That Issuer?

What type of report do I file when I first become a reporting insider of a SEDI issuer and own securities or related financial instruments of that issuer? You need to file an initial opening balance report within 10 calendar days of the date you first become a reporting insider of a reporting issuer if you have reportable securities or related financial instruments on that date. In your report, you must disclose your beneficial ownership of, or control or direction over (whether direct or indirect), securities and interests in or rights or obligations associated with related financial instruments of that issuer.

You will initially need to file (create) an insider profile in the system before you can file this opening balance report. Once your insider profile is filed, you can then file your opening balance report, disclosing all your current holdings in the securities and related financial instruments of the SEDI issuer. For each particular type of security and related financial instrument, the system will ask you to input an opening balance.

If you do not have any interests in any securities or related financial instruments of the reporting issuer when you first become a reporting insider, you do not need to file an insider profile or an initial opening balance. You may choose to set up an insider profile and file a zero balance opening balance report. If you choose to file a zero opening balance report, all subsequent reports, including your first insider report of a transaction in the securities or related financial instruments of the issuer must be filed within five calendar days [FN 11].

Otherwise, the first insider report you will file will be when you have your first transaction in securities or related financial instruments of the reporting issuer. At this time you will need to set up an insider profile (if you have not already done so) and file the initial report within five calendar days after you made this first transaction. All subsequent reports must also be filed within five calendar days.

Note that if you enter into a reportable transaction within 10 calendar days of becoming a reporting insider, this may have the effect of accelerating your requirement to file an insider profile and opening balance report, since you need to take these steps before you can file a report about the reportable transaction. See the example in question 4.2.2.

FN 11 Prior to November 1, 2010, within 10 calendar days.


Form 55-102F2 Insider Report
Section 6

Ownership Type

Indicate whether the securities in respect of which a position or transaction is being reported are (1) beneficially owned directly, (2) beneficially owned indirectly or (3) controlled or directed. Securities beneficially owned directly but held through a nominee such as a broker or book-based depository are considered direct holdings.


Companion Policy to NI 55-104 Insider Reporting Requirements and Exemptions
Part 11 Insider Trading
Section 11.2

Written disclosure policies

National Policy 51-201 Disclosure Standards outlines detailed best practices for issuers for disclosure and information containment and provides interpretative guidance of insider trading laws. We recommend that issuers adopt written disclosure policies to assist directors, officers, employees and other representatives in discharging timely disclosure obligations. Written disclosure policies also should provide guidance on how to maintain the confidentiality of corporate information and to prevent improper trading based on inside information. Adopting the CSA best practices may assist issuers to ensure that they take all reasonable steps to contain inside information.


National Policy 51-201 Disclosure Standards
Part III Overview of the Statutory Prohibitions Against Selective Disclosure
Section 3.1

Tipping and Insider Trading

(1) Securities legislation prohibits a reporting issuer and any person or company in a special relationship with a reporting issuer from informing, other than in the necessary course of business [FN 5], anyone of a material fact [FN 6] or a material change (or “privileged information” in the case of Québec) [FN 7] before that material information [FN 8] has been generally disclosed. [FN 9] This prohibited activity is commonly known as “tipping”

(2) Securities legislation also prohibits anyone in a special relationship with a reporting issuer from purchasing or selling securities of the reporting issuer [FN 10] with knowledge of a material fact or material change about the issuer that has not been generally disclosed. [FN 11]

This prohibited activity is commonly known as “insider trading”.

(3) Securities legislation prohibits any person or company who is proposing:

from informing anyone of material information that has not been generally disclosed. An exception to this disclosure prohibition is provided where the material information is given in the “necessary course of business” to effect the take-over bid, business combination or acquisition.

(4) It is important to remember that the tipping and insider trading provisions apply to both material facts and material changes. A company’s timely disclosure obligations generally only apply to material changes. This means that a company does not have to disclose all material facts on a continuous basis. However, if a company chooses to selectively disclose a material fact, other than in the necessary course of business, this would be in breach of securities legislation.

FN 5 The Alberta and British Columbia Securities Acts use the phrase “is necessary in the course of business”. The Québec Securities Act uses the phrase in the “course of business”.

FN 6 Securities legislation defines a “material fact” as follows: “material fact, where used in relation to securities issued or proposed to be issued means a fact that significantly affects, or would reasonably be expected to have a significant effect on, the market price or value of such securities”.

FN 7 “Privileged information” is defined under the Québec Securities Act as “any information that has not been disclosed to the public and that could affect the decision of a reasonable investor”.

FN 8 Material facts and material changes are collectively referred to as “material information”. When used in the Policy, material information means both “material facts” and “material changes.”

FN 9 The Québec Securities Act uses the term “generally known”.

FN 10 For the purposes of the prohibition against illegal insider trading, a “security of the reporting issuer” is deemed to include a security, the market price of which varies materially with the market price of the securities of the issuer (see subsection 76(6)(b) of the Ontario Securities Act).

FN 11 Section 187 of the Québec Securities Act provides that “no insider of a reporting issuer having privileged information relating to securities of the issuer may trade in such securities except in the following cases: (i) he is justified in believing that the information is generally known or known to the other party; (ii) he avails himself of an automatic dividend reinvestment plan, automatic subscription plan or any other automatic plan established by a reporting issuer, according to conditions set down in writing, before he learned the information”. Section 189 further expands the number of persons who are subject to the prohibition in section 187.


CSA Staff Notice 55-316 Questions and Answers on Insider Reporting and SEDI
4 Insider Information
4.2 Insider Profile
Section 4.2.7

Do I Need To Add The Name Of The Broker Or Depository As The Registered Holder Of The Securities If I Own The Securities Directly?

No. For insider reporting, the term “registered holder” means the entity through which you beneficially own or control securities such as an RRSP, holding company, family trust, or the person or company that owns the securities over which you have control or direction. Securities owned directly but held through a nominee such as a broker or book-based depository, are considered direct holdings. See Form 55-102F1, item 14, and Form 55-102F2, item 6.


CSA Staff Notice 55-312 Insider Reporting Guidelines for Certain Derivative Transactions (Equity Monetization)
Background
Section 2

How are these Transactions Reported in SEDI?

We have set out below a number of examples of arrangements and transactions involving derivatives together with examples of how to report these arrangements and transactions in SEDI.

The first example is considered in detail. The subsequent examples generally refer the reader back to the step-by-step approach taken in the first example, highlighting necessary changes.

The examples discussed in this notice have necessarily been simplified and are for illustrative purposes only. The examples assume the following set of facts:

ABC Inc. is a reporting issuer. John is a director of ABC Inc. and is therefore a reporting insider (as defined in NI 55-104) of ABC Inc. On March 1, 2010, John acquired 10 shares of ABC Inc. at a fair market value (FMV) price of $10 per share. On March 1, 2011, shares of ABC Inc. have a FMV of $100 per share. John does not wish to sell the shares, but is concerned that the shares might fall in value, and wishes to protect at least $80 of the gain (that is, to “lock in” the share price at at least $90).

The examples also assume that the following necessary preliminary steps have been taken:

  • ABC Inc. has completed an issuer profile supplement;
  • John has a valid SEDI user ID and password;
  • John has created his insider profile in SEDI and has his insider access key; and
  • John has previously added ABC Inc. to his insider profile.

For additional information about filing an insider report under SEDI, please refer to 55-102CP, SN 55-316 and the SEDI online help available on the SEDI website (www.sedi.ca).


National Instrument 81-106 Investment Fund Continuous Disclosure
Part 4 Management Reports of Fund Performance
Section 4.5

Approval of Management Reports of Fund Performance

(1) The board of directors of an investment fund that is a corporation must approve the management report of fund performance of the investment fund before the report is filed or made available to a holder or potential purchaser of securities of the investment fund.

(2) The trustee or trustees of an investment fund that is a trust, or another person or company authorized to do so by the constating documents of the investment fund, must approve the management report of fund performance of the investment fund before the report is filed or made available to a holder or potential purchaser of securities of the investment fund.


National Instrument 62-103 The Early Warning System and Related Takeover Bid and Insider Reporting Issues
Part 5 Aggregation Relief
Section 5.4

No Requirement to Satisfy Insider Reporting Requirement

If an eligible institutional investor, or an affiliate or associate of an eligible institutional investor, is relying on this Part so that it is not subject to the insider reporting requirement for a reporting issuer, then every director or senior officer of the eligible institutional investor, or of the affiliate or associate of an eligible institutional investor, who is an insider of the reporting issuer solely as a result of being a director or senior officer of the eligible institutional investor, or the affiliate or associate of an eligible institutional investor, is not subject to the insider reporting requirement for the reporting issuer.


Companion Policy to NI 55-104 Insider Reporting Requirements and Exemptions
Part 9 Exemptions
Section 9.3

Reporting Exemption (certain directors and officers of insider issuers)

The reference to “material facts or material changes concerning the investment issuer” in section 9.3 of the Instrument is intended to include information that originates at the insider issuer level but which concerns or is otherwise relevant to the investment issuer. For example, in the case of an issuer that has a subsidiary investment issuer, a decision at the parent issuer level that the subsidiary investment issuer will commence or discontinue a line of business would generally represent a “material fact or material change concerning the investment issuer”. Similarly, a decision at the parent issuer level that the parent issuer will seek to sell its holding in the subsidiary investment issuer would also generally represent a “material fact or material change concerning the investment issuer.” Accordingly, a director or officer of the parent issuer who routinely had access to such information concerning the investment issuer would not be entitled to rely on
the exemption for trades in securities of the investment issuer.


CSA Staff Notice 55-316 Questions and Answers on Insider Reporting and SEDI
4 Insider Information
4.3 Insider Report
Section 4.3.19

What Do I Do If I Have Been Previously Filing Insider Reports But Am No Longer Required To?

You should add a comment in the “Remarks” field explaining that you are no longer a reporting insider or are exempt. You can do this either on your next transaction to be filed on SEDI or by amending your last report already filed on SEDI. A member of the public viewing your insider reports on SEDI will then know why you have ceased reporting.


National Instrument 55-104 Insider Reporting Requirements and Exemptions
Part 11 Effective Date and Transition
Section 11.2

Transition

(1) Despite sections 3.3 and 3.4, a reporting insider may file an insider report required by either of those sections within 10 days of a change described in those sections if the change relates to a transaction that occurred on or before October 31, 2010.

(2) Despite section 4.1, a reporting insider may file an insider report required under that section within 10 days of an event described in that section if the event relates to a transaction that occurred on or before October 31, 2010.

(3) Despite paragraph 5.4(2)(a), a reporting insider may file an insider report required under that paragraph within 10 days of a disposition or transfer described in that paragraph if the disposition or transfer occurred on or before October 31, 2010

(4) Despite paragraph 6.4(2)(a), a reporting insider may file an insider report required under that paragraph within 10 days of a disposition or transfer described in that paragraph if the disposition or transfer occurred on or before October 31, 2010.


CSA Staff Notice 55-316 Questions and Answers on Insider Reporting and SEDI
4 Insider Information
4.3 Insider Report
Section 4.3.5

What Type Of Report Do I File After I Have Made My Initial SEDI Report?

After you have made your initial SEDI report, you need to file an insider report within five calendar days [FN 12] of the date on which any change in your holdings of the reporting issuer occurs.

You need to file an insider report on SEDI, disclosing your transactions in those securities that have resulted in a change in your beneficial ownership of, or control or direction over, them. You do not need to report closing balances if the balances did not change and you have already reported them. SEDI calculates and maintains a record of all these holdings as reported previously.

FN 12 Prior to November 1, 2010, within 10 calendar days.


CSA Staff Notice 55-316 Questions and Answers on Insider Reporting and SEDI
3 Issuer Information
3.4 Issuer Grant Report
Section 3.4.6

If An Issuer Files An Issuer Grant Report, When Do The Reporting Insiders Need To File Insider Reports About The Grant?

If an issuer files an issuer grant report within five days [FN 8] of a grant, award or issue of securities or related financial instruments, the reporting insiders named in the issuer grant report can report the grant on a deferred basis. Instead of reporting the grant within the usual five day reporting timeframe, the reporting insiders have until March 31 of the next calendar year to report the grant or award.

If, subsequent to the grant and prior to March 31 of the next calendar year, the reporting insider disposes of or transfers the securities or related financial instruments identified in the issuer grant report (other than as part of a specified disposition), the reporting insider must file an insider report within five days of the disposition or transfer.

FN 8 Prior to November 1, 2010, within 10 calendar days.


CSA Staff Notice 55-316 Questions and Answers on Insider Reporting and SEDI
3 Issuer Information
3.1 General
Section 3.1.2

Do I have to file a report if I am a reporting insider of (a) an income trust, (b) a labour sponsored investment fund corporations (LSIFs) or a labour sponsored venture capital fund corporation (LSVCF), (c) a mutual fund or (d) a limited partnership?

(a) an income trust?

Yes

(b) a labour-sponsored investment fund (LSIF) or labour-sponsored venture capital fund
corporation (LSVCF)?

The answer depends on the province(s) where the LSIF or LSVCF is a reporting issuer
(or equivalent). In certain jurisdictions, such as Alberta, LSIFs and their insiders do not
have to file on SEDI because LSIFs are considered mutual funds. In other jurisdictions,
such as Ontario and Manitoba, LSIFs and their reporting insiders must file on SEDI
because LSIFs are not considered to be mutual funds for insider reporting purposes.

(c) a mutual fund?

No. The insider reporting requirement does not apply to an insider of an issuer that is a
mutual fund (see section 9.1 of NI 55-104).

(d) a limited partnership?

Yes. You need to file insider reports if you are a reporting insider of a limited
partnership that is a reporting issuer and hold securities or related financial instruments
of that limited partnership.


Companion Policy to NI 55-104 Insider Reporting Requirements and Exemptions
Part 6 Issuer Grant Reports
Section 6.1

Overview

(1) Section 6.1 of the Instrument contains an interpretation provision that applies to Part 6. Because of this provision, directors and officers of a reporting issuer or a major subsidiary of a reporting issuer who are reporting insiders of the reporting issuer can use the exemption in this Part for grants of securities and related financial instruments.

(2) A reporting insider who intends to rely on the exemption in Part 6 for a grant of stock options or similar securities must first confirm that the issuer has made the public disclosure required by section 6.3 of the Instrument. If the issuer has not made the required disclosure within the required time, the reporting insider must report the grant within the required time and in accordance with the normal reporting requirements under Part 3 of the Instrument.


National Instrument 62-103 The Early Warning System and Related Takeover Bid and Insider Reporting Issues
Part 4 Alternative Monthly Reporting System
Section 4.2

Disqualification

(1) An eligible institutional investor shall not file reports under this Part for a reporting issuer if the eligible institutional investor, or a joint actor

(a) makes or intends to make a formal bid for securities of the reporting issuer;

(b) proposes or intends to propose a reorganization, amalgamation, merger, arrangement or similar business combination with a reporting issuer that if completed would reasonably be expected to result in the eligible institutional investor, either alone or together with any joint actors, possessing effective control over the reporting issuer or a successor to all or a part of the business of the reporting issuer; or

(c) solicits proxies from securityholders of the reporting issuer in any of the following circumstances:

(i) in support of the election of one or more persons as directors of the reporting issuer other than the persons proposed to be nominated by management of the reporting issuer;

(ii) in support for a reorganization, amalgamation, merger, arrangement or other similar corporate action involving the securities of the reporting issuer if that action is not supported by management of the reporting issuer;

(iii) in opposition to a reorganization, amalgamation, merger, arrangement or other similar corporate action involving the securities of the reporting issuer if that action is proposed by management of the reporting issuer.

(2) For the purposes of this section, “solicit” has the meaning ascribed to that term in National Instrument 51-102 Continuous Disclosure Obligations.


CSA Staff Notice 55-316 Questions and Answers on Insider Reporting and SEDI
3 Issuer Information
3.4 Issuer Grant Report
Section 3.4.7

What Happens If I Do Not File An Issuer Grant Report?

There is no requirement to file issuer grant reports. If an issuer chooses not to file an issuer grant report, the issuer should notify reporting insiders of a grant, award or issue of securities and related financial instruments in a timely manner so that those insiders can meet their individual reporting obligations within the period prescribed for filing insider reports.


CSA Staff Notice 55-316 Questions and Answers on Insider Reporting and SEDI
3 Issuer Information
3.3 Issuer Event Report
Section 3.3.4

When Do I Need To File An Issuer Event Report?

You need to file an issuer event report no later than one business day following the occurrence of an issuer event. For example, for a stock split, you report the event within one business day after the issuer issues the securities resulting from the stock split. As a preferred practice, you should report the event following the close of markets on the day of the event or before the opening of the markets on the day after the event occurred. See question 3.3.12.


National Instrument 62-103 The Early Warning System and Related Takeover Bid and Insider Reporting Issues
Part 8 Relief For Pledgees
Section 8.3

Corresponding Insider Reporting Relief

If a person or company is exempt under section 8.1 or 8.2 from the insider reporting requirement for those securities of a reporting issuer that it controls as pledgee, every director or senior officer of the person or company who is an insider of the reporting issuer solely as a result of being a director or senior officer of the person or company that is an insider of the reporting issuer is exempt from the insider reporting requirement for those securities.