OSC Staff Notice 55-701 Automatic Securities Disposition Plans and Automatic Securities Purchase Plans

Background

We have recently received a number of enquiries on behalf of insiders who wish to establish an ASDP with their broker.

These types of plans typically involve an insider instructing a broker to sell securities from the insider’s holdings in accordance with a pre-arranged set of instructions. The plans typically contemplate that the broker will continue to sell the securities regardless of whether a “blackout period” established by the issuer may be in effect and regardless of whether the insider may be in possession of material undisclosed information about the issuer at the time of the sale. The most common questions that we have received in relation to ASDPs are as follows:

  •  If an insider sells securities of a reporting issuer under an ASDP at a time when the insider has knowledge of material undisclosed information about the issuer, can the insider rely on the exemption contained in subsection 175(2)(b) of the regulations? In other words, is an ASDP an “other similar automatic plan” for the purposes of the exemption in s. 175(2)(b), with the result that the insider is exempt from the prohibition in subsection 76(1) of the Act and liability under section 134 of the Act?
  • Is there a disclosure obligation at the time the insider enters into the ASDP?
  • Does the insider have to file an insider report each time there is a disposition under an ASDP? Or can the insider rely on the insider reporting exemption for “automatic securities purchase plans” (ASPPs) in NI 55-101 which allows an insider to file a report on an annual basis rather than a transaction-by-transaction basis?

We Have Responded To These Questions As Follows.