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National Policy 51-201 Disclosure Standards
Part III Overview of the Statutory Prohibitions Against Selective Disclosure
Section 3.5

Generally Disclosed

(1) The tipping prohibition does not require a company to release all material information to the marketplace. [FN 20] Instead, it prohibits a company from disclosing nonpublic material information to anyone (other than in the “necessary course of business”) before the company generally discloses the information to the marketplace.

(2) Securities legislation does not define the term “generally disclosed”. Insider trading court decisions state that information has been generally disclosed if:

(a) the information has been disseminated in a manner calculated to effectively reach the marketplace; and

(b) public investors have been given a reasonable amount of time to analyze the information. [FN 21]

(3) Except for “material changes,” which must be disclosed by news release, securities legislation does not generally require a particular method of disclosure to satisfy the “generally disclosed” requirement. In determining whether material information has been generally disclosed, we will consider all of the relevant facts and circumstances, including the company’s traditional practices for publicly disclosing information and how broadly investors and the investment community follow the company. We recognize that the effectiveness of disclosure methods varies between companies. Whatever disclosure method is used to release information, we encourage consistency in a company’s disclosure practices. [FN 22]

(4) Companies may satisfy the “generally disclosed” requirement by using one or a combination of the following disclosure methods:

(a) News releases distributed through a widely circulated news or wire service. [FN 23]

(b) Announcements made through press conferences or conference calls that interested members of the public may attend or listen to either in person, by telephone, or by other electronic transmission (including the Internet). A company needs to provide the public with appropriate notice of the conference or call by news release.[FN 24] The notice should include the date and time of the conference or call, a general description of what is to be discussed, and the means of accessing the conference or call. [FN 25] The notice should also indicate for how long the company will make a transcript or replay of the call available over its Web site.

(5) We recognize that many companies prefer news release disclosure as the safest means of satisfying the “generally disclosed” requirement. In section 6.6 of the Policy, we recommend as a “best practice” a disclosure model centred around news release disclosure of material information, followed by an open and accessible conference call to discuss the information contained in the news release. However, we believe that alternative methods may also be appropriate. We believe it is important to preserve for companies the flexibility to develop a disclosure model that suits their circumstances and disseminates material information in the manner best calculated to effectively reach the marketplace.

(6) Posting information to a company’s Web site will not, by itself, be likely to satisfy the “generally disclosed” requirement. Investors’ access to the Internet is not yet sufficiently widespread such that a Web site posting alone would be a means of dissemination “calculated to effectively reach the marketplace.” Further, effective dissemination involves the “pushing out” of information into the marketplace. Notwithstanding the ability of some issuers’ Web sites to alert interested parties to new postings, Web sites by and large do not push information out into the marketplace. Instead, investors would be required to seek out this information from a company’s Web site. Active and effective dissemination of information is central to satisfying the “generally disclosed” requirement.

(7) We support the use of technology in the disclosure process and believe that companies’ Web sites can be an important and useful tool in improving communications to the marketplace. As technology evolves and as more investors gain access to the Internet, it may be that postings to certain companies’ Web sites alone could satisfy the “generally disclosed” requirement. At such time, we will revisit this policy statement and reconsider the guidance provided on this issue. In the meantime, we strongly encourage companies to utilize their Web sites to improve investor access to corporate information. [FN 26]

FN 20 See, however, section 2.1 regarding an issuer’s timely disclosure obligations.

FN 21 Green v. Charterhouse Group Can. Ltd. (1976), 12 O.R. (2d) 280. In the Matter of Harold P. Connor et al. (1976) Volume II OSCB 149. Existing case law does not establish a firm rule as to what would be a reasonable amount of time for investors to be given to analyze information. The time period will depend on a number of factors including the circumstances in which the event arises, the nature and complexity of the information, the nature of the market for the company’s securities, and the manner used to release the information. We recognize that the case law is dated in this respect and that, if the courts were to revisit these decisions today, they may not find the time parameters set out in the decisions appropriate for modern technology.

FN 22 A sudden change from the usual method of generally disclosing material information may attract regulatory attention in certain circumstances; for example, a last minute webcast of poor quarterly results without advance notice when positive quarterly results are generally released in advance of a subsequently scheduled discussion of the results.

FN 23 We encourage companies to file their news releases on SEDAR. Filing a news release on SEDAR alone will not constitute “general disclosure”.

FN 24 This is based on guidance provided by the U.S. Securities and Exchange Commission (the “SEC”) in the adopting release to Regulation FD.

FN 25 This might include a Web site link to any software that is necessary to access the webcast.

FN 26 See also The Toronto Stock Exchange’s Electronic Communications Disclosure Guidelines.