OSC Staff Notice 55-701 Automatic Securities Disposition Plans and Automatic Securities Purchase Plans
Queston 2

Is there a Disclosure Obligation at the Time the Insider Enters Into the ASDP?

Staff take the view that this will depend on the particular circumstances of the plan. In making this determination, the following questions should be considered:

  • Where the plan is established by the issuer, the issuer should consider whether establishing the plan constitutes a “material change”, thereby triggering a news release and a material change report.
  • Similarly, the issuer and the insider should consider whether the establishment of the plan constitutes a “material fact”, with the result that no person with knowledge of the material fact can trade so long as it has not been generally disclosed. In discussions with staff, insiders and their advisers have in some cases expressed the concern that public disclosure of the plan at the time the plan is established may have a negative impact on share price as it will indicate that a large block of securities may shortly come onto the market. We note that this concern would appear to suggest that the establishment of the plan constitutes a material change and/or a material fact.
  • The insider should consider whether entering into the arrangement involves a change in “direct or indirect … control or direction” over the insider’s securities. If yes, then an insider report is required at the time the arrangement is entered into by virtue of s. 107(2) of the Securities Act (Ontario).
  • The insider should consider whether entering into the arrangement involves a change in the insider’s “economic interest” in a security of the reporting issuer, or the insider’s “economic exposure to the reporting issuer”. If yes, then entering into the arrangement will trigger a disclosure requirement under MI 55-103 Insider Reporting for Certain Derivative Transactions (Equity Monetization), unless an exemption in that instrument is available. Where the issuer and insider conclude that there is no legal requirement to disclose the existence of the plan at the time the plan is established, it may nevertheless be advisable to disclose the existence of the plan on a voluntary basis. Disclosure about the plan may eliminate questions about apparent trading activity by insiders during blackout periods and periods when the insiders may have access to material undisclosed information.