CSA Staff Notice 55-317 Automatic Securities Disposition Plans
Part 2 Background

Insider Trading and Automatic Plans*

Under securities legislation, insiders are generally prohibited from trading in an issuer’s securities with knowledge of MNPI. However, insiders may rely on the Legal Defense when their trades are made under an “automatic plan” referred to in securities legislation. Insiders that are “reporting insiders” as defined in National Instrument 55-104 Insider Reporting Requirements and Exemptions (NI 55-104) are required to file an insider report each time there is a trade in securities of the issuer by or on behalf of the insider under an ASDP in accordance with NI 55-104.

We note that executive officers and directors are increasingly being encouraged to build and hold a significant level of securities ownership in the issuers that they manage or oversee in order to align their interests with other security holders. While the issuer’s securities may form an important part of compensation, the insider trading prohibition under securities legislation and regular exposure to MNPI may limit the ability of insiders to sell the securities they receive as part of their compensation arrangements and often results in insiders being unable to trade securities for extended periods of time.

We recognize that a well-designed and well-administered ASDP can be a legitimate mechanism for trading by insiders. However, it is important to ensure that ASDPs contain meaningful conditions and restrictions to ensure that insiders are not able to benefit from MNPI with respect to the issuer and that ASDPs are automatic in substance.

*This title is provided by Lexata; it is not part of the notice.