Historically, there has been some uncertainty as to whether, as a matter of law, certain derivative instruments involving securities are themselves securities. This uncertainty has resulted in questions as to whether a reporting obligation existed or how insiders should report a derivative instrument. The Instrument resolves this uncertainty by including derivative instruments in the definition of “related financial instrument”. Under the Instrument, it is not necessary to determine whether a particular derivative instrument is a security or a related financial instrument since the insider reporting requirement in Part 3 of the Instrument applies to both securities and related financial instruments.
To the extent the following derivative instruments do not, as a matter of law, constitute securities, they will generally be related financial instruments:
• a forward contract, futures contract, stock purchase contract or similar contract involving securities of the insider’s reporting issuer;
• options issued by an issuer other than the insider’s reporting issuer;
• stock-based compensation instruments, including phantom stock units, deferred share units (DSUs), restricted share awards (RSAs), performance share units (PSUs), stock appreciation rights (SARs) and similar instruments;
• a debt instrument or evidence of deposit issued by a bank or other financial institution for which part or all of the amount payable is determined by reference to the price, value or level of a security of the insider’s reporting issuer (a linked note); and
• most other agreements, arrangements or understandings that were previously subject to an insider reporting requirement under former Multilateral Instrument 55-103 Insider Reporting for Certain Derivative Transactions (Equity Monetization) (MI 55-103).