Ontario Securities Commission Bulletin
Issue 49/14 - April 09, 2026
Ont. Sec. Bull. Issue 49/14
• Ontario Securities Commission and Trevor Rosborough
• Ontario Securities Commission and Nathanael Anthony Aikman
• Ontario Securities Commission et al.
• Ontario Securities Commission and Trevor Rosborough -- s. 127(1)
• Ontario Securities Commission and Nathanael Anthony Aikman -- ss. 127(1), 127(4.0.1)
• Ontario Securities Commission and Trevor Rosborough -- s. 127(1)
• SCOR Canada Reinsurance Company and SCOR Investment Partners SE -- s. 74(1)
• Temporary, Permanent & Rescinding Issuer Cease Trading Orders
• Temporary, Permanent & Rescinding Management Cease Trading Orders
• Alpha Exchange Inc. -- Proposed Amendments -- Notice and Request for Comments
• Nasdaq CXC Limited -- Proposed Changes -- Notice and Request for Comment
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FOR IMMEDIATE RELEASE
April 1, 2026
TORONTO -- The Tribunal issued an Order in the above-named matter.
A copy of the Order dated March 31, 2026 is available at capitalmarketstribunal.ca.
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Ontario Securities Commission and Trevor Rosborough
FOR IMMEDIATE RELEASE
April 1, 2026
TORONTO -- Following a hearing held today, the Tribunal issued an Order in the above-named matter approving the Settlement Agreement reached between the Ontario Securities Commission and Trevor Rosborough.
A copy of the Order dated April 1, 2026, Settlement Agreement dated March 5, 2026, and Oral Reasons for Approval of a Settlement dated April 1, 2026, are available at capitalmarketstribunal.ca.
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Ontario Securities Commission and Nathanael Anthony Aikman
FOR IMMEDIATE RELEASE
April 2, 2026
TORONTO -- The Tribunal issued an Order in the above-named matter.
A copy of the Application for Enforcement Proceeding dated March 26, 2026 and the Order dated April 2, 2026 are available at capitalmarketstribunal.ca.
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Ontario Securities Commission et al.
FOR IMMEDIATE RELEASE
April 6, 2026
TORONTO -- A motion hearing in the above-named matter is scheduled to be heard on April 10, 2026, at 8:30 a.m. by videoconference.
Members of the public may observe the hearing by videoconference, by selecting the "View by Zoom" link on the Tribunal's hearing schedule, at www.capitalmarketstribunal.ca/en/hearing-schedule.
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Notice of Correction -- Cormark Securities Inc. et al.
File No. 2022-24
2024 ONCMT 26. Please be advised that the Tribunal issues this Notice of Correction to correct the following typographical error in the Reasons and Decision dated November 6, 2024.
On page 52 at footnote 28, the citation year was incorrectly stated: "2070 ONSEC 4" has been replaced with "2007 ONSEC 4".
This correction does not affect the Tribunal's analysis, reasons, or conclusions.
FOR IMMEDIATE RELEASE
April 6, 2026
TORONTO -- The Tribunal issued an Order in the above-named matter.
A copy of the Order dated April 6, 2026 is available at capitalmarketstribunal.ca.
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Ontario Securities Commission and Andre Itwaru
FOR IMMEDIATE RELEASE
April 7, 2026
TORONTO -- The merits, sanctions and costs hearing in the above-named matter scheduled to be heard on April 30, 2026 at 10:00 a.m. will instead be heard on June 17, 2026 at 10:00 a.m. by videoconference.
Members of the public may observe the hearing by videoconference, by selecting the "View by Zoom" link on the Tribunal's hearing schedule, at capitalmarketstribunal.ca/en/hearing-schedule.
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BETWEEN:
File No. 2025-11
Adjudicator: |
Andrea Burke |
March 31, 2026
WHEREAS the Capital Markets Tribunal held a hearing in writing to consider a request from the Ontario Securities Commission to vary the deadline for the Commission to serve and file written submissions set out in the Tribunal's order dated January 21, 2026;
ON READING the correspondence from the parties and on being advised that Jack Marks and CNSX Markets Inc. consent;
IT IS ORDERED THAT by no later than 4:30 p.m. EDT on April 23, 2026, the Ontario Securities Commission shall serve and file written submissions on the merits of the application, if any.
Ontario Securities Commission and Trevor Rosborough -- s. 127(1)
BETWEEN:
File No. 2026-1
Adjudicators: |
M. Cecilia Williams (chair of the panel) |
Geoffrey D. Creighton |
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Dale R. Ponder |
April 1, 2026
(Subsection 127(1) of the Securities Act, RSO 1990, c S.5)
WHEREAS on April 1, 2026, the Capital Markets Tribunal held a hearing by videoconference to consider the joint request for a settlement hearing filed by the Ontario Securities Commission and Trevor Rosborough for approval of a settlement agreement dated March 5, 2026 (the Settlement Agreement), where Rosborough admits to contravening Ontario securities law by failing to comply with a director and officer ban imposed in a Tribunal order dated August 25, 2021, in file number 2020-33;
ON READING the joint request for a settlement hearing, the Application for Enforcement Proceeding dated March 18, 2026, the Settlement Agreement and the written submissions of the Commission, on hearing the submissions of Rosborough and the representative of the Commission, and on being advised by the Commission that it has received payment from the respondent in the amount of $6,000;
IT IS ORDERED THAT:
1. the Settlement Agreement is approved;
2. Rosborough shall resign any positions that he holds as a director or officer of any issuer, pursuant to paragraph 7 of subsection 127(1) of the Securities Act (Act);
3. Rosborough is prohibited from becoming or acting as a director or officer of any issuer until August 25, 2033, pursuant to paragraph 8 of subsection 127(1) of the Act; and
4. Rosborough shall pay an administrative penalty of $6,000 for his failure to comply with Ontario securities law, pursuant to paragraph 9 of subsection 127(1) of the Act.
BETWEEN:
1. In response to breaches of Ontario securities law, the Capital Markets Tribunal (the Tribunal) may impose restrictions on respondents to protect Ontario investors and capital markets. These restrictions often include bans from acting as directors or officers of issuers. It is critical to fostering fair and efficient capital markets and confidence in capital markets that persons and companies comply with all terms and conditions of the Tribunal's orders, including these bans.
2. Trevor Rosborough (Rosborough or the Respondent) contravened Ontario securities law by failing to comply with a director and officer ban imposed in a Tribunal order dated August 25, 2021 (the August 2021 Order). The August 2021 Order required Rosborough to resign from any positions he held as a director or officer of an issuer and prohibited him from becoming an officer or director of any issuer for a period of eight years. Rosborough remained a director and officer of two non-reporting issuers in contravention of the director and officer ban. A prohibition from acting as a director or officer of an issuer applies to any issuer, not just reporting issuers.
3. Compliance with Tribunal orders is essential to maintaining the integrity of Ontario's capital markets. When persons disregard the restrictions imposed on them by orders of the Tribunal, this undermines investor confidence and the fairness and efficiency of the capital markets.
4. The parties will jointly file a request that the Tribunal issue a Notice of Hearing (the Notice of Hearing) to announce that it will hold a hearing (the Settlement Hearing) to consider whether, pursuant to section 127 of the Securities Act, RSO 1990, c S.5, as amended (the Act), it is in the public interest for the Tribunal to make certain orders against Rosborough.
5. The Ontario Securities Commission (the Commission) and Rosborough jointly recommend settlement of the proceeding (the Proceeding) against Rosborough in accordance with the terms and conditions set out in this agreement (the Settlement Agreement). Rosborough consents to the making of an order (the Order) substantially in the form attached as Schedule "A" to this Settlement Agreement based on the facts set out herein.
6. For the purposes of the Proceeding, and any other regulatory proceeding commenced by the Commission or another securities regulatory authority, Rosborough agrees with the facts set out in Part III of this Settlement Agreement and the conclusions in Part IV and V of this Settlement Agreement.
7. Rosborough is a resident of Strathroy, Ontario.
8. Rosborough was a respondent in Rosborough (Re), file number 2020-33. On August 25, 2021, the Tribunal made the August 2021 Order. Among other things, the August 2021 Order required Rosborough to resign from any positions he held as a director or officer of an issuer and prohibited him from becoming or acting as a director or officer of any issuer for a period of eight years (D&O Ban).
9. Rosborough became a director and officer of Masterpiece Financial Inc. (Masterpiece) on November 13, 2009, incorporated in Ontario on the same date. Rosborough remained a director and officer of Masterpiece after the August 2021 Order.
10. Rosborough became a director and officer of Thess518 Inc. (Thess518) on May 15, 2020, incorporated in Ontario on the same date. Rosborough remained a director and officer of Thess518 after the August 2021 Order.
11. The two corporations are issuers within the meaning of the Act.
12. Rosborough failed to comply with the D&O Ban for approximately three years.
13. On December 20, 2024, the Commission requested Rosborough to provide any evidence of his compliance with the D&O Ban.
14. Following the Commission's request, Rosborough resigned as a director and officer of Thess518 effective January 7, 2025, and as a director and officer of Masterpiece effective January 14, 2025.
15. Rosborough has accepted full responsibility for his conduct.
16. Following the Commission's contact, Rosborough resigned from being a director and officer of the two issuers, bringing him into compliance with the D&O Ban in the August 2021 Order.
17. By engaging in the conduct described above, the Respondent acknowledges and admits that he breached the D&O Ban in the August 2021 Order and, consequently, contravened Ontario securities law and section 122(1)(c) of the Act, and it is in the public interest to issue an order pursuant to section 127 of the Act.
PART V -- TERMS OF SETTLEMENT
18. The Respondent and the Commission agree to the terms of settlement set forth below.
19. The Respondent consents to the Order substantially in the form attached as Schedule "A", pursuant to which it is ordered that:
(a) this Settlement Agreement is approved;
(b) Rosborough shall resign any positions that he holds as a director or officer of any issuer, pursuant to paragraph 7 of subsection 127(1) of the Act;
(c) Rosborough is prohibited from becoming or acting as a director or officer of any issuer for a period of four years from August 25, 2029, the date of expiry of the director and officer ban contained in the August 25, 2021 order, pursuant to paragraph 8 of subsection 127(1) of the Act; and
(d) Rosborough shall pay an administrative penalty of $6,000 for his failure to comply with Ontario securities law, pursuant to paragraph 9 of subsection 127(1) of the Act.
20. Rosborough shall pay the amount set out in subparagraph 19(d) by wire transfer to the Commission prior to the issuance of the Order.
21. The Respondent acknowledges that this Settlement Agreement and the Order may form the basis for orders of parallel effect in other jurisdictions in Canada. The securities laws of some other Canadian jurisdictions allow orders made in this matter to take effect in those other jurisdictions automatically, without further notice to the Respondent. The Respondent should contact the securities regulator of any other jurisdiction in which the Respondent intends to engage in any securities or derivatives-related activities, prior to undertaking such activities.
22. If the Tribunal approves this Settlement Agreement, no enforcement proceedings will be continued against the Respondent under Ontario securities law based on the misconduct described in Part III of this Settlement Agreement, unless the Respondent fails to comply with any term in this Settlement Agreement, in which case enforcement proceedings may be brought or continued under Ontario securities law against the Respondent that may be based on, among other things, the facts set out in Part III of this Settlement Agreement as well as the breach of this Settlement Agreement.
23. The Respondent acknowledges that, if the Tribunal approves this Settlement Agreement and the Respondent fails to comply with any term in it, proceedings may be brought in order to ensure compliance with the terms of the Settlement Agreement.
24. The Respondent waives any defences to a proceeding referenced in paragraphs 22 or 23 that are based on the limitation period in the Act, provided that no such proceeding shall be commenced later than six years from the date of the occurrence of the last failure to comply with this Settlement Agreement.
25. The parties will seek approval of this Settlement Agreement at the Settlement Hearing before the Tribunal, which shall be held on a date determined by the Tribunal's Governance and Tribunal Secretariat in accordance with this Settlement Agreement and the Tribunal's Rules of Procedure.
26. The Respondent will attend the Settlement Hearing in person or by video conference.
27. The parties confirm that this Settlement Agreement sets forth all of the agreed facts that will be submitted at the Settlement Hearing, unless the parties agree that additional facts should be submitted at the Settlement Hearing.
28. If the Tribunal approves this Settlement Agreement:
(a) the Respondent irrevocably waives all rights to a full hearing, judicial review or appeal of this matter under the Act; and
(b) neither party will make any public statement that is inconsistent with this Settlement Agreement or with any additional agreed facts submitted at the Settlement Hearing.
29. Whether or not the Tribunal approves this Settlement Agreement, the Respondent will not use, in any proceeding, this Settlement Agreement or the negotiation or process of approval of this Settlement Agreement as the basis for any attack on the Commission or the Tribunal's jurisdiction, alleged bias, alleged unfairness or any other remedies or challenges that may be available.
30. If the Tribunal does not approve this Settlement Agreement or does not make an order substantially in the form of the Order attached as Schedule "A" to this Settlement Agreement:
(a) this Settlement Agreement and all discussions and negotiations between the parties before the Settlement Hearing will be without prejudice to the Commission and the Respondent; and
(b) the Commission and the Respondent will each be entitled to all available proceedings, remedies and challenges, including proceeding to a hearing on the merits of the allegations contained in an Application for Enforcement Proceeding based on the conduct described herein. Any such proceedings, remedies and challenges will not be affected by this Settlement Agreement, or by any discussions or negotiations relating to this Settlement Agreement.
31. The parties will keep the terms of this Settlement Agreement confidential until the Settlement Hearing, except as is necessary to make submissions at the Settlement Hearing. If, for whatever reason, the Tribunal does not approve the Settlement Agreement, the terms of the Settlement Agreement shall remain confidential indefinitely, unless the parties otherwise agree in writing or if required by law.
32. This Settlement Agreement may be signed in one or more counterparts which together constitute a binding agreement.
33. A facsimile copy or other electronic copy of any signature will be as effective as an original signature.
DATED at Strathroy, Ontario this "3rd" day of March, 2026.
"Shawn White" |
"Trevor Rosborough" |
________________________________________________________ |
________________________________________________________ |
Witness (print name): |
TREVOR ROSBOROUGH |
DATED at Toronto, Ontario, this "5th" day of March, 2026.
ONTARIO SECURITIES COMMISSION
By: |
"Bonnie Lysyk" |
________________________________________________________ |
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Name: Bonnie Lysyk |
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Title: Executive Vice President, Enforcement Division |
BETWEEN:
File No. 2026-1
Adjudicators: |
M. Cecilia Williams (chair of the panel) |
Geoffrey Creighton |
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Dale Ponder |
[Date order made]
(Subsection 127(1) of the Securities Act, RSO 1990, c S.5)
WHEREAS on [date], the Capital Markets Tribunal held a hearing [select option,] to consider the joint request for a settlement hearing filed by the Ontario Securities Commission and Trevor Rosborough for approval of a settlement agreement dated [date] (the Settlement Agreement), where Rosborough admits to contravening Ontario securities law by failing to comply with a director and officer ban imposed in a Tribunal order dated August 25, 2021, in file number 2020-33;
ON READING the joint request for a settlement hearing, the Application for Enforcement Proceeding dated [date], the Settlement Agreement and the written submissions of the Commission, on hearing the submissions of Rosborough and the representatives of the Commission, and on being advised by the Commission that it has received payment from the respondent in the amount of $6,000;
IT IS ORDERED THAT:
1. this Settlement Agreement is approved;
2. Rosborough shall resign any positions that he holds as a director or officer of any issuer, pursuant to paragraph 7 of subsection 127(1) of the Securities Act (the Act);
3. Rosborough is prohibited from becoming or acting as a director or officer of any issuer for a period of four years from August 25, 2029, the date of expiry of the director and officer ban contained in the August 25, 2021 order, pursuant to paragraph 8 of subsection 127(1) of the Act; and
4. Rosborough shall pay an administrative penalty of $6,000 for his failure to comply with Ontario securities law, pursuant to paragraph 9 of subsection 127(1) of the Act.
___________________________ |
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M. Cecilia Williams |
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___________________________ |
___________________________ |
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Geoffrey Creighton |
Dale Ponder |
Ontario Securities Commission and Nathanael Anthony Aikman -- ss. 127(1), 127(4.0.1)
BETWEEN:
File No. 2026-14
Adjudicator: |
Cathy Singer |
April 2, 2026
(Subsections 127(1) and 127(4.0.1) of theSecurities Act, RSO 1990, c S.5)
WHEREAS the Capital Markets Tribunal held a hearing in writing to consider an application brought by the Ontario Securities Commission for an order imposing sanctions against the respondent, Nathanael Anthony Aikman, without giving the respondent an opportunity to be heard, pursuant to subsections 127(1) and 127(4.0.1) of the Securities Act, RSO 1990, c S.5 (the Act);
ON READING the materials filed by the Commission, including the Transcripts of Proceedings at the Ontario Court of Justice, dated November 23, 2023 and July 18, 2024;
IT IS ORDERED THAT:
1. pursuant to paragraph 2 of subsection 127(1) of the Act, trading in any securities or derivatives by Aikman shall cease permanently;
2. pursuant to paragraph 2.1 of subsection 127(1) of the Act, the acquisition of any securities by Aikman is prohibited permanently;
3. pursuant to paragraph 3 of subsection 127(1) of the Act, any exemptions contained in Ontario securities law do not apply to Aikman permanently;
4. pursuant to paragraphs 7, 8.1 and 8.3 of subsection 127(1) of the Act, Aikman shall resign any positions that he holds as a director or officer of any issuer or registrant;
5. pursuant to paragraphs 8, 8.2 and 8.4 of subsection 127(1) of the Act, Aikman is prohibited permanently from becoming or acting as a director or officer of any issuer or registrant; and
6. pursuant to paragraph 8.5 of subsection 127(1) of the Act, Aikman is prohibited permanently from becoming or acting as a registrant or promoter.
BETWEEN:
(Subsections 127(1) and 127(4.0.1) of the Securities Act, RSO 1990, c S.5)
1. The Applicant, the Ontario Securities Commission (the Commission), requests that the Capital Markets Tribunal (the Tribunal) make an order in the public interest against the Respondent, Nathanael Anthony Aikman (Aikman), based on a conviction by the Ontario Court of Justice (OCJ). The Commission seeks this order without providing the Respondent an opportunity to be heard, pursuant to paragraph 2 of subsection 127(4.0.1) of the Ontario Securities Act, RSO 1990, c S.5 (the Act).
2. In 2023, Aikman pleaded guilty to and was convicted of two counts of contravening Ontario securities laws under s. 122(1)(c) of the Act: one count of engaging in the business of trading without being registered to trade in securities, contrary to s. 25(1) of the Act, and one count of fraud, contrary to s. 126.1(1)(b) of the Act. Aikman's conviction was based on admissions that between October 27, 2016 and August 30, 2019, he solicited approximately $6.3 million worth of investments in a hedge fund, falsified his trading performance and returns, paid investors inflated dividends and redemptions that were significantly funded by the investments of others, and ultimately lost and misappropriated approximately $3.9 million in investor funds.
3. Aikman was sentenced in absentia to four years in custody for the fraud conviction, and three months concurrent for the unregistered trading conviction. A restitution order totalling $3,902,176.65 was also imposed against Aikman.
4. The Tribunal has jurisdiction to make orders in the public interest on an ex parte basis under ss. 127(1) and 127(4.0.1) of the Act where, as here, a person or company has been convicted in any jurisdiction of an offence under laws respecting securities or derivatives.
5. The order requested herein is in the public interest. The order is necessary to restrain potential future misconduct by the Respondent that exposes Ontario investors to unacceptable risks and to deter others from engaging in securities misconduct such as the operation of a Ponzi-like scheme.
6. Pursuant to an information sworn December 9, 2020, Aikman was charged with three counts of contravening Ontario securities law under s. 122(1)(c) of the Act:
(a) engaging in, or holding himself out as engaging in, the business of trading in securities, without being registered to trade in securities, as required by s. 25(1) of the Act (Count 1);
(b) trading in securities, where such trading was a distribution of securities, without having filed a preliminary prospectus and prospectus and obtaining receipts for them from the Director, as required by s. 53(1) of the Act (Count 2); and
(c) engaging in an act, practice or course of conduct related to securities that he knew or reasonably ought to have known perpetrated a fraud on Ontario investors, contrary to s. 126.1(1)(b) of the Act (Count 3).
7. On November 23, 2023, Aikman pleaded guilty to Count 1 and Count 3 before the Honourable Justice L. Botham and was convicted based on admissions contained in a Synopsis for Guilty Plea (the Admissions), which was entered into the court record. Count 2 was withdrawn.
8. On July 18, 2024, Aikman was sentenced in absentia to four years in custody for Count 3, and three months concurrent for Count 1. A restitution order totalling $3,902,176.65 was also imposed against Aikman.
9. The Commission relies on the following Admissions:
(a) Aikman was one of three partners in Yonge Street Capital LLC (YSC), which was promoted as a hedge fund and raised approximately $6.3 million from over 70 Canadian residents between October 27, 2016 and August 30, 2019.
(b) Of the $6.3 million raised, $2.4 million in dividends were paid to investors, and the remaining $3.9 million were lost or misappropriated. In particular, Aikman spent $1.4 million on personal expenses.
(c) Aikman was never registered with the Commission, and neither were YSC, its two other partners, nor any of the other companies involved in the matter. None of the parties filed a prospectus in relation to the distribution of shares.
(d) Aikman nevertheless held himself out as a trader and conducted trades.
(e) A small percentage of funds raised from investors were used to trade in equities, but trading appears to have ceased as of April 2018.
(f) Aikman also conducted a few trades on Coinsquare in June 2018, generating a small profit. However, after June 2018, Aikman purchased cryptocurrency and transferred it to two unknown wallets. The wallets now have a balance of zero. No explanation has been provided for the nil balances.
(g) Aikman fabricated the returns generated from his trading activity and paid inflated dividends to investors. Investors were also given false, overstated representations of their holdings, causing some investors to contribute additional funds and others to not redeem their investments.
(h) When investors did redeem their investments, redemptions were signficantly funded by the investments of others.
(i) Since May 2019, investors have not received any funds back from YSC.
(j) In early August 2019, YSC announced a structural change that reportedly resulted in the liquidation of the 72 client accounts totalling over $10 million. Investors were told they would receive full balances in their accounts.
(k) On August 22, 2019, Aikman admitted to his partners that there was no money left to be returned to investors.
10. Pursuant to paragraph 2 of s. 127(4.0.1) of the Act, if a person or company has been convicted in any jurisdiction of an offence under laws respecting securities or derivatives, the Tribunal may make any of the orders described in paragraphs 1 to 8.5 of s. 127(1) of the Act against the respondent without giving the respondent an opportunity to be heard.
11. Aikman has been convicted by the OCJ of offences under Ontario securities laws.
12. Aikman failed to appear at his sentencing hearing.
13. Subsection 127(4.0.4) of the Act allows the Tribunal to make an order under s. 127(4.0.1) even if the circumstances arose before s. 127(4.0.1) came into force.
14. It is in the public interest to make the requested orders against the Respondent to protect investors and safeguard the integrity of Ontario's capital markets.
15. The Commission requests that the Tribunal make the following orders against Aikman:
(a) pursuant to paragraph 2 of subsection 127(1) of the Act, trading in any securities or derivatives by Aikman cease permanently;
(b) pursuant to paragraph 2.1 of subsection 127(1) of the Act, acquisition of any securities by Aikman be prohibited permanently;
(c) pursuant to paragraph 3 of subsection 127(1) of the Act, any exemptions contained in Ontario securities law do not apply to Aikman permanently;
(d) pursuant to paragraphs 7, 8.1 and 8.3 of subsection 127(1) of the Act, Aikman resign any positions that he holds as a director or officer of any issuer or registrant;
(e) pursuant to paragraphs 8, 8.2 and 8.4 of subsection 127(1) of the Act, Aikman be prohibited permanently from becoming or acting as a director or officer of any issuer or registrant;
(f) pursuant to paragraph 8.5 of subsection 127(1) of the Act, Aikman be prohibited permanently from becoming or acting as a registrant or promoter; and
(g) such other order or orders as the Tribunal considers appropriate.
March 26, 2026 |
ONTARIO SECURITIES COMMISSION |
20 Queen Street West, 22nd Floor |
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Toronto, ON |
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M5H 3S8 |
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Christine Gorgi |
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Litigation Counsel |
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Enforcement Division |
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LSO# 85216P |
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Tel: (416) 263-7717 |
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Email: cgorgi@osc.ca |
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Alex Nyikos |
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Student-At-Law |
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Enforcement Division |
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Email: ANyikos@osc.ca |
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Peter Michael Deeb et al. -- s. 8
BETWEEN:
File No. 2026-10
Adjudicators: |
James Douglas (chair of the panel) |
Judith Robertson |
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Mary Condon |
April 6, 2026
(Section 8 of the Securities Act, RSO 1990, c S.5)
WHEREAS on April 6, 2026, the Capital Markets Tribunal held a hearing at 20 Queen Street West, 17th Floor, Toronto, Ontario, to consider a motion brought by Peter Michael Deeb for a stay of the Final Order and Decision on Sanctions and Costs of the Canadian Investment Regulatory Organization dated February 3, 2026, pending the disposition of Deeb's application for a review of this decision and the Liability Decision of CIRO dated April 14, 2025, by the Tribunal (the Stay Motion);
AND WHEREAS on March 9, 2026, the Tribunal ordered the CIRO decisions be stayed pending the disposition of the Stay Motion (the Interim Stay Order);
ON HEARING the submissions of the representatives for Deeb, CIRO, and the Ontario Securities Commission;
IT IS ORDERED, for reasons to follow, that:
1. the Stay Motion is dismissed; and
2. the Interim Stay Order shall remain in effect for 10 business days following the date of this order.
Ontario Securities Commission and Trevor Rosborough -- s. 127(1)
Citation: Ontario Securities Commission v Rosborough, 2026 ONCMT 17
Date: 2026-04-01
File No. 2026-1
BETWEEN:
(Subsection 127(1) of the Securities Act, RSO 1990, c S.5)
Adjudicators: |
M. Cecilia Williams (chair of the panel) |
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Geoffrey D. Creighton |
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Dale R. Ponder |
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Hearing: |
By videoconference, April 1, 2026 |
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Appearances: |
Susan Kimani |
For the Ontario Securities Commission |
Trevor Rosborough |
On his own behalf |
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The following reasons have been prepared for publication, based on the reasons delivered orally at the hearing, as edited and approved by the panel, to provide a public record of the oral reasons.
[1] The Ontario Securities Commission and Trevor Rosborough have agreed to a settlement in respect of the Commission's allegations that Mr. Rosborough breached the director and officer ban imposed in an order of the Tribunal dated August 25, 2021, thereby contravening Ontario securities law.
[2] The Commission and Mr. Rosborough are now asking for our approval of their settlement. We approve of the settlement and will order the sanctions that have been proposed by the parties.
[3] Before turning to the agreed-upon sanctions, we will briefly summarize the facts that are contained in the settlement agreement.
[4] Mr. Rosborough was a respondent in Rosborough (Re), file number 2020-33. On August 25, 2021, the Tribunal approved a settlement between the Commission and Mr. Rosborough and ordered, among other things, that Mr. Rosborough resign from any positions he held as a director or officer of an issuer and that he be prohibited from becoming an officer or director of any issuer for eight years. Mr. Rosborough remained a director and officer of two issuers in contravention of the ban for approximately three years.
[5] Mr. Rosborough admits to breaching the director and officer ban and has since resigned as a director and officer of the issuers.
[6] By violating the director and officer ban, Mr. Rosborough contravened Ontario securities law. He has agreed to the sanctions set out in the settlement agreement, which include that he resign from any positions he holds as a director and officer, he be prohibited from becoming or acting as a director or officer of any issuer until August 25, 2033, four years after the expiry of the ban in the August 25, 2021, order, and he pay an administrative penalty of $6,000.
[7] Our role at today's hearing is to decide whether these terms fall within a reasonable range of outcomes. Before today's hearing, we held a confidential settlement conference with the parties and had the opportunity to hear from the parties and ask them questions about the settlement. In deciding whether to approve the settlement, we respect the negotiation process and accord significant deference to the resolution reached by the parties.
[8] We find the settlement terms to be reasonable. While at the lower end of the range of sanctions ordered for breaches of director and officer bans, the proposed sanctions recognize the seriousness of disregarding the terms of a Tribunal order and send a signal to both Mr. Rosborough, a former registrant with a history of capital markets misconduct, and others that breaches of this nature will not be tolerated. Respect for and compliance with Tribunal orders, particularly those arising from settlements, is a critical element in the regulation of Ontario's capital markets.
[9] The terms of the settlement also take into account certain mitigating factors, including that by settling this proceeding, Mr. Rosborough has accepted full responsibility for his misconduct, and has helped conserve both Tribunal and Commission resources. By resigning as a director and officer of the two issuers, he also brought himself into compliance with the director and officer ban.
[10] In conclusion, we find that the settlement is reasonable and in the public interest. We will issue an order substantially in the form of the draft attached to the settlement agreement.
Dated at Toronto this 1st day of April, 2026
Cormark Securities Inc. -- s. 127(1)
Citation: Cormark Securities Inc (Re), 2024 ONCMT 26
Date: 2024-11-06
File No. 2022-24
(Subsection 127(1) of the Securities Act, RSO 1990, c S.5)
Adjudicators: |
M. Cecilia Williams (chair of the panel) |
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Geoffrey D. Creighton |
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Jane Waechter |
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Hearing: |
In person, March 25, 26, April 11, 12, 15, 16, 30, May 1, 2, 3, 21, 22, 28, 29, June 13, 14, 2024; final written submissions received June 14, 2024 |
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Appearances: |
Anna Huculak |
For the Ontario Securities Commission |
Johanna Braden |
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David Di Paolo |
For Cormark Securities Inc. |
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Graham Splawski |
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Rebecca Flynn |
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Natalia Paunic |
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Melissa MacKewn |
For William Jeffrey Kennedy |
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Dana Carson |
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Joseph Groia |
For Marc Judah Bistricer |
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Kevin Richard |
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Yona Gal |
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Derek Ricci |
For Saline Investments Ltd. |
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Chantelle Cseh |
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Rui Gao |
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[1] On March 17, 2017, Canopy Growth Corporation was added to the Toronto Stock Exchange's composite index (the Index). Prior to Canopy's inclusion in the Index, Cormark Securities Inc. (a registered investment dealer) approached Canopy about participating with a Cormark client in a series of transactions (the Transactions).
[2] The proposed structure would allow Canopy to raise capital by taking advantage of the anticipated increased demand for Canopy shares on March 17. Canopy agreed to participate, and the Transactions were carried out when Canopy was added to the Index.
[3] William Jeffrey Kennedy, Cormark's Head of Equity Capital Markets, developed the structure for the Transactions. The Transactions also involved Cormark's clients Marc Judah Bistricer and his company Saline Investments Ltd. Murray Goldman, a Canopy shareholder and a member of its board of directors, also participated in the Transactions.
[4] The Ontario Securities Commission alleges that:
a. the Transactions resulted in an illegal distribution of Canopy's shares;
b. Canopy was Cormark's and Kennedy's client, and Cormark and Kennedy failed to deal fairly, honestly and in good faith with Canopy;
c. in the alternative, if Canopy was not Cormark's and Kennedy's client, Cormark and Kennedy acted in a manner that engages the Tribunal's public interest jurisdiction;
d. all the respondents engaged in other conduct that engages the Tribunal's public interest jurisdiction; and
e. Kennedy and Bistricer are personally accountable for the failures by Cormark and Saline, respectively, to comply with Ontario securities law.
[5] We conclude that the Commission has failed to prove any of its allegations against any of the respondents.
[6] Cormark was registered with the Commission as an investment dealer and by 2017 was a leading independent investment dealer. Cormark's services included trading, investment banking, and equity capital markets, an investment banking sub-service that focused on structuring capital markets transactions.
[7] Kennedy was a shareholder, director and officer of Cormark, and held the title of Managing Director -- Head of Equity Capital Markets and Operations. He was registered with the Commission as a dealing representative so that he could occasionally assist retail clients (typically employees, directors or officers of institutional clients) who were interested in participating in a transaction Cormark was managing for an institutional client. By 2017, Kennedy had decades of experience structuring capital-raising transactions.
[8] Bistricer was the Chief Executive Officer of Murchinson Ltd., an Ontario portfolio manager. Bistricer was registered with the Commission as Murchinson's ultimate designated person. Bistricer was the sole shareholder, director and officer of Saline, his holding company. Bistricer, Murchinson and Saline had been clients of Cormark since 2015.
[9] Canopy was an Ontario cannabis company. It was a reporting issuer in Ontario and graduated from the TSX Venture Exchange to the Toronto Stock Exchange in 2016. In early February 2017, analysts began predicting that Canopy would join the Index on March 17, 2017.
[10] Before turning to the substantive issues, we give reasons for rulings we made during the merits hearing about read-ins from transcripts of the Commission's compelled investigative interviews.
[11] The respondents advised that they planned to file excerpts from the transcripts of the Commission's compelled investigative interview of Goldman. The Commission objected and the parties filed written submissions. During the hearing, we decided not to permit those transcript excerpts to be admitted into evidence.
[12] As a threshold matter, the Tribunal may admit relevant hearsay evidence under s. 15 of the Statutory Powers Procedure Act.{1}
[13] Goldman was directly involved in the securities loan agreement which was one element of the transactions in issue, and his evidence would meet the relevance test for this hearing. However, neither the Commission nor the respondents called Goldman for oral testimony.
[14] We exercised our discretion not to admit excerpts from the Goldman transcript because we did not receive a satisfactory explanation why Goldman could not give evidence directly. The respondents stressed his advanced age but provided no evidence whatsoever that his age caused a barrier to his testifying. Absent compelling reasons, we should not exercise our discretion to admit hearsay evidence when better evidence is available. Here, the respondents did not demonstrate any compelling reasons.
[15] Also, the Commission told us that Goldman's transcript evidence was expected to contradict, at least in some respects, the testimony of both Kennedy and Bruce Linton, the founder, Chairman and Chief Executive Officer of Canopy. If so, Goldman's evidence should be tested by cross-examination unless there is a compelling reason why he was unable to testify orally, either in person or virtually. In the circumstances of this case, a fair hearing required the ability to challenge the truth of such controverted evidence by cross-examination and we declined to admit excerpts of Goldman's compelled interview transcripts.
[16] Prior to the Commission closing its case, Bistricer and Saline elected not to testify. The Commission asked to file excerpts from Bistricer's compelled interview transcript as part of its case against those two respondents. Bistricer and Saline did not object to the proposed excerpts. However, they asked to read in additional excerpts to explain, qualify or put into context the Commission's proposed read-ins. Neither Cormark nor Kennedy took a position on the read-ins because the Commission had stipulated that the read-ins would not be used in the Commission's case against them.
[17] We did not permit the additional excerpts to be read into evidence. We concluded that no further explanation or qualification was required for the read-ins the Commission asked to introduce.
[18] Saline and Bistricer submitted that the Tribunal's decision in Kitmitto (Re){2} provided the applicable guiding principles for our decision. In Kitmitto, the Tribunal rejected the request from two of the respondents that their entire transcripts be included in evidence. However, the Tribunal recognized that other excerpts, in addition to those proposed by the Commission, could be included in evidence.
[19] The two respondents in Kitmitto submitted that without their entire transcripts in the record, there was a risk the record would be incomplete or that there could be an unfair outcome. The Tribunal concluded that those risks were "appropriately addressed through the adverse party's ability to identify other excerpts that explain or qualify those excerpts put forward by" the Commission.{3} The Tribunal stated that had either of the respondents been concerned "about insufficient inclusion of explanatory or qualifying excerpts" they could have raised those concerns with the panel.{4}
[20] Saline and Bistricer submitted that the eight extracts they asked to include all explained, qualified or put into context the read-ins the Commission proposed to rely on.
[21] The Tribunal in Kitmitto adopted a test from Rule 31.11(3) of the Rules of Civil Procedure.{5} In civil litigation in Ontario, once the pleadings are closed, every party has the right to conduct an examination for discovery of any adverse party. At any subsequent trial, a party who has conducted an examination for discovery may read into evidence any part of that examination. Rule 31.11(3) provides that where only part of the evidence from an examination for discovery is used in evidence, the trial judge may "direct the introduction of any other part of the evidence that qualifies or explains the part first introduced."
[22] The right of adverse parties to require additional read-ins is limited. It does not shift control of the content to the adverse party, the additional read-ins should not mislead the trier of fact, and it is not an opportunity for the adverse party to introduce evidence favourable to its case that should have been presented through a witness.{6}
[23] Where an answer read in is clear and complete, "separate and distinct questions and answers should not be read in under the pretext of providing context."{7}
[24] The issue for us to determine, according to the Commission, was whether the questions and answers it wanted to read in misrepresented the question and how Bistricer answered the question. The Commission submitted that the questions asked, and the answers given, in their proposed read-ins were clear and complete. They required no explanation or qualification.
[25] The read-ins Saline and Bistricer asked to introduce, purportedly to provide context, risked opening the door to requiring the Commission to introduce as part of its case evidence that it would not otherwise adduce. The Commission submitted that it should not be required to introduce evidence to establish Bistricer's case. Nor should the Commission be required to introduce as part of its case evidence that it does not consider credible or accurate. Doing so would put the Commission in the position of having to challenge its own evidence and explain why the panel should not rely on it.
[26] Saline and Bistricer submitted that the Commission had accurately described the law in civil proceedings and the civil cases that had been provided by the Commission to the Tribunal in Kitmitto. However, there is no decision by this Tribunal or any other securities tribunal that has adopted the approach used in civil litigation.
[27] The standard they asked be applied was as stated in Kitmitto, the read-in of additional excerpts that explain or qualify those proposed by the Commission.{8} In addition, in Kitmitto, the Tribunal went on to state that including the entire transcripts as requested by the two respondents "would go beyond providing context and clarification to the statements relied on by" the Commission.{9}
[28] The additional read-ins they requested, Saline and Bistricer submitted, are about providing context and qualifying answers given. This context and qualification are to ensure fairness for the respondents: to ensure the panel has an accurate understanding of their evidence on the issues relied on by the Commission, and to ensure that incomplete answers are not taken out of context.
[29] We agreed with the reasoning in Kitmitto. A respondent may introduce additional excerpts that explain or qualify those the Commission is asking to include in its evidence. By deciding not to admit the respondents' entire transcripts, the Kitmitto panel applied the civil standard. Admitting the entire transcripts would go "beyond providing context and clarification". We read "context" narrowly, consistent with the standard the Tribunal indicated it adopted; i.e., to explain or qualify. Asking for further read-ins to provide context in a broad sense might require a party to adduce evidence it would not otherwise introduce or that it found unreliable or inaccurate. It could extend to requiring a party to present the adverse party's position or be such that the read-ins provide a means for that adverse party to avoid presenting evidence directly.
[30] We reviewed the eight additional read-ins that Saline and Bistricer proposed to include. In each instance we found that the question and answer the Commission asked to introduce was clear and complete and no further explanation or qualification was required. Since the questions and answers were clear and complete, we did not allow additional read-ins to provide explanation or qualification because each proposed addition involved one or more of the following characteristics:
a. different questions relating to the same issue or a related issue;
b. follow-ups to clearly asked and answered questions where the substance of the original answer did not change; or
c. questions about one fact from an earlier answer that launched another line of questions.
[31] The issues we must decide are:
a. Did the respondents engage in an illegal distribution?
b. Was Canopy a client of Cormark's or Kennedy's?
c. If so, did Cormark and Kennedy fail to deal honestly, fairly and in good faith with Canopy?
d. In the alternative, if Canopy was not Cormark's or Kennedy's client, does Cormark's and Kennedy's alleged misconduct engage our public interest jurisdiction?
e. Did the respondents otherwise conduct themselves in a way that engages the Tribunal's public interest jurisdiction by undermining the protection provided by hold periods, avoiding disclosure, threatening capital market efficiency, or failing to meet the high standards expected of market participants?
f. If Cormark failed to comply with Ontario securities law, did Kennedy authorize, permit or acquiesce in that non-compliance?
g. If Saline failed to comply with Ontario securities law, did Bistricer authorize, permit or acquiesce in that non-compliance?
[32] The Commission alleges that the Transactions constituted an indirect offering of securities to the public, made without the benefit of a prospectus or an exemption from the prospectus requirement. This allegation is based on the Commission's submission that the series of transactions fall within the "extended" definition of a "distribution".
[33] We disagree and conclude that the "extended" definition of distribution does not apply in this case.
[34] We first describe the Transactions before turning to our analysis of the definition.
[35] The parties agree that the Transactions took place on March 17, 2017, the day that Canopy was added to the Index. They disagree about the characterization of certain components of the Transactions and about whether the Transactions, considered together, constituted an illegal distribution.
[36] The Transactions were:
a. Canopy sold 2.5 million common shares to Saline in a private placement, subject to a four-month hold period (the Restricted Shares);
b. Saline borrowed 2.5 million freely-trading Canopy common shares (the Free-Trading Shares) from Goldman Holdings under a securities loan agreement;
c. Saline provided the Restricted Shares to Goldman Holdings as collateral for the loan of the Free-Trading Shares; and
d. Saline sold short 2.5 million Canopy common shares on the Toronto Stock Exchange through a series of sales on the open market and in the exchange's market-on-close facility, using the Free-Trading Shares to settle the short sales.
[37] The Restricted Shares carried a legend indicating that they were subject to a four-month hold period. The Restricted Shares remained in Goldman Holdings' account at Cormark until the end of the hold period when the legend was removed. The Restricted Shares were ultimately retained by Goldman Holdings in satisfaction of Saline's obligations under the securities loan agreement.
[38] The Securities Act{10} (the Act) requires that a person or company that wishes to distribute a security must file a prospectus unless an exemption applies.{11} The prospectus requirement is triggered by a "distribution". The definition of "distribution" in s. 1(1) of the Act includes two components. The first component is a list of six specific types of trades, part (a) of which is "a trade in securities that have not been previously issued." The second component, often referred to as the "extended" definition, includes "any transaction or series of transactions involving a purchase and sale or a repurchase and resale in the course of or incidental to a distribution".
[39] The Commission submits that the Transactions amounted to a single distribution by virtue of the extended definition of distribution, because:
a. the private placement to Saline of the Restricted Shares was a trade in securities that had not been previously issued, and was therefore a "distribution" under part (a) of the definition; and
b. the securities loan agreement between Goldman Holdings and Saline, and Saline's short sales of Canopy shares, were part of a series of transactions involving purchases and sales during or incidental to that distribution.
[40] We conclude, for the reasons below, that the extended definition of distribution does not apply in these circumstances. Fundamentally, that is because we do not accept the premise, at the heart of the Commission's submissions, that the Transactions effectively converted the Restricted Shares issued under the private placement into the Free-Trading Shares borrowed under the securities loan agreement. That premise is ill-conceived because it is inconsistent with the facts and contrary to the working of the closed system of Ontario's securities law, which is described below.
[41] The Commission submits that the legal analysis is fact-sensitive, taking into consideration the respondents' understanding of the Transactions, including their purpose and effects; the factors listed in Companion Policy 41-101CP General Prospectus Requirements; and the anti-avoidance functions of the extended definition. The Commission also asks that we take a purposive approach to this analysis, by considering whether a prospectus is required to protect the investing public.
[42] The Commission submits that the respondents understood that the securities loan and the short sales were "in the course of or incidental to" the private placement because:
a. Cormark and Kennedy told Canopy, in an email summarizing the Transactions, that "The resulting buyers (new shareholders) of this private placement are index funds, but the trade is facilitated by an intermediate institutional buyer of the private placement who arranges to borrow the stock in order to deliver the index funds "free trading" shares."
b. Bistricer sought and obtained compliance clearance for the Transactions together. He sought approval for "Purchase of WEED CN 4 month hold paper. Short sale of ordinary shares, borrowed by agreement. Done in Saline Investment account at Cormark". The approval Bistricer obtained linked the Transactions by virtue of approving the purchase of 2.5 million shares and a 9% discount on the purchase price. The link, the Commission submits, is that the discount to the closing price was achieved by Saline using the Free-Trading Shares to settle the short sales, the bulk of which were settled at the closing price.
[43] The respondents counter that their subjective intent or "understanding" is not relevant to determining whether there is a distribution. The legislature specifically implemented hold periods, as part of the closed system, to establish objective criteria that replace any inquiry into a purchaser's understanding.
[44] We agree with the respondents. The term "distribution" plays a fundamental role in Ontario securities law. The common theme to the wide range of activities captured by the definition of distribution is an attempt "to capture that moment of initial distribution when a security first becomes available to the public, thereby triggering the disclosure obligations designed to protect investors".{12}
[45] The general concept of a distribution of securities was first introduced in The Securities Act, 1945, which incorporated the defined term "primary distribution to the public".{13} Confusion about who constituted a member of "the public" and, therefore, when a prospectus was required{14} led to two important amendments to Ontario securities law in 1978. The phrase "to the public" was removed, with the amended statute using the simple term "distribution", and the "closed system" was introduced.
[46] The prospectus requirement is subject to exemptions and there are resale restrictions on the first trades of prospectus-exempt securities. Securities issued pursuant to an exemption from the prospectus requirement are issued and exist within the "closed system". They "are restricted from entering the secondary market", and thus restricted from getting into the hands of the general investing public.{15} Securities inside the closed system may only be traded pursuant to a prospectus or if applicable resale restrictions are satisfied. Hold periods are a form of resale restriction.
[47] The respondents submit that two important facts make it clear that the Restricted Shares were entirely different shares from, and not interchangeable with, the Free-Trading Shares:
a. the Restricted Shares bore the required resale restriction legend,{16} and
b. the Restricted Shares had a different CUSIP number than the Free-Trading Shares (CUSIP numbers being unique identifiers assigned to securities to facilitate their clearance and settlement).
[48] We agree that the Restricted Shares remained within the closed system until the end of the four-month hold period. Saline used the Free-Trading Shares to settle its short sales. The two were distinct sets of securities. The fact that the parties may have understood that the Transactions were designed to work together does not change the reality that the Transactions involved two separate sets of securities.
[49] The Commission also submits that the position that the Transactions were one distribution is supported by Companion Policy 41-101CP. While 41-101CP is not part of Ontario securities law, and therefore is not binding on the Tribunal, it sets out a list of considerations relevant to the analysis of whether a distribution under a prospectus is only one transaction in a series of transactions in the course of, or incidental to, the ultimate distribution. Those considerations, and the Commission's submissions about their application in this instance, are:
a. The number of persons or companies who are likely to purchase securities in each transaction. Saline buying and then reselling to a larger number of purchasers was akin to an underwriter in a "traditional" public offering rather than an issuer in a "traditional" private placement.
b. Whether the purchaser's traditional business is that of financing as opposed to investing. Saline and Bistricer were both in the business of investing, but neither was in the business of investing in Canopy.
c. Whether a purchaser is likely to acquire more of a specified class of securities of the issuer than it is legally entitled to or practically wishes to, hold. Saline bought more shares than it wished to hold because it sold the same number of shares short on the market before it acquired the private placement shares.
d. The type of security distributed and whether the security is convertible into publicly traded securities of the issuer. The respondents effectively converted the Restricted Shares into Free-Trading Shares.
e. Whether the purchase price of the securities is set at a substantial discount to their market price. The discount on the private placement was 9% while the discounts to the closing price on Canopy's previous four bought deals were 6.6%, 11.6%, 8.5% and 4.7% (disregarding, we note, the substantial underwriting fee in each of those prior transactions).
f. Whether the purchaser is committed to hold the securities it acquires for any specified time period. Saline demonstrated that it was not committed to holding Canopy's shares for any specified period.
[50] The respondents submit that the scenario contemplated by 41-101CP is one where an "offering" of securities is made to the purchaser, and the purchaser "immediately resell[s]" those securities in the secondary market. 41-101CP is not engaged in this instance because there was no resale of the Restricted Shares in the secondary market.
[51] We are not persuaded by the Commission's submissions, as they would require us to accept that Saline converted the Restricted Shares into Free-Trading Shares. We reject that position. Saline acquired the Restricted Shares and was committed to holding them for four months. There is no impediment to providing shares subject to a trading restriction as collateral for a loan, which Saline did, and those shares remained within the closed system.
[52] We also find that Saline was not acting akin to an underwriter and distributing shares to the public when it sold short the Free-Trading Shares. The Free-Trading Shares were previously issued and outstanding and sold in the secondary market through the Toronto Stock Exchange. In addition, 41-101CP does not state that a purchaser must be in the business of investing in a specific security and the evidence supports the conclusion that Saline and Bistricer engaged in investing generally.
[53] The Commission directs us to the guidance in Companion Policy 45-106CP Prospectus Exemptions and Companion Policy 45-501CP Ontario Prospectus and Registration Exemptions, submitting that the guidance makes clear that the extended definition applies to persons and companies acting as underwriters in a distribution. The guidance explains, in s. 1.7 of 45-106CP and s. 3.5 of 45-501CP, that underwriters should not sell securities to the public without providing a prospectus.
[54] The respondents submit that the policy concern addressed in the guidance is the underwriter's ability to resell securities purchased under an exemption to the prospectus requirement in the secondary market without a prospectus. The Commission concedes that the guidance is focused on a situation where an underwriter purchases newly issued securities and then resells those same securities to investors. However, the Commission submits that the anti-avoidance principles in the guidance would apply equally to an underwriter who purchases newly issued securities and resells identical borrowed securities to investors.
[55] The anti-avoidance language in the guidance states that "[i]f a dealer purchases securities through a series of exempt transactions in order to avoid the obligation to deliver a prospectus, the transactions will be viewed as a whole to determine if they constitute a distribution."
[56] We adopt the guidance that underwriters should not sell securities to the public without providing a prospectus but conclude it does not apply in this case because we do not accept that:
a. Saline was acting as an underwriter;
b. the Free-Trading Shares and the Restricted Shares were identical securities; or
c. the Transactions were structured to avoid delivering a prospectus for the distribution of newly issued shares to the public.
[57] Saline purchased shares from Canopy under a prospectus exemption. These shares were subject to a hold period. They were provided as collateral for the securities loan and were not resold to the public. Investors buying Canopy shares through Saline's short sales on the market did not require the protections of a prospectus. They bought free-trading shares that had been issued earlier. Those shares were not, as the Commission submits, "identical" to the shares issued under the private placement. While both the private placement and the short sales involved Canopy common shares, the first transaction was in Restricted Shares and the latter involved Free-Trading Shares. In addition, the mandatory four-month hold period for newly issued treasury shares is designed to ensure that Canopy would make its next quarterly continuous disclosure before the restricted shares became freely tradeable and entered the secondary market.
[58] The Commission submits that application of the extended definition to the Transactions is also supported by Crystallex International Corp (Re).{17} We disagree.
[59] In Crystallex, the Tribunal found the following series of transactions to be a distribution: Crystallex issued repayment rights to a third-party lender to Crystallex; the lender exercised the repayment rights and received common shares from Crystallex as a result; and then the lender resold those common shares to the public. The Commission submits this is analogous to the Restricted Shares being exchanged for the Free-Trading Shares under the securities loan. We do not accept this view.
[60] In Crystallex, the repayment rights that were issued were exercised for the common shares. The repayment rights disappeared once exercised. The situation before us is completely different. The Restricted Shares were not replaced by the Free-Trading Shares. Both continued to exist; the Restricted Shares in Goldman Holdings' account at Cormark and the Free-Trading Shares passing to purchasers of the short sales.
[61] The Commission also cited a US Court of Appeals case{18} relating to a "swap scheme" involving the sale of free-trading shares by a party who had replaced those shares with restricted shares. No such swap occurred in the case before us. Further, while the prospectus regimes in the US and Ontario share some features, there are also important differences, and we must be cautious about applying US principles.{19} The Commission did not provide us with any analysis of the similarities or discrepancies between the concept of "distribution" under Ontario securities law and "offer of sale" under US securities law. Therefore, we do not rely on the US case.
[62] The Commission put to Kennedy that he could have achieved the same outcome for Canopy by structuring either an "equity line" or "at-the-market" offering and then seeking exemptive relief. The Commission asserted that there are previous exemptive relief decisions relating to both types of offerings that would have permitted the distribution of Canopy's treasury shares to secondary market purchasers through the facilities of the Toronto Stock Exchange. Kennedy said that he was not familiar with "equity line" offerings. He also stated that an "at-the-market" offering would not have been viable for an index rebalancing offering because it was his understanding that the exemptive relief decisions typically included a cap of 25% of the daily trading volume, and the total number of shares which would be traded during the Index inclusion day would not be known. Kennedy did not approach the Commission to discuss obtaining exemptive relief without the cap in the circumstance of an index rebalancing.
[63] We give no weight to the fact that Kennedy did not consider, or discuss with the Commission, other available types of exemptive relief. We accept his evidence about his lack of awareness of the one and his understanding of the limits of the other. Moreover, we accept his evidence that, in structuring the Transactions, he considered issues of regulatory compliance and, if the transaction as proposed did not work, he would have tried to figure out something else or walked away.
[64] The Commission also raised the regulatory framework whereby underwriters may over-allocate up to 15% of a distribution, which allows underwriters to hold a short position in the securities following closing. This in turn allows underwriters to engage in market stabilization to compensate for increased liquidity in the market following the distribution. The underwriter may deliver to purchasers either newly issued shares or shares purchased in the market through the over-allocation. Regardless of the origin of the shares a purchaser receives, they are entitled to the protections of the prospectus for the offering. The Commission asserts that short sales made by underwriters to create an over-allocation position in connection with a prospectus offering "are caught by the extended definition of "distribution"".
[65] The respondents submit that there is no authority to support the Commission's submission that the extended definition applies to short sales conducted as part of an over-allocation. In fact, such short sales are subject to a prospectus requirement because of a specific provision of Ontario securities law, s.11.1 of NI41-101 General Prospectus Requirements.
[66] The existence of a specific regulatory regime to provide prospectus protection to shares other than those issued from treasury is, in our view, irrelevant and does not support the Commission's argument that the extended definition of distribution should apply in the unique circumstances before us.
[67] The 2.5 million Restricted Shares issued by Canopy to Saline in the private placement were shares that had not been previously issued. The private placement by Canopy was a distribution under part (a) of the definition. Those shares were subject to a four-month hold period. They bore a legend reflecting that they were restricted from trading.
[68] The Restricted Shares were posted as collateral for the securities loan. A pledge of shares as collateral for a loan is excluded from the definition of 'trade" in s. 1(1) of the Act. The Restricted Shares stayed within the closed system until the hold period ended. There were no further transactions involving the Restricted Shares. In the circumstances of this case, we do not consider it appropriate to extend the definition of distribution to include transactions involving different shares.
[69] We therefore conclude that there were no sales or resales that were "in the course of or incidental" to the distribution of the Restricted Shares by way of private placement. In addition, we conclude Saline was not an underwriter. Saline sold (short) Free-Trading Shares to the public. Those sales were not a distribution because they did not involve newly issued treasury shares.
[70] Registered dealers and advisers, and representatives of registered dealers and advisers, have an obligation under s. 2.1 of OSC Rule 31-505 Conditions of Registration to deal fairly, honestly and in good faith with their clients. Cormark is registered as an investment dealer in Ontario. Kennedy was employed by Cormark and acted as a representative of Cormark in his dealings with that firm's clients.
[71] The Commission submits that Cormark and Kennedy misled Canopy about the full scope of the Transactions, concealing the short selling, including sales through the market-on-close facility, and the effect the short sales could have on Canopy's net proceeds.
[72] To determine whether there was a breach of Rule 31-505, we must first determine if Canopy was a client of Cormark and Kennedy. For the reasons below, we conclude that Canopy was not their client.
[73] The Act provides that without an exemption, no person or company may "engage in or hold himself, herself or itself out as engaging in the business of trading in securities" unless the person or company is registered.{20} The Commission relies on what it describes as the Tribunal's fact-sensitive, multi-factor approach to determining whether there is a client relationship. In particular, the Commission directs us to Marek (Re).{21} The Commission submits that many of the Tribunal's comments in that case apply here, even though Marek involved an advisor-investor relationship.
[74] We are not persuaded that the advisor-investor relationship in Marek is analogous to the investment banking-issuer relationship between Cormark, Kennedy and Canopy. However, Marek does provide some helpful guidance. The determination of whether a client relationship exists is highly contextual, depends on the relevant circumstances and is guided by the purposes of the Act.{22} In Marek, the Tribunal considered a non-exhaustive list of helpful indicia of a client relationship. Those indicia include conducting registrable activities, receipt of a benefit, formal documentation, and the parties' beliefs. None of the factors is definitive, but their presence may assist us in determining if a client relationship exists. We now look at each of the factors in turn.
[75] Christopher Shaw was a Managing Director in Cormark's investment banking department in March 2017. Shaw approached Linton on March 6, 2017, to see if Canopy would be interested in participating in the Transactions. This would be Canopy's first private placement transaction.
[76] Kennedy explained the proposed Transactions to Linton in a telephone conversation on March 7, 2017. Shaw provided a summary of the structure in an email which Timothy Saunders, Canopy's Executive Vice President and Chief Financial Officer, used as the basis for a memo to the Canopy board. Kennedy had conversations and email exchanges with Deborah Weinstein, a partner in the law firm LaBarge Weinstein LPP, who acted as Canopy's external counsel and Corporate Secretary.
[77] Cormark was only able to identify a portion of the shares needed for the loan portion of the Transactions through its back office. Shaw, therefore, asked Linton if he knew any large shareholders who might be interested in loaning their shares. Linton identified Goldman as a potential lender, contacted Goldman to gauge his interest, and then introduced Goldman to Kennedy. Kennedy met with Goldman to discuss the proposed structure. When Goldman agreed to participate, Kennedy met with him to sign the securities loan agreement and account documentation for Goldman Holdings.
[78] Cormark provided the draft Share Subscription Agreement for the private placement to Canopy and provided comments on the agreement from Saline's perspective. Cormark's client, Bistricer, agreed to buy the private placement shares and later identified one of his companies, Saline, to be the purchaser.
[79] The Commission submits that Cormark's and Kennedy's actions described above made Canopy their client because Canopy was vulnerable to Cormark and Kennedy and because Cormark and Kennedy were engaging in activities requiring registration.
[80] Since this was Canopy's first private placement, the Commission submits Canopy was at an informational disadvantage to Cormark and Kennedy, who were experienced investment bankers. That disadvantage made Canopy vulnerable to Cormark and Kennedy and, the Commission submits, Canopy relied on Cormark and Kennedy.
[81] We do not agree that Canopy was vulnerable to Cormark and Kennedy or relied on them, for the following reasons:
a. Canopy, Linton and Saunders were experienced in raising capital. Linton had extensive experience as an entrepreneur in different sectors and had been involved in a range of securities offerings (for example, private placements, non-brokered deals, and bought deals). Saunders had worked at public and private companies. By March 2017, he had been involved with Canopy's four bought deal offerings.
b. Canopy's lawyer, Weinstein, was an experienced securities counsel. Both Linton and Saunders testified that they relied on her advice regarding the Transactions. Weinstein reviewed copies of the Share Subscription Agreement and Share Loan Agreement. She also had numerous contacts with Kennedy about the Transactions and their constituent parts.
c. Kennedy testified that he explained the Transactions to Linton, Goldman and Weinstein and believed that they understood the Transactions. We accept his testimony, as there was no evidence to the contrary from either Goldman or Weinstein, and Linton's testimony showed that his attention was focused on the details of the Share Subscription Agreement impacting Canopy.
d. Canopy had an experienced board. Linton, Saunders, Weinstein and Goldman all participated in the board meeting where the Transactions were approved (although Goldman did not vote because of his declared conflict).
[82] The Commission further submits that Cormark and Kennedy engaged in the business of trading securities each time they traded in securities and that Cormark's and Kennedy's dealings with Canopy were acts in furtherance of trades in securities. Since the Transactions benefitted Canopy, those trading activities must also have been for Canopy's benefit.
[83] To the extent that Cormark and Kennedy were carrying out registrable activities in relation to the Transactions, we find that they were doing so on behalf of Cormark's clients, Saline and Goldman. Canopy had its own lawyers to advise and support it. That support was primarily directed toward the only part of the Transactions that Canopy was party to -- the Share Subscription Agreement. The balance of Cormark and Kennedy's registrable activity was directed toward Saline's and Goldman's parts of the Transactions. Canopy did benefit from the Transactions, but so did Cormark's clients Saline and Goldman. Linton and Saunders both clearly testified that Canopy did not need the capital at the time and that Canopy would only participate on terms that were acceptable to Canopy. The fact that Canopy benefited from Cormark's and Kennedy's activities is not sufficient for us to conclude, as the Commission asks us to, that there is a strong presumption of a client relationship.
[84] The Commission submits that the benefits Cormark and Kennedy received from Canopy are persuasive evidence of a client relationship. We do not agree. The alleged benefits are indirect, hypothetical and/or insignificant.
[85] The alleged benefits the Commission submits Canopy conveyed are:
a. by agreeing to the private placement, Canopy enabled Cormark to assist an important client, Bistricer/Saline, to make a substantial, virtually risk-free profit;
b. Canopy introduced Goldman to Kennedy and Kennedy hoped to secure future business from Goldman, and some months later did propose another transaction to Goldman;
c. Cormark hoped to be engaged by Canopy at a senior level going forward;
d. Canopy indirectly paid Cormark's fees through the 9% discount from the market closing price on the private placement purchase price; and
e. Kennedy, as a shareholder of Cormark who received compensation based on firm profitability, would benefit from possible future business.
[86] Bistricer was an established client of Cormark at the time of the Transactions. The fact that Saline made a profit is irrelevant. It is not unreasonable for market participants to have an expectation of profit. It is not surprising or indicative of a client relationship that Cormark and Kennedy would hope that contacts with Canopy, an issuer at a significant point in its growth, or Goldman, an established market participant, may result in future business. At the time of the Transactions, any future business was hypothetical at best. Canopy did not pay Cormark. Saline paid Cormark commissions for the trades. The trading commission Cormark received from Saline, $362,500, was minimal in the context of the Transactions. Kennedy's potential to share in revenue from any trading or future business was yet to be determined by Cormark's compensation committee based on Cormark's profitability.
[87] The Commission submits that a registrant ought not to be able to avoid their obligations by avoiding formally documenting the relationship.{23} This, the Commission submits, is what Cormark and Kennedy did. Kennedy designed the Transactions to be "non-brokered" (i.e. without an underwriting or agency agreement"). Canopy asked three times about an agreement. Cormark did not provide one.
[88] While the existence or lack of documentation is not determinative of the existence of a client relationship, in this instance we find the lack of an agreement is consistent with Cormark's and Kennedy's understanding that Canopy was not their client.
[89] Kennedy and Shaw both stated that Cormark's practice was to sign either an agency or an underwriting agreement with clients. Cormark was not acting as an agent or an underwriter for Canopy with respect to the Transactions. Kennedy stated that entering into an agency agreement would have changed the economics of the private placement, because agency connotes a different relationship with associated obligations and fees.
[90] Saunders asked Shaw about an engagement agreement. Shaw does not appear to have responded. Weinstein asked Kennedy about an agency or underwriting agreement and Kennedy advised her there would not be an agreement. This is consistent with Kennedy's understanding that Canopy was not engaging Cormark as an agent or underwriter. Weinstein also asked for a representation letter from Cormark for comfort about Cormark's "know your client" obligations regarding the purchaser of the private placement. Kennedy indicated the private placement purchaser (Bistricer, at that stage) was an existing client and that the Share Subscription Agreement would have an accredited investor certificate, which it did.
[91] Weinstein was an experienced securities counsel. Linton and Saunders both stated that they relied on her. Linton also stated that it would be "impossible" to put any restrictions on Weinstein's ability to ask any questions. We conclude that it is more likely than not that had Canopy thought an agreement with Cormark was necessary to reflect its relationship with Cormark and/or to protect its interests, there would be evidence of Linton, Saunders or Weinstein requiring an agreement with Cormark before completing the private placement. There was no such evidence.
[92] The Commission also submits that Cormark and Kennedy deliberately structured the Transactions so there would be no written agreement between Cormark and Canopy. This allegation was not made in the Statement of Allegations. We therefore do not consider this submission.
[93] The Commission submits that while it is not determinative of the existence of a client relationship, some weight ought to be given to the parties' beliefs about the nature of the relationship. The relevant evidence the Commission submits demonstrates that Canopy was Cormark's client, includes:
a. Linton thought Cormark was advising and directing Canopy;
b. Kennedy and Shaw stated in their compelled interviews that Canopy was Cormark's client;
c. Saunders "trusted that this transaction would work the way that Cormark said it would";
d. Linton observed that Canopy had no experience with entering the Index or transactions related to entering the Index and Canopy relied on Cormark to do the transaction and get them the benefit from index funds and "indexers" (traders who attempt to track an index's performance) buying;
e. Kennedy agreed that market participants who deal with Cormark would rely on Cormark's expertise. Kennedy was the one with experience with taking advantage of the increased volume on a company's addition to the Index and he understood that Canopy lacked that knowledge, and Kennedy was adding value by sharing his knowledge with Canopy; and
f. no one at Canopy would have any knowledge of how Saline was trading Canopy shares on March 17; only Cormark had that knowledge.
[94] The respondents submit that Canopy understood it was not Cormark's client. In an email dated March 21, 2017 (four days after the Transactions occurred), Weinstein stated that "Canopy did not retain Cormark, nor is Canopy directly paying their fees". Canopy's counsel at Bennett Jones also confirmed that Canopy was not Cormark's client in a response to a question during the Commission's investigation. They stated: "Cormark acted as the broker for Saline in the transaction. Canopy did not engage, nor pay Cormark's broker fees; these fees were paid by Saline."
[95] In addition:
a. no one at Cormark told anyone at Canopy that Canopy was their client;
b. no one at Canopy told anyone at Cormark that Canopy thought it was Cormark's client;
c. while Linton and Saunders had stated in their compelled interviews that they thought Canopy was Cormark's client, they admitted on cross-examination that Canopy was not Cormark's client;
d. Cormark indicated in multiple emails in March 2017 that Saline was its client; and
e. Cormark, on Saline's behalf, negotiated the terms of the private placement in arm's length negotiations with Canopy.
[96] We are not persuaded that Canopy believed it was Cormark's client or that Cormark believed Canopy was its client. Canopy and Cormark are sophisticated parties. Weinstein, at the time of the Transactions, and Bennett Jones, during the Commission's investigation, confirmed their understanding that Canopy was not Cormark's client. While Linton and Saunders may have thought at the time of their intervIews that Canopy was Cormark's client, both agreed on cross-examination that they did not think Canopy was Cormark's client.
[97] Regardless of what any of the parties thought about whether Canopy was Cormark's client, that question is a legal issue and one of the fundamental issues for us to decide based on the evidence proven before us.
[98] We conclude that Canopy was not Cormark's or Kennedy's client. Canopy, with its experienced management, board and counsel, was not akin to a vulnerable individual investor. The relationship between Canopy and Cormark was not akin to an agency or underwriting relationship. There is evidence that Cormark frequently referred to Saline as its client in communications with Canopy. There is no evidence of Cormark indicating to Canopy that it was its client, nor of Canopy referring to itself as Cormark's client. The alleged benefits accruing to Cormark and Kennedy were hypothetical or minimal.
[99] Because we have determined that Canopy was not Cormark's or Kennedy's client, Rule 31-505 is not engaged. We therefore dismiss the Commission's allegation that Cormark and Kennedy breached that Rule.
[100] The Commission alleges that our public interest jurisdiction is engaged in two instances:
a. first, as an alternative allegation against Cormark and Kennedy if we find, as we have, that Rule 31-505 does not apply to the conduct alleged to breach that Rule; and
b. second, because of other alleged misconduct by the respondents, which we detail below.
[101] We deal with each category of public interest allegations below and conclude that the Commission has failed to establish the alleged misconduct. We, therefore, dismiss all the Commission's public interest allegations.
[102] We heard submissions from Bistricer with respect to the standard to be applied when exercising the Tribunal's public interest jurisdiction. Because the Commission failed to prove its factual allegations, it is not necessary for us to consider the standard.
[103] As an alternative to its allegation that Cormark and Kennedy breached Rule 31-505, the Commission submits that Cormark's and Kennedy's alleged misleading conduct and concealment of details about the Transactions from Canopy engages our public interest jurisdiction and warrants an order under s. 127(1) of the Act.
[104] The respondents submit that this argument was not asserted in the Statement of Allegations. Rather, the Commission framed its allegation as a breach of Rule 31-505.
[105] We disagree with the respondents. In the Statement of Allegations, under the heading "Failure to deal fairly, honestly and in good faith", after laying out the allegations about how Cormark and Kennedy misled Canopy and concealed details of the Transactions from Canopy, the Commission alleges that this conduct was contrary to the public interest.{24} We therefore will consider the Commission's alternate argument.
[106] The Commission submits that Cormark and Kennedy had to disclose fully to Canopy the entire series of Transactions. Only then could Canopy make an informed decision as to whether to participate, including whether the short selling was in the best interest of the company and its shareholders. The Commission submits that instead of making that full disclosure, Cormark and Kennedy:
a. misled Canopy about the ordinary course nature of the Transactions;
b. lied to Canopy about the short selling, telling it that the free-trading shares were required so that they could be delivered to index funds;
c. concealed the risk-reward ratio that Saline faced; and
d. made a misleading comparison between the Transactions and Canopy's December 2016 bought deal with respect to Canopy's cost of capital and, by implication, its net proceeds.
[107] We consider each of the four alleged failures by Cormark and Kennedy and conclude in each instance that the evidence does not support the allegations.
[108] The Commission submits that Cormark and Kennedy told Canopy the Transactions were in the ordinary course in connection with joining the Index. This allegation is based on:
a. Saunders' evidence that Linton told him doing a private placement as a low cost means of getting the private placement shares into the hands of Index funds was "apparently a common drill" when a company first joins the Index;
b. Linton understood from Cormark that it had a "mechanism, a machine, a process" when an issuer is added to the Index. Cormark "came forward with this thing. Okay. Cormark is good at this. Great. Terrific. That's their specialty.";
c. Shaw proposed that Linton take a call with Kennedy, Cormark's "ECM guy ...who does these trades." [Emphasis added];
d. Shaw wrote in an email to Saunders on March 9 attaching the draft share purchase agreement: "The price would be at a 9% discount, which includes all fees, commissions and our legal costs (we make about 1.5% on these trades.)" [Emphasis added];
e. an initial draft of a Cormark PowerPoint presentation contained the statement "Cormark has successfully completed several deals in similar structures";
f. in response to a question from Weinstein, Cormark responded that it had done "this type of transaction" for Centerra Gold, but Centerra Gold did not involve an index inclusion, a sale into the market-on-close facility, short selling or a promise that the private placement shares would end up in the hands of index funds;
g. Kennedy advised Weinstein that a lending arrangement with an individual insider was not a normal transaction for Cormark but failed to advise her that other aspects of the Transactions were also new to him and to Cormark;
h. Shaw believed this was the first time he had ever approached an issuer about a private placement in connection with joining an index;
i. Kennedy:
i. had not executed an index inclusion event for any issuer before March 17, 2017;
ii. had not used this same structure before March 17, 2017;
iii. agreed this was the first time Cormark had engaged in a transaction where short selling was occurring concurrently with a private placement offering; and
iv. agreed that while the various elements of the Transactions were "normal features", he combined them in a way that was not "plain vanilla", "not normal" and "not run-of-the mill".
[109] While Saunders did state that he understood the Cormark proposal was a "common drill", he said this understanding came from Linton. Linton stated that Cormark brought the Transactions to Canopy, and he understood them to have a process that was specialized or that had a normal course in relation to joining an Index. There is no evidence about how Linton came to this understanding or the basis for his "common drill" comment to Saunders.
[110] We found Linton to be a credible witness. However, he did not have a clear memory of the conversations he had with Shaw and Kennedy about the Transactions. These unattributed understandings by Linton are insufficient, in the absence of any direct evidence, to ground a finding that Cormark and Kennedy misled Canopy.
[111] Nor is there any direct evidence of Shaw or Kennedy telling anyone at Canopy that the Transactions were in the ordinary course in connection with an Index inclusion. The two email references by Shaw to "these trades" are too vague and ambiguous to support the conclusion that Cormark and Kennedy misled Canopy. The draft PowerPoint deck that stated that Cormark had successfully completed several of these transactions (which Kennedy stated during cross-examination he didn't believe was true) was never given to Canopy. Nor is there any evidence linking that draft document to any subsequent statement by Shaw about "these trades".
[112] The email exchange between Weinstein and Kennedy about Centerra Gold involved a discussion about an immaterial private placement and did not constitute a representation by Kennedy that the Transactions were ordinary course in relation to an index inclusion. Regarding the email exchange between Weinstein and Kennedy about lending arrangements with insiders, which Kennedy stated was "not the normal type of transaction", there is insufficient basis for us to read into that narrow exchange the need for Kennedy to tell Weinstein that the combined Transactions were unique, particularly when there is no evidence that he had told Weinstein they were ordinary course.
[113] The facts that this was the first time Shaw had approached an issuer about a private placement when the issuer was joining an index, and that Kennedy had not executed an index inclusion transaction before March 2017, are irrelevant given that there is no evidence that either person told Canopy the Transactions were in the ordinary course.
[114] For reasons that follow, we conclude that Cormark and Kennedy neither lied about nor concealed the short selling. We also conclude that Linton and Saunders did not focus on or retain information about the mechanics of how Saline was to deliver the Free-Trading Shares to index funds. There was no evidence that Canopy would not have proceeded with the private placement if it had known about the short sales.
[115] Before turning to the analysis of this issue, it is helpful to first lay out the facts and chronology of Canopy's approval of the private placement and the execution of the various aspects of the Transactions on March 17.
Select Chronology
[116] Shaw emailed Linton on March 6 asking for a call to discuss an "idea". They agreed to speak around 13:00 that day. After that meeting, Shaw emailed Linton again (at 13:21) asking Linton to take a call the next day, March 7, with Cormark's "ECM guy" (Kennedy) to "walk through the logistics of how this works and when we can execute it".
[117] In response to a request from Linton for a summary of the proposed Transaction to provide to the Canopy Board, Shaw sent an email on March 10. Saunders copied the email into a presentation to the Board, adding some additional language and an appendix. We discuss the relevant parts of the email and Board presentation further below.
[118] Also, on March 10 Linton told Shaw that Canopy required a "collar" or floor price: if the 9% discount to the market closing price on March 17 fell below a 10% discount to the opening price on March 10, Canopy would not participate in the private placement. Shaw did not immediately pass this information on to Kennedy or anyone else at Cormark.
[119] On March 13, the Canopy Board approved the private placement, as described in the Board presentation. Goldman disclosed to the Board his role in the Transactions as the lender of the Free-Trading Shares to Saline and recused himself from the vote.
[120] On March 17:
a. 10:00 -- Kennedy met with Goldman, in Goldman's office, to get Goldman's signature for Goldman Holdings on the securities loan agreement;
b. 10:24 -- continuing an exchange that started on March 15, Canopy's counsel Tayyaba Khan, an associate with Weinstein's firm who assisted with the Transactions, advised that March 22 for closing the private placement may be aggressive and that the closing date should be on or before March 24;
c. 11:03 -- Kennedy replied to Khan that the "slight problem" was that the delivery of the Free-Trading Shares needed to happen on March 22;
d. 11:03 -- Saline began selling Canopy shares short on the Toronto Stock Exchange's open market, selling 450,000 shares between 11:08 and 15:19;
e. 12:07 -- Canopy provided Cormark with a signed Share Subscription Agreement, to be held in escrow pending confirmation of the final price for the private placement;
f. 12:50 -- Kennedy sent the Share Subscription Agreement to Bistricer for signature on behalf of Saline;
g. 12:55 -- Kennedy emailed Khan (copying Shaw, Saunders and Weinstein) stating that "what my client needs to know is that we have a deal now regardless of the price...";
h. 13:03 -- Linton emailed Weinstein, Kennedy and Khan (copying Saunders and Shaw) "Chris knows we have a deal only if price stays with [sic] 10% of the open the day we had the discussion.";
i. 13:04 -- Kennedy emailed Saunders (copying Shaw, Weinstein, Khan and Linton) stating "That can't work my client will be short by that time and have nothing to provide Murray as collateral if Canopy backs away".
j. 13:07 -- Linton emailed Kennedy and Saunders (copying Shaw, Weinstein and Khan) stating "lots of Cormark selling today. May want to work on that so we stay in the agreed limit. Chris made that deal -- not a new term."
k. 14:30 -- Shaw emailed Kennedy, Linton, Saunders, Weinstein and Khan that the minimum net subscription price would be $9.25, a 9% discount to 90% of the March 10 open price of $11.30;
l. 15:27 -- Saline placed an order to sell 2,050,000 shares of Canopy at market in the Toronto Stock Exchange's market-on-close facility;
m. 15:33 -- Linton emailed that Canopy was good to proceed with the private placement;
n. 15:56 -- Cormark confirmed the receipt of Goldman's Free-Trading Shares from Goldman Holdings' account at another registered dealer;
o. 16:00 -- trading in the Toronto Stock Exchange's market-on-close facility resulted in a closing price for Canopy shares of $10.66;
p. 16:00 -- Saline sold 2,050,000 Canopy shares short in the market-on-close facility at the established closing price, bringing Saline's total short sales that day to 2.5 million; and
q. 17:26 -- Canopy advised it was prepared to release its signature on the Share Subscription Agreement for the private placement.
Parties' submissions and our analysis
[121] The Commission submits that Cormark and Kennedy told Canopy that the buyer of the private placement would borrow shares from Goldman Holdings "in order to deliver the index funds 'free trading' shares." In fact, the Free-Trading Shares were used by Saline to close short sales made in the open market on March 17, before the closing price referenced in the private placement was determined. Short selling, the Commission submits, was important to the structure of the Transactions, but Cormark and Kennedy did not explain this to Canopy.
[122] The Commission's position is supported, it submits, by the fact that:
a. neither Linton nor Saunders knew about the short selling;
b. neither Shaw nor Kennedy could recall using "short" or "short selling" in any correspondence or conversations with anyone at Canopy and there is no evidence that they did so;
c. the only mention of "short" was in Kennedy's email at 13:04 on March 17 and no one at Canopy understood it to mean that short sales in the market were happening;
d. Shaw did not understand that the Transactions involved short selling so we cannot conclude that he explained to Canopy that there would be short selling;
e. Shaw's March 10 email describing the Transactions, which Saunders used as the foundation for the Canopy Board presentation, begins with "As discussed...". It is a reasonable assumption that the email therefore lays out all the salient points discussed about the Transactions, and yet there is no reference to short selling;
f. neither the draft nor final press release refers to short selling;
g. neither Linton nor Saunders was aware of the market-on-close facility where, according to Kennedy, the short sales were to take place and not all the short sales happened in that facility; and
h. not all the buyers were index funds as represented to Canopy, which Canopy would have understood had they been told that the Free-Trading Shares would be sold in the blind market-on-close facility.
Linton and Saunders
[123] We found Linton and Saunders to be credible witnesses. We accept their evidence that they do not recall being told about the short selling or about the market-on-close facility. However, this does not mean that Cormark or Kennedy concealed the fact or lied to them about it either. Their lack of recollection is consistent with Linton and Saunders being focused on the aspects of the Transactions that were most relevant to them -- selling 2.5 million shares at a 9% discount with downward price protection.
[124] Linton did not have a clear recollection of the March 7 meeting with Kennedy to "walk through the logistics" of the Transactions. Linton confirmed that he did not ask or know how Saline was going to deliver the Free-Trading Shares to the buyers. Saunders also stated that he did not ask or know how Saline or Cormark would deliver the Free-Trading Shares to the buyers.
[125] Linton and Saunders understood market-on-close to mean the price of the security at close of the market. The Board presentation refers to the private placement being priced based on the market-on-close price, which is consistent with Linton's and Saunder's understanding that it was a pricing mechanism. Part of the private placement's structure was pricing at a discount to Canopy's closing price on March 17. We agree that, given that fact, it is logical to read the Board presentation as referring to that aspect of the structure. That does not necessarily lead to the conclusion that Cormark and Kennedy lied about the market-on-close facility.
Kennedy
[126] Kennedy had a clear recollection of his meetings with Linton and Goldman. He testified that he explained the mechanics of the Transactions to Linton at the March 7 meeting. He also explained the logistics of the Transactions to Goldman when he met with Goldman to discuss the securities loan. While Kennedy could not recall using the word "short", he stated that the concept of selling borrowed securities was fundamental to the Transactions and he recalled with certainty discussing that with Linton, Goldman and Weinstein.
[127] We accept Kennedy's evidence. We have nothing to contradict it because Linton does not recall the conversation, and we have no evidence from Goldman or Weinstein.
Shaw
[128] Regarding Shaw, we conclude that he did not have a detailed understanding of the logistics of the trading component of the Transactions. If he had, he would have realized the significance of the floor price to the structure when Linton raised it with him on March 10 and would have told Kennedy about it immediately, which he did not.
[129] Shaw stated that he understood the borrowed shares had to be sold to meet the index inclusion demand but did not necessarily know that is the same thing as saying a short sale. Shaw also stated that he was not involved in the "structural mechanics of the trading aspects" of the Transactions. Had there been any questions from Canopy or its counsel about the trading aspects (though he did not recall there being any such questions), Shaw was confident that he would have referred those questions to Kennedy or some other appropriate person at Cormark.
[130] The fact that Shaw did not completely understand the logistics of the trading part of the Transactions does not mean that he lied about or concealed the short selling. He connected Canopy to Kennedy as the person who "does these trades" to "walk them through the logistics" and Kennedy says that he explained the details to Canopy.
Shaw's March 10 email
[131] We now address Shaw's email of March 10 and the reference to "As discussed" with no following reference to short selling. Kennedy submits that we must assess what Canopy understood based not just on the documentary evidence alone but also on the context of the many conversations that Kennedy had with Linton, Goldman, Weinstein and Khan in connection with the Transactions. The words "As discussed" did not mean that everything that had been discussed was included in the summary and the summary was not a script that would be followed. We agree.
[132] Saunders forwarded Shaw's email to Weinstein. Kennedy had several telephone conversations and email exchanges with Weinstein about the Transactions. During those conversations, Kennedy testified, he discussed with Weinstein that there would be a private placement and a lending agreement, and the loaned shares would be sold on the market using the market-on-close facility. He concluded that at the end of those conversations Weinstein understood the key aspects of the Transactions.
[133] Weinstein was an experienced securities lawyer. Linton and Saunders both stated that they relied on her to advise them about the Transactions. Had Weinstein had concerns about the Transactions it is more likely than not that she would have raised those concerns with Kennedy, Linton and/or the Canopy Board. No party called Weinstein as a witness. The evidence we have is that Kennedy explained the Transactions to Weinstein, he believed she understood them, and Canopy proceeded with the Transactions.
Kennedy's March 17 "my client will be short" email
[134] The parties disagree on the import of Kennedy's March 17 "my client will be short" email. The Commission submits that neither Linton nor Saunders understood the reference to the client being short to mean there was active short selling in the secondary market at that time. The Commission also submits that Kennedy's evidence about the meaning of the email shifted. Initially, Kennedy said it meant that if Canopy stepped away his client would be short the collateral to provide to Goldman. Later, the Commission submits, Kennedy said the email states that his client will have a short position, and without the private placement his client will have no collateral to deliver for the securities loan agreement.
[135] Saunders testified that he understood the email to mean that there was something in Cormark's sequence for the Transactions that would be out of order, not that there would be short sales. He thought Kennedy was applying pressure to get the transaction done. For Saunders, the deal with Canopy was concluded, agreed and finalized at close of business on March 17. He testified that he had no reason to ask about Saline's trading. We find that Saunders was not concerned about Cormark's "sequence" of events.
[136] Similarly, Linton testified that he understood the email to mean that there was a timing issue and some exposure for others. He did not understand it to mean there was short selling happening. However, Linton also said that he understood the "incentives more than the mechanics" and he understood that "[s]omeone wants to do something on the other side" of the securities loan, "which covers their short position with that stock". Linton went on to say, "They do some mechanism that I'm not up on", but that was his high level understanding. We find that Linton was not concerned with aspects of the Transactions that did not directly impact Canopy.
[137] We agree with Kennedy that his March 17 email says at least two things. First, "my client will be short by that time" is a clear statement that Saline will have sold Canopy short by the time the closing price for the day was established. The email goes on to say "...and have nothing to provide Murray as collateral if Canopy backs away." Again, we find this to be an unambiguous statement of fact that if Canopy were to back away from the private placement, Saline would not have Restricted Shares to deliver to Goldman Holdings as collateral for the loan of the Free-Trading Shares. Kennedy's email is inconsistent with an effort to conceal the short selling.
[138] In addition, Weinstein reviewed the securities loan agreement, was aware that the Restricted Shares were collateral for the loan of the Free-Trading Shares and was told by Kennedy that the Free-Trading Shares would be sold. Since selling borrowed shares is short selling, we find that Kennedy conveyed to Canopy's counsel that short selling was happening.
[139] While neither Linton nor Saunders said they understood Kennedy's email to mean that Cormark's client would be short or that active short selling was happening, their comments clearly indicate that they were not focused on issues that would not directly impact Canopy, including the risks to Cormark or Cormark's client. Canopy's deal would be complete at the close of business on March 17, provided the 9% discount remained within 10% of the opening price of Canopy's shares on March 10.
[140] We conclude that Linton and Saunders retained, from what they were told, the information that was most important to them. That did not include the mechanics of how the borrowed Free-Trading Shares made it into the hands of the ultimate purchasers on March 17.
Canopy's press release
[141] With respect to Canopy's press release of the private placement, we disagree that the absence of any mention of short selling is evidence that Cormark and Kennedy concealed the short selling or that Canopy was not aware of it.
[142] On March 16, Weinstein emailed Saunders that she had not yet seen a draft press release for the private placement. She had, however, found a precedent where an insider was involved in a lending agreement. Weinstein provided Saunders with draft language about Goldman's role as a lender and stated that disclosure of his role would "close any loop in investor inquiries" regarding why Goldman was making regulatory filings about his shares.
[143] Later that day, a director in Canopy's public relations department asked Saunders if the "bankers" were doing a first draft of the press release. We conclude that Saunders asked Cormark to provide a draft of the press release because on March 18 Shaw emailed Linton and Saunders (copying Weinstein) attaching a draft press release. Saunders testified that the final press release was reviewed by Canopy's Disclosure Committee. Canopy issued a press release on March 22.
[144] Neither Cormark's draft nor Canopy's published press release referred to short selling.
[145] Canopy was in control of its disclosure. The press release reflects the fact that Canopy sold 2.5 million shares in a private placement at a specified discount and an insider was involved in a loan connected to that issue. Weinstein's March 16 email clearly indicates a focus on the private placement and the role of Goldman, an insider, in the securities loan agreement. We concluded earlier that Canopy and Weinstein were told that there would be short selling in the market on March 17. We have no evidence about the internal discussions at Canopy, including at the Disclosure Committee, about the content of the press release. We cannot conclude that the absence of any mention of short selling in the release indicates that Cormark or Kennedy lied about or concealed the short selling.
The identity of the buyers of the Free-Trading Shares
[146] The Commission alleges that Cormark and Kennedy told Canopy that the purchasers would be index funds when in fact a variety of purchasers bought from Saline's short sales, including 157 retail accounts. The Commission submits that had the market-on-close facility been fully explained to Canopy, Linton and Saunders, they would have understood that the purchasers would not be index funds, as they expected. Because the facility is a blind market, the purchasers could be and were anyone including index funds and indexers.
[147] The Commission submits that if Cormark wanted to make clear that the shares were going to be sold short through the market-on-close facility, it could have said so. A reasonable market participant like Canopy, the Commission suggests, would have understood the language Cormark provided to Canopy for the Board presentation to mean that Cormark had lined up institutional buyers to do a pre-arranged block trade.
[148] There is no evidence that Canopy, Linton or Saunders had any more experience with block trades among institutional market participants than they did with private placements and short selling. Nor is there any evidence to support that Canopy thought Cormark and Kennedy had lined up institutional block trades.
[149] Kennedy's evidence is to the contrary. He explained the index funds did not have trade desks you could call on; their trading was mechanical, algorithmic-driven and by direct market access. Kennedy states that he explained that to get the Free-Trading Shares into the hands of index funds and indexers, one had to meet them where they traded, which was in the market-on-close facility.
[150] We accept Kennedy's uncontradicted evidence that he explained the Transactions to Linton, Goldman and Weinstein, including his statement that he explained the market-on-close facility. We conclude it was among the mechanics that neither Linton nor Saunders was concerned about. The fact that Saline sold shares short in the open market prior to placing an order to sell the bulk of the shares in the market-on-close facility does not indicate that Cormark or Kennedy lied to Canopy. Kennedy testified that he was not aware of the earlier short sales, a statement we find to be credible since Bistricer had direct access to Cormark's trading desk.
[151] Bistricer, in the excerpts of his compelled evidence read into the record, said that he "guessed" he had placed the earlier order because "we thought we could get a better price", although when pressed, he was unable to remember with whom he had shared that view. Bistricer went on to say that there was nothing obliging him to do the short sales on a specific date or at a specific time. This is clearly inconsistent with Kennedy's view about the Transactions and the importance of the timing of the private placement and the short sales. We conclude that Saline did not feel bound by the parameters of the structure Kennedy had designed and sold shares in the open market as an opportunity to increase its potential return on the Transactions.
[152] Saunders testified that he did not think Canopy would necessarily have participated in the Transactions if the resulting buyers of the Free-Trading Shares were anyone other than index funds. Linton also stated that he did not recall ever having any information other than that the Transactions were being driven by Canopy's inclusion in the Index and that they were facilitating the index funds buying Canopy's shares. However, there is nothing in the documentary evidence to suggest that anyone at Canopy asked about the identity of the ultimate buyers or sought any representation or warranty about their identity. In addition, the Commission's investigator testified that all the Saline shares sold in the market on close went to institutional investors. Linton and Saunders confirmed in their oral evidence that they did not ask Cormark or Kennedy who had bought the Free-Trading Shares.
[153] We find that Canopy would have understood that there would be trades in the Free-Trading Shares on the market on March 17 and it was not concerned with whether all the shares went into the hands of index funds or indexers.
[154] The Commission submits that because Cormark concealed the short selling from Canopy, Canopy was not aware that the Transactions were structured such that they were virtually risk-free for Saline. We do not accept the Commission's submission on this point. Hedging or managing risk is a normal and accepted part of participating in the capital markets. Merely because a structure might reduce or eliminate risk does not make it contrary to the animating principles of the Act.
[155] We also do not agree that the structure was virtually risk-free for Saline. Saline entered into the securities loan agreement prior to signing the Share Subscription Agreement. It agreed to the Share Subscription Agreement after entering short sales in the open market and after learning that Canopy had a floor price. If Canopy's share price dropped below the floor, Canopy could walk away from the private placement. If it did, Saline would have had no collateral to deliver for the securities loan, which would be in default, leaving Saline without Free-Trading Shares to settle the short sales. Saline accepted that risk.
[156] The Commission submits that Shaw's email to Linton on March 9 misrepresented the relationship between the 9% discount and the lending fee. That email stated there would be room for a 'small' discount for Saline, while Saline ended up with substantial profits.
[157] Shaw's email was a response to Linton's question about how much Goldman would be paid as a lending fee, information Linton wanted to have before he approached Goldman about lending his shares. The email states "To achieve a 9% discount, we could pay 6.5% annualized on the borrow, which leaves us enough room for small discount for buyer and us to make 1-1.5% commission (including paying our legal costs)."
[158] Goldman negotiated a loan fee of $875,000. Kennedy testified this was a 10.8% annualized return or 3.6% of the 9% discount. Cormark's commission on Saline's trades was 1.5%. That left 3.9% for Saline, a 0.3% difference from Goldman.
[159] Shaw's email only conveyed what might be paid for a loan. It was based on what Cormark might pay if it borrowed from other dealers through the dealers' back office. In fact, Cormark was not the borrower, and the terms of the loan were negotiated between Goldman and Saline. Linton and Saunders both knew that Goldman would receive a fee for lending his shares to Saline. They both testified that they did not ask what fee Goldman had negotiated. Had either been concerned about what profit, if any, Saline was making on the Transactions, they could have followed up with either Goldman or Cormark. They did not. In addition, Weinstein received a copy of the securities loan agreement from Cormark with the lending fee displayed on the first page. There is no evidence before us to suggest that Weinstein raised any issues about that information.
[160] There is no basis for us to conclude that Saline's risk-reward ratio was even relevant to Canopy's decision to participate in the Transactions. Nor can we conclude that a hypothetical number provided in response to a specific question about a possible lending fee that would be negotiated by other parties amounts to Cormark concealing Saline's risk-reward ratio from Canopy.
[161] The Commission submits that the short sales put Canopy's net proceeds at risk. Canopy was unaware of that risk because Cormark and Kennedy concealed the short sales from them. We concluded earlier that Cormark and Kennedy did not conceal the short sales from Canopy, but rather the details of the Transactions were explained to Canopy, and Linton and Saunders retained what was most relevant to them. However, we deal briefly with the question of whether Canopy's net proceeds were at risk.
[162] The parties agree that net proceeds were an important metric to Canopy. The minutes of Canopy's March 13 board meeting indicate that the Board considered Canopy's net proceeds from the private placement. Saunders stated that the Board was cautious about the Transactions and carefully considered them. Canopy knew that trading in the market on March 17 would affect its net proceeds because the private placement was to be priced at a discount to that day's closing price.
[163] At the time of the Board meeting, Linton also knew that Canopy had downward price protection. He had told Shaw on March 10 that Canopy would only do the private placement if the 9% discount from the March 17 closing price was no lower than 10% below the March 10 opening price. The board presentation included the fact that Canopy had a "no cost" out. Linton said the floor price was important for price certainty, and he could not recommend the deal to the Board without it. Saunders stated that the Board's approval was based on having the floor price. We conclude that Canopy's Board carefully considered the net proceeds from the Transactions. Given the floor price, there was no risk to Canopy's net proceeds beyond the risk it had negotiated to accept.
[164] The Commission also submits that Cormark and Kennedy made a misleading comparison between the Transactions and Canopy's December 16 bought deal with respect to Canopy's cost of capital and, by implication, its net proceeds. The March 7 email addressed to Shaw stated that "The 9% is an all-inclusive discount and compares favourably to your last deal which was ~12% (including underwriting fees and expenses)." The Board package that Saunders prepared included that statement. However, it also included an appendix that Saunders had prepared, that compared the 9% discount with the cost of Canopy's four previous bought deals.
[165] We conclude that Canopy did its own assessment of how the cost of this transaction compared to its previous capital raising activities and was not misled by Cormark or Kennedy. Canopy had the information necessary to do that analysis and factored in the downward price protection provided by the negotiated floor price. There is no evidence that Kennedy made a specific statement to anyone at Canopy comparing Canopy's cost of capital (and therefore its net proceeds) for the Transactions versus Canopy's most recent bought deal. Kennedy denied drafting or providing input to the email and did not agree with the Commission's proposition that Shaw received the statements in the email from Kennedy.
[166] We conclude that the Commission has failed to establish that Cormark and Kennedy engaged in the alleged misconduct. We therefore dismiss this alternate allegation.
[167] We now turn to the second category of the Commission's public interest allegations. The Commission submits that in addition to the conduct set out above relating to Cormark and Kennedy, the respondents behaved in a manner that engages our public interest jurisdiction because they:
a. undermined the investor protection provided by hold periods;
b. avoided disclosure by sizing the private placement to be immaterial and by making misleading statements in the draft press release Cormark provided to Canopy;
c. threatened capital markets efficiency and confidence because Saline's short sales were unlikely to contribute to an efficient trading price; and
d. failed to meet the high standards of fitness and business conduct expected of market participants and registrants.
[168] As indicated above, we conclude that the Commission has failed to establish the alleged misconduct. Our public interest jurisdiction is therefore not engaged, and we dismiss these allegations.
[169] The Commission alleges that the securities loan was not really a loan. Rather, it asserts that the agreement was structured to enable Saline to avoid the hold periods of Ontario securities law. The Commission alleges that:
a. the respondents used the securities loan agreement to "effectively convert the restricted shares into free-trading shares that were distributed to the public"; and
b. having successfully subverted the hold periods, Saline and Goldman Holdings abandoned the agreement and failed to comply with the remainder of its terms.
[170] We agree with the Commission about the importance of hold periods and the role they play in Ontario securities law. However, we cannot conclude that the respondents subverted any hold periods.
[171] We concluded earlier that the Restricted Shares were not converted into the Free-Trading Shares. There is nothing to prevent the Restricted Shares from being used as collateral for the securities loan. The Restricted Shares remained restricted and were held for four months in Goldman Holdings' account at Cormark. The Free-Trading Shares were not subject to any hold period and there was nothing to prevent Goldman Holdings from loaning those shares to Saline and Saline in turn using them to settle its short sales.
[172] We conclude that Saline and Goldman Holdings did not abandon the securities loan agreement when the hold period expired. When the hold period expired the Restricted Shares became free-trading shares. The separate identifying number for the Restricted Shares was changed by the Canadian Depository Service into the identifying number for Canopy's common shares.
[173] We agree with the respondents that there is nothing untoward about Saline and Goldman Holding agreeing to use the now free-trading shares to settle their obligations under the securities loan agreement. The securities loan agreement provided, in s. 10(b) and (d), that Saline's obligation at the end of the term of the agreement was to return "Equivalent Loaned Securities" -- shares that are "of an identical type, nominal value, description and amount" to the Free-Trading Shares it borrowed. Once the hold period expired and the restriction on the Restricted Shares was lifted, they became interchangeable with and therefore equivalent to the Free-Trading Shares Saline had borrowed.
[174] The Commission also alleges that investor protection was undermined because the Transactions increased the public float. Goldman Holdings was willing to loan the Free-Trading Shares (willing to swap them, in the Commission's words) because it had no intention of selling them and therefore the Free-Trading shares became part of the public float.
[175] We were not given a clearly applicable definition of public float. However, in our view, one is not necessary for our purposes. Common sense allows us to conclude that no new shares were added into the public market until the hold period expired and the Restricted Shares become free trading. We have no direct evidence of Goldman's intentions regarding his holdings and agree with the respondents that it is irrelevant because, there being no restrictions on those shares, Goldman was free to do whatever he wished with them.
[176] The Commission alleges that our public interest jurisdiction is engaged because the respondents avoided disclosure by:
a. breaching the prospectus requirement for full, true and plain disclosure by failing to provide a prospectus for the indirect offering of 2.5 million Canopy shares into the market; and
b. minimizing the timely, accurate and efficient disclosure of information about the Transactions by:
i. sizing the private placement to not be a material change for Canopy;
ii. Cormark and Kennedy discouraging Canopy from making timely disclosure of the Transactions; and
iii. Cormark and Kennedy providing a draft press release to Canopy that was misleading in three respects:
- by stating that the Transactions were "non-brokered", Cormark and Kennedy were trying to hide their role in the Transactions;
- by stating that "no finder's fees were paid as part of" the private placement it might have suggested that Cormark was not receiving any compensation for the Transactions when they received a commission from Saline; and
- by omitting to state that the Restricted Shares were being converted into free-trading shares and used to settle short sales made to the public on March 17.
[177] We have already concluded that the Transactions did not constitute a "distribution" and therefore we will not deal with the Commission's first allegation. We have also previously concluded that the Restricted Shares were not converted into the Free-Trading Shares and therefore, find no fault with disclosure that did not refer to something that did not happen. With respect to the Commission's remaining allegations under this heading, we conclude that the respondents did nothing wrong.
[178] The Commission alleges that the private placement was deliberately sized so that it was not a material change, and no timely disclosure would be required. Although the Commission alleges that the "respondents" engaged in this alleged conduct there is no evidence that Bistricer or Saline had any role in determining the size of the private placement (other than agreeing to buy 2.5 million shares) or in any discussions with Canopy about whether Canopy should issue a press release or the contents of that release.
[179] We accept Kennedy's evidence that he thought carefully about regulatory compliance when structuring the Transactions, that the private placement had to be immaterial for the Transactions to work, and if that part of the Transactions did not work for Canopy, he would have figured something else out or walked away.
[180] There is nothing about Kennedy's and Cormark's efforts to comply with insider trading rules that is inconsistent with the animating principles underlying those rules. Shaw's and Kennedy's statements to Canopy that the private placement was immaterial are consistent with that. Saline wanting to ensure that its short sales would not be considered insider trading is an attempt to ensure that it was following applicable securities laws.
[181] Cormark and Kennedy had no control over Canopy's disclosure. Had Canopy decided the private placement was material, there would have been consequences for Cormark, Kennedy and Saline. Recognizing that and seeking assurance from Canopy about whether it developed a view that the private placement was material is consistent with wanting to ensure that the Transactions would not have to be restructured or abandoned to comply with all applicable laws.
[182] We find that telling Canopy that the private placement was designed to be immaterial does not amount to Cormark and Kennedy discouraging Canopy from making timely disclosure. The private placement being immaterial was part of the structure. If Canopy had a different view, the structure would have been changed or abandoned.
[183] Canopy asked Cormark to provide a draft press release. The draft did not refer to Cormark, stated that the private placement was non-brokered and stated that no additional finder's fees were paid. The Commission alleges the draft release was misleading and demonstrated that the respondents did not want their roles disclosed in Canopy's news release. We concluded earlier there was no evidence that Bistricer or Saline had any role in the draft press release.
[184] We heard evidence and received submissions about the meaning of "non-brokered" and "finder's fee" versus "commissions". In our view none of that is relevant to our decision. This was a draft press release. Cormark and Kennedy had no control over what Canopy disclosed. The fact that the press release was reviewed by Canopy's Disclosure Committee and that Canopy made changes to the draft Cormark provided to it is consistent with that conclusion.
[185] There is no evidence that Canopy concluded that Cormark's role in structuring the Transactions, or Saline's involvement in them, were important to Canopy's disclosure.
[186] The Commission alleges that the Transactions threatened the efficiency of Ontario's capital markets and confidence in them as an efficient pricing mechanism because Saline's short sales were unlikely to contribute to an efficient trading price. They may have prevented Canopy's share price from rising as much as it would have without the short sales or caused that price to decline -- all for reasons unrelated to the merits of Canopy shares as an investment. The short sales risked the proceeds that selling Canopy shareholders received in the secondary market and Canopy's offering proceeds.
[187] We note that market participants can and do trade for reasons other than an issuer's merits and that all trading, regardless of the traders' reasons for being in the market, contribute to pricing a security. Short sales are a common element in many trading strategies. Had any party wished to, they might have sought to introduce expert evidence to assist us to conclude whether Saline's short sales had the outcomes or resulted in the risks the Commission alleges they might have had. We conclude that hypothetical outcomes that have not been established to have occurred are insufficient to conclude that the respondents did anything wrong.
[188] One of the primary means for achieving the purposes of the Act are the requirements for the maintenance of high standards of fitness and business conduct by market participants.{25} Registrants ought to be held to a higher standard of conduct{26} than non-registrants and their conduct has been found to have engaged the Tribunal's public interest jurisdiction when it violates the high standards applicable to them.{27}
[189] Cormark is a registered investment dealer. Kennedy was a registered dealing representative. Bistricer was an ultimate designated person for Saline. The Commission alleges that they failed to meet the high standards applicable to them by failing to act effectively as gatekeepers for the capital markets. The Commission alleges that Cormark, Kennedy and Bistricer deployed their knowledge and skills to enrich themselves improperly at the expense of the investing public and the capital markets.
[190] We disagree. The Commission's specific allegations are based on the premise that the Restricted Shares were converted into or swapped for the Free-Trading Shares so that investors who bought the Free-Trading shares were receiving newly issued treasury shares from Saline as an underwriter without the benefit of the protections of a prospectus. We concluded earlier that this is factually not what happened and is also contrary to the functioning of the closed system. Investors who bought from Saline's short sales received the Free-Trading Shares Saline had borrowed from Goldman Holdings for that very purpose. Saline was not acting as an underwriter and the investors did not require a prospectus.
[191] We also agree with the respondents that Cormark, Kennedy and Bistricer using their knowledge and skills, and benefitting from their efforts, is what is expected of market participants and registrants. We conclude that their conduct in this case was not improper, and we also conclude that there is no evidence that the investing public in this instance suffered from the Transactions.
[192] Having found that the Commission has not proven any of its numerous allegations of misleading, dishonest or other wrongful conduct, we conclude that these allegations against the respondents were an overreach. The unfortunate consequence is that the respondents have incurred significant costs due to this proceeding, both financial and reputational, which they cannot recover.
[193] Because we concluded that neither Cormark nor Saline breached Ontario securities law we do not need to consider if either Kennedy or Bistricer was liable under s. 129.2 of the Act.
[194] Before concluding, we set out our reasons for our December 21, 2023 order, which:
a. held that the issue of whether the respondents' expert's opinion (the Mackasey Opinion) was admissible would be decided at the merits hearing; and
b. varied the timelines for the filing of responding and reply expert reports, if any.
[195] The Respondents subsequently elected not to call Mackasey as a witness.
[196] On November 1, 2023, the Commission filed a notice of motion asking, among other things:
a. that the Tribunal hear a motion to have the Mackasey Opinion excluded prior to the merits hearing; and
b. to amend its order dated June 28, 2023, and permit the Commission to deliver an expert opinion responding to the Mackasey Opinion, if required, after the Tribunal's disposition of the motion.
[197] The respondents filed joint submissions requesting that the Commission's motion be denied. At an attendance on November 15, 2023, a differently constituted panel ordered that the following two preliminary issues would be heard by this hearing panel on December 19, 2023:
a. Should the question of whether the Mackasey Opinion is admissible be determined prior to or during the merits hearing?; and
b. Should the Commission be granted an extension for filing an expert response report?
[198] The parties agreed that the test for determining if the issue of admitting the expert report should be decided prior to or at the merits hearing is as set out in Mega-C Power Corporation (Re).{28} They disagreed on the result that comes from applying the Mega-C criteria in these circumstances.
[199] In determining whether to decide a principal issue at a preliminary stage, the Tribunal has determined that it is appropriate to ask three questions:
a. Can the issues raised in the motion be resolved without regard to contested facts and the anticipated evidence that will be presented at the hearing on the merits?
b. Is it necessary for a fair hearing for the relief sought in the motion to be granted prior to the proceeding on its merits?
c. Will the resolution of the issues raised in the motion make the process materially more efficient and effective?{29}
[200] If the answer to any of the three questions is "yes", then the motion should be heard in advance of the hearing on the merits, absent strong reasons to the contrary. If the answer to all three questions is no, then the Tribunal should be reluctant to hear the motion before the merits hearing.{30}
[201] The Commission conceded that it is not necessary for its motion to be heard before the merits hearing. We therefore needed to address only the first and third questions. We concluded that the answer to both questions is "no". Therefore, the issue of whether the expert opinion is admissible would be addressed at the merits hearing.
[202] Opinion evidence is generally inadmissible, subject to narrow exceptions including expert evidence on matters requiring specialized knowledge. The Commission submitted that in determining whether the Mackasey Opinion met the test set by the Supreme Court of Canada in R v. Mohan{31} (Mohan) for admission of expert evidence there was no need for us to resolve the contested facts in the merits hearing.
[203] To be admissible under the Mohan test, the expert opinion must be relevant, necessary, not subject to an exclusionary rule and proffered by a qualified expert.{32} For the purposes of this motion, we were not determining whether the Mackasey Opinion was admissible but rather when that question should be resolved. We considered the parties' submissions on the Mohan factors only to the extent necessary to resolve the timing issue.
[204] According to the Commission, what is relevant at the merits hearing is determined by the Statement of Allegations and the Commission cannot expand the issues through the evidence led at the merits hearing.
[205] The respondents submitted that resolving the admissibility of the Mackasey Opinion before the merits hearing would require the Tribunal to make findings, without the full evidentiary record, on at least two contested issues (whether the Transactions were ordinary course in connection with Canopy joining the Index, and whether the respondents misled Canopy about the Transactions such that Canopy could not make an informed decision about participating). This would negatively affect the respondents' ability to make full answer and defence to the allegations against them.
[206] We agree with the Commission that we can determine the relevance of the Mackasey Opinion to the allegations against the respondents as set out in the Statement of Allegations, without resolving these or any other contested issues because relevance is determined by the Statement of Allegations.
[207] The Commission submitted that it is not necessary for a specialized Tribunal to have the full context of the merits hearing to decide whether the issues are outside of the Tribunal's experience and knowledge and that an expert's opinion is needed.{33} The respondents submitted that if the Commission leads evidence that the Transactions are abusive and contrary to the public interest, the Mackasey Opinion would be necessary to the Tribunal as it would provide evidence on industry practices regarding similar transactions and evidence that compares the Respondent's practices to those prevalent in the industry. Such evidence has been found necessary by the Tribunal in the past.{34}
[208] We disagree that an allegation that conduct engages our public interest jurisdiction necessarily requires expert evidence. The Tribunal can determine whether the issues raised in a Statement of Allegations are outside of the Tribunal's knowledge and expertise.
[209] The Commission submitted that the respondents would have to establish that the Mackasey Opinion was not subject to any other exclusionary rule, including the "ultimate issue" rule. That rule generally prohibits opinion evidence that usurps the role of the trier of fact.{35} The Commission submitted that whether all or any of the Mackasey Opinion addresses issues that were for the Tribunal to determine at the merits hearing could be determined prior to the hearing without reference to contested facts or anticipated evidence.
[210] Whether the Mackasey Opinion was subject to some other exclusionary rule, the respondents submitted that the opinion compared Cormark's, Kennedy's and Canopy's understanding of the transactions at issue with what could be reasonably expected of a similarly situated investment bank and issuer. This would provide necessary context to the allegations that Canopy was misled and would not be an opinion on the ultimate issue.
[211] We agree with the Commission that the Tribunal can determine whether the Mackasey Opinion addresses issues that were for us to determine without having reference to the contested facts or anticipated evidence.
[212] In addition, the respondents submitted that Mega-C should be considered in a broader context of requiring a balancing of interests -- ensuring the fairness of the proceedings and that all procedural rights the parties are entitled to are properly and effectively provided. The manner of achieving that goal will depend on the circumstances of each case, "including the sanctions and outcomes sought and what is ultimately at stake" for the respondents.{36} In this instance, the respondents faced very serious consequences including, for Cormark, revocation of the right to carry on business in the securities industry. The respondents submitted that the Tribunal should, therefore, in exercising our discretion balance in favour of the respondents' ability to make full answer and defence.
[213] While we agree with the Commission that whether the Mackasey Opinion met the Mohan test could be determined prior to the merits hearing, we concluded that in balancing the interests of the parties to ensure that the respondents are able in these circumstances to make full answer and defence to the very serious allegations and their attendant consequences, the question of whether the opinion was admissible should be determined in the context of the merits hearing. The answer to the first question was therefore "no".
[214] We also concluded, for the reasons below, that the answer to the third question was "no".
[215] The Commission submitted that resolving the issue of whether the Mackasey Opinion was admissible before the merits hearing would be materially more efficient and effective regardless of the outcome. If the Commission were successful there would be no need for a responding or reply opinion and no need for Mackasey or any other expert to testify. Regardless of who would be successful there would be greater certainty about how the merits hearing would proceed, because the scope of the relevant issues would have been clarified. Dealing with the question of admissibility mid-hearing might result in delays needed to schedule the experts, hear their evidence, and for the panel to make its decision.
[216] The respondents submitted that no efficiencies would be gained from determining this issue on a preliminary basis. They submitted that given that several of the Commission's allegations could not be tested without factual findings and reference to the anticipated oral evidence, a full hearing would be required. This would duplicate the merits hearing.
[217] In addition, the respondents submitted that Mega-C cannot be interpreted to read that a process that is merely more efficient trumps the right of the respondents to make full answer and defence to the serious allegations and their potential consequences for the respondents.
[218] We agreed with the respondents that while there may be some efficiencies from resolving the issue of whether the Mackasey Opinion is admissible on a pre-hearing basis, those efficiencies do not reach a level of materiality suggested by Mega-C.
[219] We heard submissions about the few cases in which the Tribunal has considered the admissibility of an expert opinion. In Solar Income, the issue was dealt with pre-hearing and the expert report was ruled inadmissible. In that case, the Commission had sought to introduce an expert opinion to presumptively rebut anticipated evidence from the respondents, but the respondents undertook not to lead evidence on the issue in question. In Kraft (Re),{37} the parties exchanged expert opinions and submissions and chose a day close to the start of the merits hearing on which the issue was addressed. In Mithaq Canada Inc. (Re),{38} the Tribunal dealt with whether an expert report was admissible at the outset of the merits hearing. In each instance, the Tribunal's decision is very fact specific.
[220] The efficiencies that might be gained in this instance from addressing this issue before the merits hearing would be minor. In balancing the interests of efficiency against the potential serious consequences faced by the respondents in this matter, we concluded the balance weighed more heavily on the side of ensuring that all the procedural protections were available to the respondents. We concluded that the answer to the third Mega-C question was also "no".
[221] We now turn to the reasons for our decision to vary the scheduling order and extend the time for the Commission to file a responding expert opinion, if any.
[222] The respondents served two expert reports on September 15, 2023. The Commission had until November 3, 2023, to serve any expert reports in response but served none. On November 1, 2023, the Commission brought its motion. We granted the Commission an extension to file any responding expert report by January 15, 2024. The Commission did not file any such report.
[223] The Commission conceded that it would have been ideal if it had served its notice of motion earlier. However, the Kraft decision, dealing with a similar issue, was issued on October 20, 2023. Four days later, the parties were advised that the panel was no longer available on five hearing dates. The parties were asked for submissions on whether the dates should be rescheduled or vacated. The number of days required for the merits hearing depended, in the Commission's view, on whether the Mackasey Opinion was admissible. The Commission advised the respondents on October 26, 2023, that it would be challenging the opinion and filed its motion on November 1, 2023.
[224] The Commission submitted that it brought this motion in good faith with the aim of streamlining the proceeding. There was ample time in the hearing schedule, with several breaks built into the schedule, for a responding opinion to be served if one were required. If its motion were denied, the Commission could file a reply expert opinion by January 15, 2024. In its written submissions the Commission had said an expert response report could be filed within two weeks. The amended request to be able to file by January 15, 2024, was because of the pending holidays.
[225] The respondents submitted that the schedule was set in June 2023, and it was inappropriate for the Commission to have waited until November 1, 2023, to bring this motion. The Commission could have filed a responding expert opinion without prejudice by the deadline or filed its motion earlier. The respondents submitted that the Commission was pursuing a de-risking strategy that the Tribunal should not sanction by granting the requested relief. The Commission intended to take the position that the Mackasey Opinion is irrelevant and if unsuccessful then it would serve a responding opinion two months late, hedging the need for it to provide a responding expert opinion. The Commission had made its decision about what evidence it needed to prove its case and should not be given an opportunity to lead additional evidence if that decision proved to have been wrong.
[226] The Commission's proposed approach, the respondents submitted, put the merits hearing schedule at risk and was not efficient. The respondents had incurred the cost of their expert's report and had to attend this motion hearing and, if the Commission were successful, attend an admissibility hearing. If the Commission were unsuccessful at the motion hearing and were allowed to file a late responding expert opinion, the respondents would then have to consider preparing and serving a reply opinion, while having to prepare for the merits hearing itself.
[227] Expert evidence is intended to assist the Tribunal with understanding technical issues that are outside the scope of the Tribunal's expertise. If the Tribunal found the Mackasey Opinion to be admissible and there were no responding expert evidence, the Tribunal may be disadvantaged. The Tribunal would not have the benefit of a fully argued opinion on whatever issues the Tribunal determined it needed assistance with.
[228] We took the Commission at its word that it was not engaged in a de-risking strategy but acting in good faith to make the proceeding more efficient. It would have been better for the Commission to have brought its motion earlier. However, to proceed without a responding opinion in this instance could have led to an unfair result. We therefore granted the Commission an extension to file a responding expert report.
[229] We conclude that the Commission has failed to establish any of its allegations. We therefore dismiss this proceeding.
Dated at Toronto this 6th day of November, 2024
{1} RSO 1990, c S.22
{2} 2022 ONCMT 12 (Kitmitto)
{3} Kitmitto at para 60
{4} Kitmitto at para 60
{5} RRO 1990, Reg 194
{6} Andersen v. St. Jude Medical Inc., 2010 ONSC 1824 (Andersen) at para 15
{7} Andersen at para 20
{8} Kitmitto at para 60
{9} Kitmitto at para 61
{10} RSO 1990, c S.5
{11} Act, s 53(1)
{12} David Johnston, Kathleen Rockwell and Cristie Ford, Canadian Securities Regulation, 5th ed. (Toronto: Lexis/Nexis Canada, 2014) at 5.7
{13} Five Year Review Committee, Final Report -- Reviewing the Securities Act (Ontario) (Toronto: Queen's Printer, 2003) at s 1, p. 22. The phrase "primary distribution to the public" is defined in the Securities Act, 1945, SO 1945, c 22 at s 1(j)
{14} Five Year Review -- Final Report at s 12.1, p 134
{15} Five Year Review -- Final Report at s 12.1, p 134
{16} National Instrument 45-102 -- Resale of Securities
{17} (1999), 22 OSCB 2595 (Crystallex)
{18} Zacharias v SEC 569 F.3d 458
{19} Tiffin 2020 ONCA 217
{20} Act, s 25
{21} 2017 ONSEC 41 (Marek)
{22} Marek at paras 5, 30 and 31
{23} Marek at para 51
{24} Statement of Allegations, Cormark, November 9, 2022 at para 26
{25} Act, s 2.1(2)(iii)
{26} Kitmitto at para 241, affirmed Kitmitto v Ontario (Securities Commission), 2024 ONSC 1412, leave to appeal to the Ontario Court of Appeal currently sought by Appellants (Kitmitto)
{27} Donald (Re), 2012 ONSEC 26 at para 319; Agueci (Re), 2015 ONSEC 2 at para 175; Kitmitto
{28} 2007 ONSEC 4 (Mega-C)
{29} Solar Income Fund Inc. (Re) 2021 ONSEC 2 (Solar Income) at para 32, citing Mega-C at para 44
{30} Solar Income at para 33, citing Mega-C at paras 35-36
{31} [1994] 2 SCR 9 (Mohan)
{32} Mohan at para 20
{33} Paramount (Re), 2020 ONSEC 12 at para 15 (Paramount)
{34} Paramount at para 12
{35} R v Sekhon, 2014 SCC 15 at para 75 (Sekhon)
{36} Mega-C at para 31
{37} 2023 ONCMT 36 (Kraft)
{38} 2024 ONCMT9 (CanLII) (Mithaq)
SCOR Canada Reinsurance Company and SCOR Investment Partners SE -- s. 74(1)
Application to the Ontario Securities Commission for an order pursuant to subsection 74(1) of the Securities Act (Ontario) (the Act) for an order that the applicant be exempted from the adviser registration requirements in subsection 25(3) of the Act. The applicant will provide advice to a Canadian affiliate in Ontario only for so long as such affiliate remains an affiliate of the applicant.
Securities Act, R.S.O., c. S.5, as am., ss. 25(3) and 74(1).
March 30, 2026
(Subsection 74(1) of the Act)
UPON the application (the Application) of SCOR IP to the Ontario Securities Commission (the Commission) for an order pursuant to subsection 74(1) of the Act that SCOR IP be exempted from the requirement in section 25(3) of the Act to be registered as an adviser in respect of SCOR IP providing investment advice to SCOR Canada with respect to the assets of SCOR Canada (the Order);
AND UPON considering the Application and the recommendation of staff of the Commission;
AND UPON the Filers having represented to the Commission as follows:
1. SCOR Canada is a corporation incorporated under the laws of the Province of Ontario. The head office of SCOR Canada is located in Toronto, Ontario.
2. SCOR Canada is a Canadian reinsurance company serving Canadian clients across property & casualty and life & health reinsurance. It was incorporated in 1978 as a federally regulated Canadian reinsurance company. SCOR Canada has 35 full-time employees working out of the head office based in Toronto.
3. SCOR Canada is a permitted client as such term is defined in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations (NI 31-103).
4. SCOR Canada has personnel located in Ontario, including individuals working remotely from locations within Ontario, to whom SCOR IP will provide investment advice with respect to the assets of SCOR Canada.
5. SCOR Canada and SCOR IP are part of a corporate group of financial services companies headquartered in Europe known as SCOR (the SCOR Corporate Group). SCOR IP and SCOR Canada are affiliates as defined in the Act.
6. SCOR Canada is not a reporting issuer in Ontario and is not in default of securities legislation of any jurisdiction in Canada.
7. SCOR IP is a corporation incorporated under the laws of France. The head office of SCOR IP is located at 5 avenue Kleber, 75016, Paris, France.
8. SCOR IP is an asset management company of the SCOR Corporate Group, a leading global reinsurance firm headquartered in Paris. Created in 2009, the company manages both the portfolios of its parent group and third party assets, offering investment strategies built on a strong culture of asymmetric risk, diversification, recurring income, and capital loss mitigation. As at end of Q4 2025, SCOR IP has more than EUR 27 billion in assets under management, including EUR 8 billion from external clients.
9. SCOR IP is authorised by the Autorité des Marchés Financiers (AMF, French financial markets authority) under the number GP-09000006, registered May 15, 2009. SCOR IP is approved by the AMF (i) to operate a portfolio management company for the fixed-income, credit and equities categories; (ii) to manage loans, complex interest-rate and credit derivatives, real estate investments funds, unit-linked alternative investments and insurance-linked securities; (iii) to manage syndicated loans, including infrastructure loans and commercial real estate mortgages; (iv) to directly manage securitization funds invested in real estate and infrastructure loans; and (v) to grant direct lending.
10. SCOR IP is in compliance with securities laws of France.
11. SCOR IP is currently relying on the international dealer exemption and the international investment fund manager exemption in Ontario and Québec.
12. SCOR IP does not have an office, place of business or employees in Canada.
13. SCOR IP is not a reporting issuer in Ontario and is not in default of securities legislation of any jurisdiction in Canada.
14. SCOR IP wishes to provide investment advice to SCOR Canada with respect to the assets of SCOR Canada, and SCOR Canada wishes to receive such advice. SCOR IP seeks to provide this investment advice without becoming registered as an adviser under subsection 25(3) of the Act.
15. SCOR IP's advisory services to SCOR Canada may involve providing advice in respect of a significant number of Canadian securities owned by SCOR Canada. SCOR IP is not registered as an adviser in any jurisdiction of Canada and cannot rely on the international adviser exemption set out in section 8.26 of NI 31-103. In the advisory relationship between SCOR IP and SCOR Canada, SCOR IP will provide investment advice that includes advice in respect of Canadian securities. However, the international adviser exemption in section 8.26 of NI 31-103 is not applicable with respect to the Canadian portfolio assets of SCOR Canada that would be managed by SCOR IP since such advice is not incidental to the advice it is providing on a "foreign security" (as defined in subsection 8.26(2) of NI 31-103).
16. There is no requirement for employees of a corporation to be registered as advisers under the Act if the employees provide investment advice to their corporate employers with respect to the portfolio assets of such corporate employers. SCOR Canada does not currently employ individuals to provide investment advice with respect to its Canadian portfolio assets, but rather SCOR Canada proposes to outsource the adviser function to SCOR IP. Outsourcing the investment function is permitted under the federal or provincial insurance company legislation, as applicable
17. SCOR Canada and SCOR IP are affiliates as defined in the Act and SCOR IP does not provide, and does not intend to provide, advice to any other person in Ontario or Canada. The proposed advisory arrangement between SCOR IP and SCOR Canada does not raise any investor protection concerns, as no external clients or members of the public are involved.
18. The portfolio assets in respect of which SCOR IP will provide investment advice are directly owned by SCOR Canada. There are no external stakeholders, or other third parties (such as, for example, holders of variable annuity contracts or segregated/separate accounts for policyholders), who have any direct or indirect interest in the performance of such portfolio assets. Accordingly, there are no stakeholders in Ontario or elsewhere other than SCOR Canada and its affiliates that will be directly affected by the results of the investment advice to be provided by SCOR IP. The only person directly affected by the advisory services that will be provided by SCOR IP will be SCOR Canada. Therefore, it should not be prejudicial to the public interest to grant the relief requested by SCOR IP.
AND WHEREAS section 74 of the Act provides that an order may be made by the Commission that a person or company is not subject to section 25 of the Act, subject to such terms and conditions as the Commission considers necessary, where the Commission is satisfied that to do so would not be prejudicial to the public interest;
AND UPON the Commission being satisfied that to do so would not be prejudicial to the public interest;
IT IS ORDERED pursuant to subsection 74(1) of the Act, that SCOR IP is exempt from the adviser registration requirement of subsection 25(3) of the Act in respect of it acting as an adviser to SCOR Canada in Ontario, provided that:
1. SCOR IP provides advisory services in Ontario only to SCOR Canada;
2. SCOR Canada remains an "affiliate" of SCOR IP, as defined in the Act;
3. SCOR Canada remains a "permitted client" as defined in NI 31-103;
4. SCOR Canada remains licensed or otherwise duly permitted or authorized to carry on business as an insurance company in Canada or a branch of a foreign insurance company in Canada;
5. SCOR IP notifies the Commission of any regulatory action initiated after the date of this Order in respect of SCOR IP, or, to the best of SCOR IP's knowledge and after reasonable inquiry, any predecessors or "specified affiliates" (as defined in Form 33-109F6 to National Instrument 33-109 Registration Information) of SCOR IP, by completing and filing with the Commission Appendix "A" hereto within ten days of the commencement of such action;
6. SCOR IP, in the course of its dealings with SCOR Canada acts fairly, honestly and in good faith;
7. SCOR IP is in compliance with, and remains in compliance with, any applicable adviser licensing or registration requirements under applicable securities legislation in France; and
8. this Order will terminate on the earliest of:
a. five years after the date of this Order; and
b. the coming into force of a change in securities legislation that exempts SCOR IP from the registration requirement in connection with the advising activity it provides to SCOR Canada on terms and conditions other than those set out in this Order.
OSC File #: 2025/0743
Has the firm, or any predecessors or specified affiliates{1} of the firm entered into a settlement agreement with any financial services regulator, securities or derivatives exchange, SRO or similar agreement with any financial services regulator, securities or derivatives exchange, SRO or similar organization?
Yes _____ No _____
If yes, provide the following information for each settlement agreement:
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Has any financial services regulator, securities or derivatives exchange, SRO or similar organization:
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(a) Determined that the firm, or any predecessors or specified affiliates of the firm violated any securities regulations or any rules of a securities or derivatives exchange, SRO or similar organization? |
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(b) Determined that the firm, or any predecessors or specified affiliates of the firm made a false statement or omission? |
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(c) Issued a warning or requested an undertaking by the firm, or any predecessors or specified affiliates of the firm? |
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(d) Suspended or terminated any registration, licensing or membership of the firm, or any predecessors or specified affiliates of the firm? |
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(e) Imposed terms or conditions on any registration or membership of the firm, or predecessors or specified affiliates of the firm? |
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(f) Conducted a proceeding or investigation involving the firm, or any predecessors or specified affiliates of the firm? |
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(g) Issued an order (other than an exemption order) or a sanction to the firm, or any predecessors or specified affiliates of the firm for securities or derivatives-related activity (e.g. cease trade order)? |
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If yes, provide the following information for each action:
Name of Entity |
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Is the firm aware of any ongoing investigation of which the firm or any of its specified affiliate is the subject?
Yes _____ No _____
If yes, provide the following information for each investigation:
Name of entity |
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Reason or purpose of investigation |
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Regulator/organization |
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Date investigation commenced (yyyy/mm/dd) |
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Jurisdiction |
Authorized signing officer or partner
Name of firm |
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Name of firm's authorized signing officer or partner |
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Title of firm's authorized signing officer or partner |
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Signature |
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Date (yyyy/mm/dd) |
Witness
The witness must be a lawyer, notary public or commissioner of oaths.
Name of witness |
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Title of witness |
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Signature |
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This form is to be submitted through the Ontario Securities Commission's Electronic Filing Portal: https://www.osc.gov.on.ca/filings
{1} In this Appendix, the term "specified affiliate" has the meaning ascribed to that term in Form 33-109F6 to National Instrument 33-109 Registration Information.
National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Filer granted exemption from the prospectus and registration requirements in connection with trades by applicants or licensed real estate agents in condo hotel units included in a rental program provided that purchasers receive certain disclosure prior to entering into an agreement of purchase and sale -- Relief granted subject to conditions.
Securities Act, R.S.O. 1990, c. S.5, as am., ss. 25, 53, 74(1).
The securities regulatory authority or regulator in each of the Jurisdictions (the "Decision Maker") has received an application from the Filer for a decision under the securities legislation of the Jurisdictions (the "Legislation") for an exemption from the Registration Requirements (as defined below) and the Prospectus Requirement (as defined below) in connection with the initial sale by the Filer, agents of the Filer (the "Filer Agents") licensed under the Real Estate Trading Act (Nova Scotia), as amended (the "RET Act"), Project Entities (as defined in paragraph 3 below) and Project Entity Agents (as defined in paragraph 27 below) of Condo Units (as defined in paragraph 5 below) within certain Developments (as defined in paragraph 3 below) built or to be built by the Filer or a Project Entity on the land located next to the Cape Smokey Ski Resort in Ingonish Beach, Nova Scotia (the "Lands").
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a dual application):
(a) the Nova Scotia Securities Commission is the principal regulator for this application;
(b) the Filer has provided notice that section 4.7(1) of Multilateral Instrument 11-102 Passport System ("MI 11-102") is intended to be relied on in British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Quebec, New Brunswick, Prince Edward Island, Newfoundland and Labrador, Northwest Territories, Yukon and Nunavut, and
(c) the decision is the decision of the principal regulator and evidences the decision of the securities regulatory authority or regulator in Ontario.
Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.
"Act" means the Securities Act (Nova Scotia).
"Registration Requirements" means, collectively, Section 31 of the Act and the similar or equivalent provisions of the Legislation as applicable.
"Prospectus Requirement" means, collectively, Section 58 of the Act and the similar or equivalent provisions of the Legislation as applicable.
This decision is based on the following facts represented by the Filer:
1. The Filer and Holding (defined in paragraph 3 below) are the owners of the Lands located next to Cape Smokey Ski Resort (the "Resort") in Ingonish Beach, Nova Scotia and their head and registered offices are located in Nova Scotia.
2. The Filer and each of the Project Entities are not in default of securities legislation in any jurisdiction. The Filer and each of the Project Entities are not a reporting issuer under the Act or under any other securities legislation in Canada and have no present intention of becoming a reporting issuer under the Act or any other securities legislation in Canada.
3. The Filer is developing part of the Lands by constructing, in phases, either directly or through project limited partnerships, affiliated companies (including sister companies, subsidiaries, Cape Smokey Holding Ltd. ("Holding") or 4715747 Nova Scotia Limited ("CS Resort")) or special project entities (collectively, the "Project Entities" or, individually, a "Project Entity"), dwelling units to be constructed as villa style residential condominium units in a duplex or triplex configuration (individually, a "Villa Condo" and collectively, "Villa Condos") or in an apartment style condohotel configuration (individually, an "Apartment Condo" and collectively, "Apartment Condos"; the Villa Condos and the Apartment Condos are collectively referred to as "Condos") within certain condominium corporations to be formed (each such condominium project being a "Development" and collectively, the "Developments") which will function as short-term rental accommodations, in accordance with applicable Nova Scotia provincial and municipal laws. Limited portions of the Developments may be freehold (and therefore excluded from condominium registration) to provide flexibility of access and use of non-residential areas such as parking or ancillary retail spaces. The retail spaces may be constructed as either a part of a Development, their own separate condominium or freehold. The Developments and the Condos will further support and enhance the Resort's village environment to be developed around the ski operations and other recreational activities that will be attractive to both frequent and infrequent users of the Resort's facilities.
4. The Project Entities will be used to develop the Lands in phases and each phase may contain one or more Developments. The Filer or affiliates of the Filer will supervise the development, construction and marketing of each Project Entity's Development, and will also provide administrative services to each Project Entity. The Filer and/or Project Entity may elect directly or through an affiliate to retain some of the Condos in order to participate in the Rental Program described in paragraph 16 below.
5. The Filer is proposing to offer to purchasers investment contracts comprising Condos and mandatory participation in a leasing program described in paragraph 16 below (collectively, a "Condo Unit"). Each owner of a Villa Condo will participate in pooled profits from rentals of all Condos of the same Class (as defined below) participating in the rental pool (the "Rental Program"). Villa Condos will initially be classed as "waterfront" and "non-waterfront", and Apartment Condos may be classed to include all Apartment Condos in a Development or all Apartment Condos in the Developments (each such class being a "Class"). There will be several rental pools in the Developments, one among the waterfront Class Condo owners, one among the non-waterfront Class Condo owners and one or more among the owners of the Apartment Condos. The Filer expects that the waterfront Class Condos will attract a higher rental fee than non-waterfront Class Condos or Apartment Condos due to their proximity to the water and better views of the surrounding areas. Revenues and expenses of a Class in connection with its rental pool will not be intermingled with those of a different Class.
6. A Development is a condominium complex which consists of a number of self-contained dwelling units and common areas and common facilities that are available for use by the owners and other occupants of such dwelling units.
7. It is expected that each Condo will have a living area, a kitchen and at least one bathroom and at least one sleeping area/bedroom and will be sold with the option of being fully furnished.
8. The common areas and common facilities of a Development will generally consist of amenities to support the Condos as well as shared facilities for utilities, parking, recreation, and additional space that may be required to support the rental management operation of the Development as more particularly described in paragraph 16 below.
9. In addition to his or her own Condo, each owner of a Condo will be entitled to a proportionate share of the relevant Development's common property, common facilities and other common assets of the condominium corporation (the "Condo Corporation") that will be created pursuant to the Condominium Act (Nova Scotia), as amended (the "Condominium Act") for each Development.
10. Each owner of a Condo will be responsible for expenses, such as heat, light, power, cable television (which may be offered by the property manager or the Rental Pool Manager (as defined in paragraph 16 below), telephone line charges and real property taxes, that are directly attributable to their Condo, and will also be responsible for his or her proportionate share of certain utilities and other expenses related to the common property of the Development in which the Condo is situated.
11. Common expenses and repair reserve funds in respect of the common areas will be determined by the relevant Condo Corporation and will be payable by each owner of a Condo.
12. The Filer or a Project Entity, as the case may be, will cause the relevant Condo Corporation to enter into a property management agreement with a qualified property manager, which may be any of the following: (i) a qualified third party not affiliated with the Filer, Holding or CS Resort; or (ii) a qualified third party affiliate of the Filer such as Holding and CS Resort, or other affiliates of the Filer, Holding, or CS Resort. The property manager shall manage and administer a Development's common property and shall be paid a management fee for its services. It is expected that any property management agreement will be on market terms and be subject to termination provisions typical for agreements with condominium corporations. Depending on the ownership structure, a separate property manager may be retained to manage the retail spaces and will be paid a management fee for its services.
13. Holding is a related party to the Filer and operates the Resort, including the ski operations and associated buildings. It is also the limited partner of CS Resort Management Limited Partnership.
14. CS Resort is a related party to the Filer and to Holding. It was formed for the purposes of acting as the general partner of CS Resort Management Limited Partnership.
15. Holding and CS Resort have formed a limited partnership under the laws of Nova Scotia called CS Resort Management Limited Partnership to act as the Rental Pool Manager (as defined below) (the "Limited Partnership"). CS Resort is the general partner, and Holding is the limited partner, of the Limited Partnership.
16. Pursuant to restrictive covenants to be registered against each Development (the "Restrictive Covenants"), every owner of a Condo Unit ("Rental Program Participant") will be required to enter into a lease (the "Rental Agreement") with any of the following: the Filer, Holding, CS Resort, the Limited Partnership, an affiliate of the Filer or Holding or CS Resort or the Limited Partnership or a qualified third party, as the case may be (the "Rental Pool Manager"), in order to (i) permit the establishment and operation of a Rental Program by way of a rental pooling arrangement in accordance with the Rental Agreements; and (ii) ensure that the terms of any ruling and order granted by the Commission are complied with by the Filer and the Project Entities. The Rental Pool Manager will be the exclusive agent for the rental of each Rental Program Participant's Condo.
17. The Rental Agreement will require a Rental Program Participant to participate in an arrangement whereby revenues derived from, and/or expenses relating to, the rental of the Rental Program Participant's Condo by the Rental Pool Manager would be pooled with revenues derived from, and/or expenses relating to, the rental of all other Condos of the same Class and all such pooled revenues and expenses would be proportionately shared by the Rental Program Participants in such Class on the basis of the number of Condos owned by a Rental Program Participant that are available under the Rental Program for the Class for the relevant time period and the number of Condos available under the Rental Program for the Class for that time period, all as more particularly set out in the Rental Agreement (a "Rental Pool"). The Filer anticipates that the form of Rental Agreement will be the same for each Class and that the Class of the participating Condo will be specified in the Rental Agreement to designate such Condo to the appropriate Class.
18. The Rental Pool Manager, will (i) determine the rental rates for the Condos, including any differentials to be applied between Classes; (ii) coordinate the marketing, advertisement and rental of Condos; (iii) collect all rental payments and charges; (iv) deposit the rent revenues and pooling revenues of the Rental Program into operating accounts for each Class under the exclusive control of the Rental Pool Manager pursuant to the terms of the Rental Agreement; (v) pay aggregate revenue distribution to Condo owners in accordance with the Rental Agreement; and (vi) operate, supervise, manage, clean and maintain the Condos.
19. Maintenance fees and repair costs for each Condo that participates in the Rental Program, including charges for annual deep cleaning, furniture and appliance repair and normal "wear-and-tear", will be payable by the owner of the Condo. If a Condo is damaged by a guest who rents such Condo, the owner will be ultimately responsible for the repair costs relating to such damage (to the extent such cost cannot be recovered from the guest). The Rental Pool Manager and the owner will co-operate in recovering such costs from any guest which may have caused such damage.
20. Individual expenses incurred in connection with an owner's personal use of his/her Condo, including items such as room service charges and telephone bills, shall be paid after each period of personal use by the owner in accordance with the Rental Agreement. The Rental Pool Manager may deduct any unpaid individual expenses incurred by an owner from that owner's aggregate revenue distribution. Each owner of a Condo will be responsible to the Rental Pool Manager for any shortfall between the owner's aggregate revenue distribution and any of the costs associated with such owner's Condo. If the Rental Pool Manager elects to deduct any unpaid individual expenses incurred by an owner from that owner's aggregate revenue distribution, a penalty charge may also be applied by the Rental Pool Manager. The owner of a Condo will not be responsible for personal use charges incurred by guests of the Rental Pool Manager.
21. The Rental Pool Manager will be responsible for all operating costs of the Condo other than certain fees, charges and expenses listed in the Rental Agreement (the "Fees, Charges and Expenses") that are to be paid by the owners of each Condo in connection with the earning of revenues for the Developments. The Rental Agreement will include a description of how such costs associated with the operation and maintenance of the Condos will be allocated between the Rental Pool Manager and the owners of the Condos. The Rental Pool Manager will be entitled to deduct the Fees, Charges and Expenses from each Condo owner's aggregate revenue distribution. If the aggregate revenues from the Rental Program do not cover the full amount of the Fees, Charges and Expenses, then the owners of the Condos will be responsible for such shortfall.
22. The Rental Pool Manager will be entitled to receive a fee for managing the Rental Program that is based upon an allocation of rental revenue between the Rental Program Participants and the Rental Pool Manager generated by the Rental Program. Distributions, applicable expenses, and fees will be calculated and paid in accordance with and as set out in the Rental Agreement, as applicable, anticipated to be on a monthly or quarterly basis.
23. Additional revenues from the Rental Program may be derived from various services provided to, and various amenities available to, Rental Program Participants and guests who rent Condos in the Rental Program.
24. It is expected that the Rental Agreement may provide for the lease of a Condo, for the purposes of the Rental Program, by the Rental Pool Manager for portions of a calendar year comprising the period from December 15 of one year to April 30 of the following year and the period from June 1 to October 31 of a year, as amended from time to time by the Rental Pool Manager in its sole discretion to reflect the resort operating season (a "Rental Year").
25. It is expected that any Rental Agreement would have an initial term of not more than five (5) years and three (3) subsequent terms of not more than five (5) years each. It would renew automatically at the end of each term unless terminated in accordance with its terms by (i) the Rental Program Participant which will require termination by a Rental Program Participant only with the approval of a prescribed majority of the Condo owners within the Developments as set out in the Rental Agreement, (ii) or the Rental Pool Manager in accordance with the provisions of the Rental Agreement. On the resale of a Condo Unit, the Rental Agreement will be assigned by the seller of the Condo Unit and assumed by the purchaser.
26. Rental Program Participants' right to occupy their Condos will be restricted in accordance with the Rental Pool Agreement. Such restrictions would limit a Rental Program Participant's occupancy to 10% of any Rental Year, with a further restriction of no more than 10% during designated peak periods, all as more particularly set out in the Rental Agreement.
27. Condo Units will initially be offered for sale in Nova Scotia through one or more of the Filer, a Filer Agent, a Project Entity or an agent of a Project Entity licensed under the RET Act (a "Project Entity Agent").
28. As the Condos are located in Nova Scotia, the Filer Agents and Project Entity Agents selling the Condos are subject to Nova Scotia legal requirements, regardless of where the marketing of the real property is undertaken and of the home jurisdiction of the purchaser. The protections available to purchasers of real estate, including Condos, in Nova Scotia where a person licensed under the RET Act is engaged in the selling process stem primarily from the RET Act (where the Nova Scotia Real Estate Commission ("NSREC") is incorporated by statute) and NSREC's By-laws. The combination of the RET Act and NSREC's By-laws establish licensing, conduct, insurance, trust account, and disclosure obligations for real estate professionals that resembles those for registrants under securities legislation as well as many other regulated professions.
29. The offering of Condo Units by the Filer, the Filer Agents, the Project Entities and the Project Entity Agents will be made in compliance with the Condominium Act.
30. Some Condo Unit owners may wish to sell their Condo Units in the future, with or without the assistance of an agent licensed under the RET Act. The resale of Condo Units may be subject to a right of first refusal in favour of one of the Filer Parties (as defined below), or its assignee, whereby if such owner receives a bona fide written offer of purchase and sale that it is willing to accept (the "Offer"), it must notify the relevant Filer Party (as defined below) and such Filer Party (as defined below) shall have the right (but not the obligation) to purchase the Condo Unit on the same terms and conditions as the prospective purchaser under the Offer (such right, the "ROFR") prior to the owner accepting the Offer. One or more of the Filer Parties (as defined below) may wish to purchase Condo Units from Condo Unit owners, either through the exercise of the ROFR or from the Condo Unit owner with or without the assistance of a Nova Scotia licensed real estate broker/agent engaged to market and sell the Condo Unit.
31. The Filer, a Filer Agent, a Project Entity or a Project Entity Agent, as applicable, will deliver to an initial purchaser of a Condo Unit, before an agreement of purchase and sale is entered into, an offering memorandum (the "Disclosure Document") in the form of a disclosure statement required under the Condominium Act (together with the condominium documents, site plan and initial condominium budget) which will also include additional information in the body of the disclosure statement relating to the real estate securities aspects of the offering prepared substantially in accordance with the form and content requirements of B.C. Form 45-512F under the Securities Act (British Columbia) R.S.B.C. 1996, c. 418, as amended (Form 45-512F), including, but not limited to:
(a) a description of the Developments and the offering of Condo Units;
(b) a summary of the material features of the Rental Agreement;
(c) a description of the continuous reporting obligations of the Condo Corporation (if any pursuant to the Condominium Act) and the Rental Pool Manager to owners of Condo Units as more particularly described in paragraph 36 below;
(d) a description of the risk factors that make the offering of Condo Units a risk or speculation;
(e) a description of the contractual right of action available to purchasers of Condo Units as more particularly described in paragraph 33 below; and
(f) a certificate signed by the president or chief executive officer and chief financial officer (or equivalent) of either: (i) the Filer; (ii) the Project Entity or if the Project Entity is a project limited partnership, the general partner of the Project Entity; (iii) CS Resort as the general partner of the Rental Pool Manager; or (iv) their successors, as the case may be, in the following form:
"The foregoing contains no untrue statement of a material fact and does not omit to state a material fact that is required to be stated or that is necessary to prevent a statement that is made from being false or misleading in the circumstances in which it was made".
32. An initial purchaser of a Condo Unit will have a statutory right under the Condominium Act to rescind an agreement to purchase a Condo Unit within ten days of receiving the Disclosure Document or a material amendment to the Disclosure Document.
33. Purchasers of Condo Units will be provided with a contractual right of action identical to that as set out in section 138 of the Act. The Disclosure Document will describe the contractual right of action, including any defences available to the Filer or a Project Entity, or the Rental Pool Manager, as the case may be, the limitation periods applicable to the exercise of the contractual right of action, and will indicate that the rights are in addition to any other right or remedy available to the purchaser.
34. Prospective purchasers of Condo Units will not be provided with rental or cash flow guarantees or any other form of financial projection or commitment on the part of the Filer, the Project Entity or the Rental Pool Manager, as the case may be, save and except for (i) the budget that must be delivered to an initial purchaser of a Condo Unit pursuant to the Condominium Act, and (ii) examples of financial calculations solely for the purpose of better explaining to prospective purchasers of Condo Units how the rental revenue is calculated and allocated or revenue pooling proceeds are calculated and allocated, as the case may be, which sample calculations will be included in the Disclosure Document.
35. The economic value of a Condo Unit will be attributable primarily to its real estate component because Condo Units will be advertised and marketed as resort properties and will not be advertised or marketed with reference to the expected economic benefits of the Rental Agreement. Notwithstanding the foregoing, the existence of the Rental Program will be disclosed to prospective purchasers, and the form of Rental Agreement will be provided to prospective purchasers of Condo Units, each for the purpose of disclosing the encumbrances placed upon a Condo and as disclosure regarding the operation of the Rental Program.
36. The Rental Agreement will impose an irrevocable obligation on the Rental Pool Manager to send to each owner of a Condo Unit and to the board of directors for the Development in which the Condo Unit is located:
(a) audited annual financial statements for the Rental Pool in which such owner participates that have been prepared and delivered in accordance with sections 4.1 and 4.2 of National Instrument 51-102 Continuous Disclosure Obligations (NI 51-102) as if the Rental Pool was a reporting issuer for purposes of the Act; and
(b) interim unaudited financial statements for the Rental Pool in which such owner participates that have been prepared and delivered in accordance with sections 4.3 and 4.4 of NI 51-102 as if the Rental Pool was a reporting issuer for purposes of the Act.
37. The Rental Agreement will impose an irrevocable obligation on the Rental Pool Manager to send to each Rental Program Participant and to the board of directors for the Development in which the Rental Program Participant's Condo Unit is located, statements of revenues and expenses for his, her or its Condo Unit for each quarter or such shorter period as may be stated in the Rental Agreement, on or before the 30th day after the date to which they are made up.
38. The by-laws for a Development shall contain provisions to require its board of directors to provide copies of the financial statements described in paragraph 36 upon the request for the same by a prospective purchaser of a Condo Unit, provided that the board of directors has received such financial statements from the Rental Pool Manager.
39. The Rental Agreement will impose an irrevocable obligation on the Rental Pool Manager to deliver to a subsequent prospective purchaser of a Condo Unit (unless such subsequent prospective purchaser is the Filer, a Project Entity or an affiliate of the Filer or Project Entity (each a "Filer Party", and collectively, the "Filer Parties")), upon reasonable notice of an intended sale by the owner of a Condo Unit (collectively, such sales being referred to as a "Condo Resale"), and before an agreement of purchase and sale is entered into:
(a) the most recent audited annual financial statements (which include financial statements for the prior comparative year) and, if applicable, interim unaudited financial statements for the Rental Pool prepared in accordance with paragraph 36 hereof (collectively "Financial Statements"); and
(b) either (i) quarterly statements of revenues and expenses for the Condo for the two-year period preceding the entering into of the agreement of purchase and sale for the Condo Unit but only to the extent that the Condo was subject to the Rental Agreement during such two-year period; or (ii) to the extent that the Condo was subject to the Rental Agreement for less than two-years, the quarterly statements of revenues and expenses for the Condo for such period preceding the entering into of the agreement of purchase and sale for the Condo Unit that the Condo was subject to the Rental Agreement, prepared in accordance with paragraph 36 hereof (the "Quarterly Statements", and collectively with the Financial Statements, the "Financial Information").
40. The Rental Agreement will impose an irrevocable obligation on:
(a) the Rental Pool Manager to deliver the Disclosure Document to a subsequent prospective purchaser in a Condo Resale (other than where such purchaser is a Filer Party) upon receiving reasonable notice of a proposed Condo Resale that is to take place either prior to, or within 12 months of, the issuance of permission to occupy the relevant Condo; and
(b) the Rental Pool Manager to deliver a summary of the Disclosure Document (the "Disclosure Document Summary") to a subsequent prospective purchaser in a Condo Resale (other than where such purchaser is a Filer Party) upon receiving reasonable notice of a proposed Condo Resale that is to take place any time following the expiration of a period of 12 months from the date of issuance of permission to occupy the relevant Condo.
41. A Disclosure Document Summary that is delivered to a prospective purchaser in a Condo Resale (other than where such purchaser is a Filer Party) in which a Condo Unit is subject to a Rental Agreement will include:
(a) items 1, 2(1), 4, 5, 6, 8(1), (2), (3) and (4), 9(b) and 15 of Form 45-512F with respect to the proposed sale, modified as necessary to reflect the operation of the Rental Pool and the form of disclosure, and
(b) items 11(2), (3) and (4) of Form 45-512F with respect to the Rental Pool Manager under the Rental Agreement modified so that the period of disclosure runs from the date of the certificate attached to the Disclosure Document Summary,
and will be certified by the Rental Pool Manager in the form of the certificate required pursuant to item 17 of Form 45-512F.
42. The Rental Agreement will impose an irrevocable obligation on each owner of a Condo Unit to provide:
(a) the Rental Pool Manager with reasonable notice of a proposed Condo Resale; and
(b) a subsequent prospective purchaser in a Condo Resale (other than where such purchaser is a Filer Party) with notice of his, her or its right to obtain from the Rental Pool Manager, Financial Information and the Disclosure Document or Disclosure Document Summary, as the case may be.
43. A Rental Agreement will not require purchasers of Condo Units to give any person any assignment of their right to vote in accordance with the Condominium Act or condominium bylaws, or to waive notice of meetings of the condominium corporation in respect of a Development.
44. Where the seller in a subsequent trade is a Filer Party and the sale is to a purchaser that is not a Filer Party, such purchaser will be provided with (a) a right to rescind the agreement to purchase the Condo Unit within ten days of receiving the Disclosure Document or a material amendment to the Disclosure Document, and (b) a contractual right of action as described in paragraph 33.
Each of the Decision Makers is satisfied that the decision meets the test set out under the Legislation for the Decision Maker to make the decision.
The decision of the Decision Makers under the Legislation is that that the distribution of a Condo Unit by the Filer, the Filer Agents, the Project Entities and the Project Entity Agents is exempt from the Prospectus Requirement and the Registration Requirement, provided that:
(a) each of the Filer and the Project Entities deal fairly, honestly and in good faith with potential purchasers and purchasers;
(b) the Filer Agents and the Project Entity Agents are each licensed under the RET Act and deal with potential purchasers and purchasers according to the requirements of its license under the RET Act and NSREC's By-laws;
(c) the Filer, Filer Agents, Project Entities, and Project Entity Agents will only advertise and market the Condo Units and the Development as resort properties and will not advertise or market the Condo Units or the Development with reference to the expected economic benefits of the Rental Agreement;
(d) every initial purchaser of a Condo Unit receives all of the documents and information referred to in paragraph 31 above, and a copy of this ruling, prior to entering into an agreement of purchase and sale;
(e) every initial purchaser of a Condo Unit receives the ten-day period for rescission described in paragraph 32 above;
(f) every initial purchaser of a Condo Unit is provided with a contractual right of action as described in paragraph 33 above;
(g) any subsequent trade of a Condo Unit, shall be a "distribution" for the purposes of the Legislation, unless:
(i) the seller of the subject Condo Unit is not a developer (other than a Filer Party) or an agent acting on such developer's behalf;
(ii) the seller of the subject Condo Unit provides written notice to the Rental Pool Manager of his, her or its intention to sell his, her or its Condo Unit;
(iii) the prospective purchaser of such Condo Unit (other than where such purchaser is a Filer Party) receives, prior to entering into an agreement of purchase and sale, all of the documents and information referred to in paragraphs 39 and 40, as the case may be;
(iv) the seller, or an agent acting on the seller's behalf, does not advertise, market, promise or otherwise represent any projected economic benefits of the Rental Program to any prospective purchaser; and
(v) if the seller is a Filer Party, the subsequent purchaser is provided with (a) a right to rescind the agreement to purchase the Condo Unit within ten days of receiving the Disclosure Document or a material amendment to the Disclosure Document, and (b) a contractual right of action as described in paragraph 33.
DATED this 14th day of January, 2026.
NOVA SCOTIA SECURITIES COMMISSION
OSC File #: 2025/0734
Coinbase Canada, Inc. and Coinbase, Inc.
Application for time-limited relief from prospectus requirement, suitability requirement, trade reporting requirements and marketplace rules -- suitability relief to allow the Filer to distribute Crypto Contracts and operate a platform that facilitates the buying, selling, depositing, withdrawing, staking and holding of crypto assets -- relief granted subject to certain conditions set out in the decision, including fair access, transparency, market integrity, investment limits, account appropriateness, disclosure and reporting requirements -- relief is time-limited and will expire two years from the date of the decision -- relief granted based on the particular facts and circumstances of the application with the objective of fostering capital raising by innovative businesses in Canada -- decision should not be viewed as precedent for other filers in the jurisdictions of Canada.
Securities Act, R.S.O. 1990, c. S.5, as am., ss. 1(1), 53 & 74.
Multilateral Instrument 11-102 Passport System, s. 4.7.
National Instrument 21-101 Marketplace Operation, s. 15.1.
National Instrument 23-101 Trading Rules, s. 12.1.
National Instrument 23-103 Electronic Trading and Direct Electronic Access to Marketplaces, s. 10.
National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations, s. 13.3.
OSC Rule 91-506 Derivatives: Product Determination, ss. 2 & 4.
OSC Rule 91-507 Trade Repositories and Derivatives Data Reporting, Part 3.
April 1, 2026
As set out in CSA Staff Notice 21-327 Guidance on the Application of Securities Legislation to Entities Facilitating the Trading of Crypto Assets (Staff Notice 21-327) and Joint CSA/Investment Industry Regulatory Organization of Canada (IIROC) Staff Notice 21-329 Guidance for Crypto-Asset Trading Platforms: Compliance with Regulatory Requirements (Staff Notice 21-329), securities legislation applies to crypto asset trading platforms (CTPs) that facilitate or propose to facilitate the trading of instruments or contracts involving anything commonly considered a crypto asset, digital or virtual currency, or digital or virtual token (a Crypto Asset) because the user's contractual right to the Crypto Asset may itself constitute a security and/or a derivative (a Crypto Contract).
To foster innovation and respond to novel circumstances, the Canadian Securities Administrators (CSA) have considered an interim, time-limited registration that would allow CTPs to operate within a regulated environment, with regulatory requirements tailored to the CTP's operations. The overall goal of the regulatory environment is to ensure there is a balance between the need to be flexible and to facilitate innovation in the Canadian capital markets, while upholding the regulatory mandate of promoting investor protection and fair and efficient capital markets.
The Filer is currently registered in the category of restricted dealer in all provinces and territories of Canada. In connection with its registration as a restricted dealer, the Filer previously applied for and received exemptive relief in a decision dated April 3, 2024 (the Original Decision).
Under the terms and conditions of the Original Decision, the Filer has operated, and continues to operate, on an interim basis, a platform (the Platform) that permits clients resident in Canada to enter into Crypto Contracts to purchase, hold, sell, deposit, withdraw, and stake Crypto Assets.
The exemptive relief granted under the Original Decision (the Original Relief) expires on April 3, 2026, and required the Filer, by October 3, 2024, to submit an application to its Principal Regulator and the Autorité des marchés financiers (AMF) to become registered as an investment dealer, and to submit an application to the Canadian Investment Regulatory Organization (CIRO), to become a dealer member.
The Filer submitted an application to the Ontario Securities Commission (OSC) and the Authorité des marches financiers (AMF) to become registered as an investment dealer on October 3, 2024 and submitted an application to CIRO to become a dealer member on October 3, 2024.
The Filer has submitted an application to extend the relief in the Original Decision in order to allow the Filer to complete the CIRO membership process while continuing to operate the Platform past April 3, 2026 on an interim basis as a restricted dealer.
This Decision has been tailored for the specific facts and circumstances of the Filer, and the securities regulatory authority or regulator in the Applicable Jurisdictions (as defined below) will not consider this Decision as constituting a precedent for other filers.
The securities regulatory authority or regulator in the Jurisdiction has received an application from the Filer (the Passport Application) for a decision under the securities legislation of the Jurisdiction (the Legislation) exempting the Filer from:
(a) the prospectus requirement under the Legislation in respect of the Filer entering into Crypto Contracts with clients to purchase, hold, sell, deposit, withdraw and stake Crypto Assets (the Prospectus Relief); and
(b) the requirement in section 13.3 of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations (NI 31-103), before it opens an account, takes investment action for a client, or makes a recommendation or exercises discretion to take investment action, to determine on a reasonable basis that the action is suitable for the client (the Suitability Relief).
The securities regulatory authority or regulator in the Jurisdiction and each of the other jurisdictions referred to in Appendix A (collectively, the Coordinated Review Decision Makers) have received an application from the Filer (collectively with the Passport Application, the Application) for a decision under the securities legislation of those jurisdictions exempting the Filer from the following:
(a) certain reporting requirements under the Local Trade Reporting Rules (as defined in Appendix A) (the Trade Reporting Relief); and
(b) except in British Columbia, New Brunswick, Nova Scotia and Saskatchewan, the entirety of National Instrument 21-101 Marketplace Operation, National Instrument 23-101 Trading Rules, and National Instrument 23-103 Electronic Trading and Direct Access to Marketplaces (the Marketplace Relief) (together with the Prospectus Relief, the Suitability Relief and the Trade Reporting Relief, the Requested Relief).
The Filer also applied to revoke the Original Decision as of the date of this Decision.
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a hybrid application):
(a) the Ontario Securities Commission is the principal regulator for the Application (the Principal Regulator);
(b) in respect of the Prospectus Relief and the Suitability Relief, the Filer has provided notice that, in the jurisdictions where required, subsection 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in each of the other provinces and territories of Canada (the Non-Principal Jurisdictions, and, together with the Jurisdiction, the Applicable Jurisdictions);
(c) the Decision is the decision of the Principal Regulator; and
(d) in respect of the Trade Reporting Relief and the Marketplace Relief, the Decision evidences the decision of each applicable Coordinated Review Decision Maker.
Terms defined in National Instrument 14-101 Definitions, MI 11-102, Canadian securities legislation or the Original Decision have the same meaning if used in this Decision, unless otherwise defined.
This Decision is based on the following facts represented by the Filer:
1. The Filer is a corporation incorporated under the laws of British Columbia with its head office in Toronto, Ontario.
2. The Filer is an affiliate of Coinbase, Inc., which was founded in 2012, and is a wholly-owned subsidiary of Coinbase Global, Inc. Coinbase Global, Inc., through its operating subsidiaries and affiliates (collectively, Coinbase), owns and operates an electronic trading platform for Crypto Assets that includes hosted wallet and ancillary services to over 110 million verified clients globally (the Coinbase Global Platform). In the year ended December 31, 2023, Coinbase facilitated US$468 billion in trades.
3. Coinbase, Inc. is the operator of the Coinbase Global Platform outside of Canada. The Filer is the operator of the Coinbase Global Platform in Canada (the Platform). Any person or company resident in Canada that wishes to use the Coinbase Global Platform must do so through the Platform offered by the Filer.
4. Companies within the Coinbase group, including the Filer, have received licenses and registrations to operate from a number of different financial services regulators globally and are subject to regular oversight by those regulators, including the New York Department of Financial Services, the UK Financial Conduct Authority, the Federal Financial Supervisory Authority in Germany and the Central Bank of Ireland. These licenses cover both Crypto Asset and e-money / money transmission activities. The Filer is registered as a money services business under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (Canada).
5. The Filer and Coinbase, Inc. do not have any securities listed or quoted on an exchange or marketplace in any jurisdiction. Coinbase Global, Inc. is the equivalent of a reporting issuer in the United States and the common shares of Coinbase Global, Inc. are listed on Nasdaq. Coinbase Global, Inc. has audited consolidated financial statements, which are publicly available. The accounts of the Filer are considered a significant subsidiary within the audited consolidated financial statements of Coinbase Global, Inc.
6. The Filer's and Coinbase, Inc.'s personnel include product, engineering and design professionals, as well as qualified compliance, legal and financial professionals. These professionals bring a significant level of experience in crypto and financial services businesses. All personnel undergo a rigorous multi-stage interview process, and all personnel have and any new personnel will have passed a criminal background check.
7. The Filer and Coinbase, Inc. are not in default of securities legislation of any of the Applicable Jurisdictions.
8. The Filer is registered as a dealer in the category of restricted dealer with the Applicable Jurisdictions to operate the Platform.
9. In the Original Decision dated April 3, 2024, the Filer was granted relief from certain prospectus, trade reporting, suitability and marketplace requirements applicable to the Filer in connection with the operation of the Platform, subject to certain terms and conditions.
10. On October 3, 2024, the Filer submitted an application to the OSC and AMF to become registered as an investment dealer and submitted an application to CIRO to become a dealer member. However, the Filer has been advised by CIRO to re-submit its application as a dealer member following the outcome of the discussions described below and therefore the Filer is applying for a further extension of the exemptive relief granted under the Original Decision to allow the Filer to continue to work with CIRO on its dealer member application.
11. The Filer's application raised novel issues regarding market structure regulation for CTPs in Canada, which gave rise to extensive discussions. The Filer has been working collaboratively with the OSC and CIRO on these issues and responded to all requests for information on a prompt and comprehensive basis.
12. It is the Filer's understanding that these market structure issues have been substantially resolved, and the Filer has commenced updating all aspects of its CIRO membership application to reflect the agreed-upon approach toward market supervision.
13. Having regard to the length of time that has elapsed since the Filer's initial submission, a new CIRO Form 1 is also required to be prepared and submitted with the CIRO membership application. The Filer has a calendar year-end and will file its audited annual financial statements for 2025 by March 31, 2026. The Filer has engaged its auditor to complete a Form 1 audit in 2026 for a period ending no more than 90 days before the date of its CIRO application.
14. The Filer will continue to work actively and diligently with CIRO to transition the operation of the Platform to the oversight of CIRO and will provide the Principal Regulator with regular and timely updates relating to the Filer's CIRO membership process.
15. Representations 52 and 53 of the Original Decision are replaced with the following:
52. Simple Trade users can buy or sell, through the Filer, Crypto Assets at a quoted price without having to interact directly with Coinbase's central limit order book (the CB Orderbook). When a client initiates a request to buy or sell a Crypto Asset via Simple Trade, the Filer provides the client with a firm quote, which the client can then reject or accept. Accordingly, all orders on Simple Trade are "fill or kill" orders, meaning that each order is either entirely filled immediately upon acceptance by the client or it is canceled. Upon the client's acceptance of an order, the Filer fills Simple Trade orders on the CB Orderbook in such a way that market risk throughout the execution of the transaction is de minimis.
53. The client order and the corresponding transaction(s) on the CB Orderbook are almost never concluded at the same price; rather, in almost all cases, the Filer will fill a buy order from a client only if it is matched on the CB Orderbook at a price that is the same or lower than the price quoted to the client (and vice versa for sell orders from clients). Consequently, the Filer earns a "spread" (i.e., the difference between the price quoted to the client and the price at which the order is filled on the CB Orderbook), in addition to any fee or other charge for the transaction.
16. This Decision is based on the same representations as were made by the Filer in the Original Decision, which remain true and complete to the extent not modified by the representations in this Decision.
The Principal Regulator is satisfied that the Decision satisfies the test set out in the Legislation for the Principal Regulator to make the Decision and each Coordinated Review Decision Maker is satisfied that the Decision in respect of the Trade Reporting Relief and the Marketplace Relief, as applicable, satisfies the tests set out in the securities legislation of its jurisdiction for the Coordinated Review Decision Maker to make the Decision in respect of the Trade Reporting Relief and the Marketplace Relief, as applicable.
The Decision of the Principal Regulator under the Legislation is that the Original Decision is revoked and the Requested Relief is granted, and the Decision of each Coordinated Review Decision Maker under the securities legislation in its jurisdiction is that the Original Decision is revoked, as applicable, and the Trade Reporting Relief and the Marketplace Relief, as applicable, is granted, provided that and for so long as the Filer complies with the following terms and conditions:
A. The Filer and Coinbase, Inc. comply with all of the terms and conditions of the Original Decision, as applicable, as if the Original Decision had not been revoked, except as amended by this Decision.
B. The Filer will continue to work actively and diligently with the OSC, AMF and CIRO to transition the Filer's registration to investment dealer registration and obtain CIRO membership.
C. Condition XXI of the Original Decision is replaced with the following: The Filer will ensure that the maximum amount of Crypto Assets, excluding Specified Crypto Assets, that a client, except those clients that are residents of Alberta, British Columbia, Manitoba, Québec and Saskatchewan or that are permitted clients or that are Registered CTPs, may enter into Crypto Contracts to buy and sell on the Platform (calculated on a net basis and in an amount not less than $0) in the preceding 12 months does not exceed a net acquisition cost of $30,000.
D. Appendix B of the Original Decision is replaced with Appendix B of this Decision.
E. Condition XXIX of the Original Decision is replaced with the following:
(a) Except for Value-Referenced Crypto Assets and Crypto Contracts based on Value-Referenced Crypto Assets, the Filer will only offer Clients and will only allow Clients the ability to enter into Crypto Contracts based on or to trade, Crypto Assets that are not themselves securities and/or derivatives.
(b) The Filer does not allow Clients to buy or deposit, or to enter into Crypto Contracts to buy or deposit, Value-Referenced Crypto Assets other than Value-Referenced Crypto Assets that meet the terms and conditions in Appendix C of this Decision.
F. Appendix F of the Original Decision is replaced with Appendix C of this Decision.
G. This Decision may be amended by the Principal Regulator upon written notice to the Filer in accordance with applicable securities legislation.
H. This Decision shall expire on the earlier of:
(a) two years from the date of this Decision, or
(b) the date on which the Filer is registered as an investment dealer and becomes a CIRO member.
OSC File #: 2026-86
In this Decision, "Local Trade Reporting Rules" collectively means each of the following:
(a) Part 3, Data Reporting of Ontario Securities Commission Rule 91-507 Trade Repositories and Derivatives Data Reporting (OSC Rule 91-507);
(b) Part 3, Data Reporting of Manitoba Securities Commission Rule 91-507 Trade Repositories and Derivatives Data Reporting (MSC Rule 91-507); and
(c) Part 3, Data Reporting of Multilateral Instrument 96-101 Trade Repositories and Derivatives Data Reporting in Alberta, British Columbia, New Brunswick, Newfoundland and Labrador, Northwest Territories, Nova Scotia, Nunavut, Prince Edward Island, Saskatchewan, and Yukon (MI 96-101).
• Bitcoin
• Ether
• Bitcoin Cash
• Litecoin
• Solana
• A Value-Referenced Crypto Asset that complies with condition E of this Decision
1. The Filer establishes that all of the following conditions are met:
(a) The Value-Referenced Crypto Asset references, on a one-for-one basis, the value of a single fiat currency (the "reference fiat currency");
(b) The reference fiat currency is the Canadian dollar or United States dollar;
(c) The Value-Referenced Crypto Asset entitles a Value-Referenced Crypto Asset holder who maintains an account with the issuer of the Value-Referenced Crypto Asset to a right of redemption, subject only to reasonable publicly disclosed conditions, on demand directly against the issuer of the Value-Referenced Crypto Asset or against the reserve of assets, for the reference fiat currency on a one-to-one basis, less only any fee that is publicly disclosed by the issuer of the Value-Referenced Crypto Asset, and payment of the redemption proceeds within a reasonable period as disclosed by the issuer of the Value-Referenced Crypto Asset;
(d) The issuer of the Value-Referenced Crypto Asset maintains a reserve of assets that is:
(i) in the reference fiat currency and is comprised of any of the following:
1. cash;
2. investments that are evidence of indebtedness with a remaining term to maturity of 90 days or less and that are issued, or fully and unconditionally guaranteed as to principal and interest, by the government of Canada or the government of the United States;
3. securities issued by one or more Money Market Funds licensed, regulated or authorized by a regulatory authority in Canada or the United States of America; or
4. such other assets that the principal regulator of the Filer and the regulator or securities regulatory authority in each Canadian jurisdiction where clients of the Filer reside has consented to in writing;
(ii) all of the assets that comprise the reserve of assets are:
1. measured at fair value in accordance with Canadian GAAP for publicly accountable enterprises or U.S. GAAP at the end of each day,
2. held with a Qualified Custodian,
3. held in an account clearly designated for the benefit of the Value-Referenced Crypto Asset holders or in trust for the Value-Referenced Crypto Asset holders,
4. held separate and apart from the assets of the issuer of the Value-Referenced Crypto Asset and its Affiliates and from the reserve of assets of any other Crypto Asset, so that, to the best of the knowledge and belief of the Filer after taking steps that a reasonable person would consider appropriate, including consultation with experts such as legal counsel, no creditors of the issuer other than the Value-Referenced Crypto Asset holders in their capacity as Value-Referenced Crypto Asset holders, will have recourse to the reserve of assets, in particular in the event of insolvency, and
5. not encumbered or pledged as collateral at any time; and
(iii) the fair value of the reserve of assets is at least equal to the aggregate nominal value of all outstanding units of the Value-Referenced Crypto Asset at least once each day.
2. The issuer of the Value-Referenced Crypto Asset makes all of the following publicly available:
(a) details of each type, class or series of the Value-Referenced Crypto Asset, including the date the Value-Referenced Crypto Asset was launched and key features and risks of the Value-Referenced Crypto Asset;
(b) the quantity of all outstanding units of the Value-Referenced Crypto Asset and their aggregate nominal value at least once each business day;
(c) the names and experience of the persons or companies involved in the issuance and management of the Value-Referenced Crypto Asset, including the issuer of the Value-Referenced Crypto Asset, any manager of the reserve of assets, including any individuals that make investment decisions in respect of the reserve of assets, and any custodian of the reserve of assets;
(d) the quantity of units of the Value-Referenced Crypto Asset held by the issuer of the Value-Referenced Crypto Asset or any of the persons or companies referred to in paragraph (c) and their nominal value at least once each business day;
(e) details of how a Value-Referenced Crypto Asset holder can redeem the Value-Referenced Crypto Asset, including any possible restrictions on redemptions such as the requirement for a Value-Referenced Crypto Asset holder to have an account with the issuer of the Value-Referenced Crypto Asset and any criteria to qualify to have an account;
(f) details of the rights of a Value-Referenced Crypto Asset holder against the issuer of the Value-Referenced Crypto Asset and the reserve of assets, including in the event of insolvency or winding up;
(g) all fees charged by the issuer of the Value-Referenced Crypto Asset for distributing, trading or redeeming the Value-Referenced Crypto Asset;
(h) whether Value-Referenced Crypto Asset holders are entitled to any revenues generated by the reserve of assets;
(i) details of any instances of any of the following:
(i) the issuer of the Value-Referenced Crypto Asset has suspended or halted redemptions for all Value-Referenced Crypto Asset holders, and
(ii) the issuer of the Value-Referenced Crypto Asset has not been able to satisfy redemption rights at the price or in the time specified in its public policies;
(j) within 45 days of the end of each month, an assurance report from a public accountant that is authorized to sign such a report under the laws of a jurisdiction of Canada or the United States of America, and that meets the professional standards of that jurisdiction, that complies with all of the following:
(i) provides reasonable assurance in respect of the assertion by management of the issuer of the Value-Referenced Crypto Asset that the issuer of the Value-Referenced Crypto Asset has met the requirements in paragraphs (1)(d)-(f) as at the last business day of the preceding month and at least one randomly selected day during the preceding month,
(ii) the randomly selected day referred to in subparagraph (i) is selected by the public accountant and disclosed in the assurance report,
(iii) for each day referred to in subparagraph (i), management's assertion includes all of the following:
1. details of the composition of the reserve of assets,
2. the fair value of the reserve of assets in subparagraph (1)(e)(i), and
3. the quantity of all outstanding units of the Value-Referenced Crypto Asset in paragraph (b), and
(iv) the assurance report is prepared in accordance with the Handbook, International Standards on Assurance Engagements or attestation standards established by the American Institute of Certified Public Accountants; and
(k) starting with the first financial year ending after December 1, 2023, within 120 days of the issuer of the Value-Referenced Crypto Asset's financial year end, annual financial statements of the issuer of the Value-Referenced Crypto Asset that comply with all of the following:
(i) the annual financial statements include all of the following:
1. a statement of comprehensive income, a statement of changes in equity and a statement of cash flows, each prepared for the most recently completed financial year and the financial year immediately preceding the most recently completed financial year, if any,
2. a statement of financial position, signed by at least one director of the issuer of the Value-Referenced Crypto Asset, as at the end of the most recently completed financial year and the financial year immediately preceding the most recently completed financial year, if any, and
3. notes to the financial statements;
(ii) the statements are prepared in accordance with one of the following accounting principles:
1. Canadian GAAP applicable to publicly accountable enterprises, and
2. U.S. GAAP;
(iii) the statements are audited in accordance with one of the following auditing standards:
1. Canadian GAAS,
2. International Standards on Auditing,
3. U.S. PCAOB GAAS;
(iv) the statements are accompanied by an auditor's report that:
1. if (iii)(1) or (2) applies, expresses an unmodified opinion,
2. if (iii)(3) applies, expresses an unqualified opinion,
3. identifies the auditing standards used to conduct the audit, and
4. is prepared and signed by a public accountant that is authorized to sign such a report under the laws of a jurisdiction of Canada or the United States of America.
3. The Crypto Asset Statement includes all of the following:
(a) a prominent statement that no securities regulatory authority or regulator in Canada has evaluated or endorsed the Crypto Contracts or any of the Crypto Assets made available through the platform;
(b) a prominent statement that the Value-Referenced Crypto Asset is not the same as and is riskier than a deposit in a bank or holding cash with the Filer;
(c) a prominent statement that although Value-Referenced Crypto Assets may be commonly referred to as "stablecoins", there is no guarantee that the Value-Referenced Crypto Asset will maintain a stable value when traded on secondary markets or that the reserve of assets will be adequate to satisfy all redemptions;
(d) a prominent statement that, due to uncertainties in the application of bankruptcy and insolvency law, in the event of the insolvency of [Value-Referenced Crypto Asset issuer], there is a possibility that creditors of [Value-Referenced Crypto Asset issuer] would have rights to the reserve assets that could outrank a Value-Referenced Crypto Asset holder's rights, or otherwise interfere with a Value-Referenced Crypto Asset holder's ability to access the reserve of assets in the event of insolvency;
(e) a description of the Value-Referenced Crypto Asset and its issuer;
(f) a description of the due diligence performed by the Filer with respect to the Value-Referenced Crypto Asset;
(g) a brief description of the information in section (2) and links to where the information in that section is publicly available;
(h) a link to where on its website the issuer of the Value-Referenced Crypto Asset will disclose any event that has or is likely to have a significant effect on the value of the Value-Referenced Crypto Asset or on the reserve of assets;
(i) a description of the circumstances where the secondary market trading value of the Value-Referenced Crypto Asset may deviate from par with the reference fiat currency and details of any instances where the secondary market trading value of the Value-Referenced Crypto Asset has materially deviated from par with the reference fiat currency during the last 12 months on the Filer's platform;
(j) a brief description of any risks to the client resulting from the trading of a Value-Referenced Crypto Asset or a Crypto Contract in respect of a Value-Referenced Crypto Asset that may not have been distributed in compliance with securities laws;
(k) any other risks specific to the Value-Referenced Crypto Asset, including the risks arising from the fact that the Filer may not, and a client does not, have a direct redemption right with the issuer of the Value-Referenced Crypto Asset;
(l) a direction to the client to review the Risk Statement for additional discussion of general risks associated with the Crypto Contracts and Crypto Assets made available through the platform;
(m) a statement that the statutory rights in section 130.1 of the Act and, if applicable, similar statutory rights under securities legislation of other Applicable Jurisdictions, do not apply in respect of the Crypto Asset Statement to the extent a Crypto Contract is distributed under the Prospectus Relief in the Decision; and
(n) the date on which the information was last updated.
4. If the Filer uses the term "stablecoin" or "stablecoins" in any information, communication, advertising or social media related to the Platform and targeted at or accessible by Canadian investors, the Filer will also include the following statement (or a link to the following statement when impractical to include):
"Although the term "stablecoin" is commonly used, there is no guarantee that the asset will maintain a stable value in relation to the value of the reference asset when traded on secondary markets or that the reserve of assets, if there is one, will be adequate to satisfy all redemptions."
5. The issuer of the Value-Referenced Crypto Asset has filed an undertaking in substantially the same form as set out in Appendix B of CSA Staff Notice 21-333 Crypto Asset Trading Platforms: Terms and Conditions for Trading Value-Referenced Crypto Assets with Clients (CSA SN 21-333) and the undertaking is posted on the CSA website.
6. To the extent the undertaking referred to in section 5 of this Appendix includes language that differs from sections 1 or 2 of this Appendix, the Filer complies with sections 1 and 2 of this Appendix as if they included the modified language from the undertaking.
7. The KYP Policy of the Filer requires the Filer to assess whether the Value-Referenced Crypto Asset or the issuer of the Value-Referenced Crypto Asset satisfies the criteria in sections 1, 2, 5 and 6 of this Appendix on an ongoing basis.
8. The Filer has policies and procedures to facilitate halting or suspending deposits or purchases of the Value-Referenced Crypto Asset, or Crypto Contracts in respect of the Value-Referenced Crypto Asset, as quickly as is commercially reasonable, if the Value-Referenced Crypto Asset no longer satisfies the criteria in sections 1, 2, 5 and 6 of this Appendix.
9. In this Appendix, terms have the meanings set out in Appendix D of CSA SN 21-333.
Ninepoint Gold Bullion Fund et al.
National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Revocation and replacement of previous decision granting relief from custodian requirements of paragraph 6.1(3)(b) and section 6.2 of NI 81-102 to permit the Royal Canadian Mint (the Mint) to act as sub-custodian and International Depository Services of Canada (IDSC) to act as sub-custodian to the Mint in respect of bullion held in Canada by investment funds for whom CIBC Mellon acts as custodian -- IDSC being acquired by Loomis International (CA) who is replacing IDSC as sub-custodian to the Mint -- New decision grants relief from paragraph 6.1(3)(b) and section 6.2 of NI 81-102 to permit the Mint to act as sub-custodian and Loomis International (CA) to act as sub-custodian to the Mint in respect of bullion held in Canada by investment funds for whom CIBC Mellon acts as custodian -- Relief subject to conditions.
Securities Act, R.S.O. 1990, c. S.5, as am., s. 144.
National Instrument 81-102 Investment Funds, ss. 6.1(3)(b) and 6.2 and 19.1.
March 11, 2026
The principal regulator in the Jurisdiction has received an application from the Filers for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) revoking and replacing a previous decision granted to the Filers on April 30, 2019 (the Previous Decision) and granting to the Filers an exemption pursuant to section 19.1 of National Instrument 81-102 Investment Funds (NI 81-102) from:
(a) clause 6.1(3)(b) of NI 81-102, to permit the Mint and the Sub-Custodian to the Mint, respectively, which are persons or companies that are not described in sections 6.2 or 6.3 of NI 81-102, to be appointed as sub-custodians of the Funds to hold the Funds' bullion; and
(b) section 6.2 of NI 81-102 to permit the Mint and the Sub-Custodian to the Mint, as applicable, to be appointed as sub-custodians of the Funds to hold the Funds' bullion in Canada.
(collectively, the Requested Relief).
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):
(a) the Ontario Securities Commission is the principal regulator for this application, and
(b) the Filers have provided notice that section 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in each other province and territory in Canada (together with Ontario, the Jurisdictions).
Terms defined in NI 81-102, National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.
"bullion" means physical silver, gold, platinum or palladium bullion.
"Custodian" means CIBC Mellon or any entity that is an affiliate and acts as successor custodian and that meets the requirements in NI 81-102 for a custodian.
"Funds" means the Representative Fund and each of the other public investment funds now, or in the future, that has appointed, or will appoint, the Custodian to act as custodian under NI 81-102 that holds, or intends to hold, bullion in its investment portfolio and that is, or will be, managed by a Manager.
"Loomis International (CA)" means Loomis International (CA) Inc.
"Manager" means the Representative Manager and each of the investment fund managers of the Funds.
"Mint" means The Royal Canadian Mint.
"Mint Business Day" means any day other than a Saturday, a Sunday or a holiday observed by the Mint or the Sub-Custodian to the Mint.
"Representative Fund" means Ninepoint Gold Bullion Fund.
"Representative Manager" means Ninepoint Partners LP.
"Sub-Custodian to the Mint" means each person or entity listed in Schedule "A", including any of its affiliates, successors and assigns, that operates a vault in Canada and that is, or will be, appointed as a sub-custodian to the Mint in respect of which the representations relating to a Sub-Custodian to the Mint set out below are applicable.
This decision is based on the following facts represented by the Filers, as indicated:
The Managers
1. The Representative Manager is a limited partnership formed and organized under the laws of the Province of Ontario. The head office of the Representative Manager is located in Toronto, Ontario. The general partner of the Representative Manager is Ninepoint Partners GP Inc. (the General Partner), which is a corporation incorporated under the laws of the Province of Ontario. The General Partner is a wholly-owned, direct subsidiary of Ninepoint Financial Group Inc. Ninepoint Financial Group Inc. is a corporation incorporated under the laws of the Province of Ontario. Ninepoint Financial Group Inc. is the sole limited partner of the Representative Manager and the sole shareholder of the General Partner.
2. The Representative Manager is registered under the securities legislation: (i) in British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, New Brunswick, Nova Scotia, and Newfoundland and Labrador as an adviser in the category of portfolio manager; (ii) in Ontario, Newfoundland and Labrador and Quebec as an investment fund manager; (iii) in British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, New Brunswick, Nova Scotia, Quebec and Newfoundland and Labrador as a dealer in the category of exempt market dealer; and (iv) in Ontario as a commodity trading manager.
3. The Representative Manager is the manager and portfolio adviser of the Representative Fund.
4. Each of the Managers has been, or will be, formed and organized under the laws of Canada or a Jurisdiction. Each of the Managers is, or will be, registered under the securities legislation of one or more of the Jurisdictions in such registration categories as are necessary to carry on its business. Each of the Managers is, or will be, the investment fund manager of one or more of the applicable Funds.
The Funds
5. The Representative Fund is an open-ended mutual fund trust established under the laws of Ontario. The units of the Representative Fund are qualified for distribution pursuant to a simplified prospectus and Fund Facts dated May 16, 2025 that have been prepared and filed in accordance with the securities legislation of each applicable Jurisdiction.
6. The investment objective of the Representative Fund is to seek to provide a secure, convenient alternative for investors seeking to hold gold. The Representative Fund invests primarily in unencumbered, fully allocated gold bullion and permitted gold certificates, the underlying interest of which is gold. The Representative Fund may also invest a portion of its assets in cash, money market instruments and/or treasury bills.
7. The Representative Fund has obtained exemptive relief from Canadian securities regulatory authorities to invest up to 100% of its net asset value, taken at the market value at the time of investment, in gold and/or permitted gold certificates. The Representative Fund's investment in gold is made in accordance with the conditions described in the exemptive relief and as described in the simplified prospectus of the Representative Fund.
8. Each of the Funds is, or will be, an investment fund established under the laws of Canada or a Jurisdiction. The securities of each of the Funds are, or will be, qualified pursuant to a prospectus or a simplified prospectus, as applicable, that have been prepared and filed with the securities legislation of one or more Jurisdictions such that it will be a reporting issuer under the securities legislation in one or more of the Jurisdictions.
9. The investment objective and/or strategies of each of the Funds specifies, or will specify, that the Fund may invest in bullion. The investment by each of the Funds in bullion is, or will be, made in accordance with the securities legislation of each applicable Jurisdiction or in accordance with an exemption granted by Canadian securities regulatory authorities. Each of the Fund's investments in bullion are, or will be, as described in the prospectus or simplified prospectus of the Fund.
CIBC Mellon
10. CIBC Mellon is a Canadian trust company existing under the Trust and Loans Companies Act (Canada) and is regulated and supervised by the Office of the Superintendent of Financial Institutions. CIBC Mellon provides custodial services to a number of public investment funds in Canada.
11. The head office of CIBC Mellon is located in Toronto, Ontario.
12. Each of CIBC Mellon, the Representative Manager and the Representative Fund is not in default of securities legislation in any of the Jurisdictions.
Appointment of the Custodian
13. The Representative Manager has appointed the Custodian to act as the custodian of the portfolio assets for the Representative Fund. Each of the Managers has appointed, or will appoint, the Custodian to act as the custodian of the portfolio assets for the applicable Funds. The Custodian acts as the custodian of the portfolio assets for the Representative Fund pursuant to the terms of a custodial services agreement dated April 16, 2018 (as amended and supplemented from time to time) (the Custodial Services Agreement), and the Custodian acts, or will act, as the custodian of the portfolio assets for the Funds pursuant to agreements (such agreements include the Custodial Services Agreement, other trust agreements or custodian agreements (collectively, the Fund Custodian Agreements)), that comply with all of the requirements in Part 6 of NI 81-102, other than the matters covered in the Requested Relief.
14. CIBC Mellon is unable to store a Fund's bullion as it does not currently own a vault facility which could accommodate a Fund's bullion. There are a limited number of custodians that meet the requirements in NI 81-102 and which have the vault space, facilities, operational infrastructure and expertise to hold bullion on behalf of clients.
The Previous Decision
15. To address the storage capacity constraints described in paragraph 14, the Previous Decision granted the Filers relief from paragraph 6.1(3)(b) and section 6.2 of NI 81-102 to permit the appointment of the Mint and International Depository Services of Canada (IDSC) as sub-custodians of the Funds to hold the Funds' bullion in Canada.
Appointment of the Mint
16. As a result, CIBC Mellon has appointed the Mint to be a sub-custodian to CIBC Mellon and to hold each Fund's bullion pursuant to a precious metals storage and custody agreement relating to bullion entered into between CIBC Mellon and the Mint (as amended and supplemented from time to time) (the Storage and Custody Agreement). Each Manager, on behalf of each Fund, has provided, or will provide, written consent to such appointment. The Storage and Custody Agreement complies with the requirements of Part 6 of NI 81-102, other than the matters covered in the Requested Relief. The head office of the Mint is located in Ottawa, Ontario.
17. In order to meet the bullion custody supply needs of its public investment fund clients in Canada and in considering the options available to the Funds for custody of their bullion, the appointment by the Custodian of the Mint as sub-custodian to the Custodian in respect of the bullion owned by the Funds is the most efficient and cost-effective means of providing storage for the Funds' bullion and represents the least operational and custodial risk for the Funds in terms of transporting, storing and managing bullion. The Mint is the appropriate choice to provide bullion custodial services to each Fund because the Mint is experienced in providing bullion storage and custodial services, and is familiar with the requirements relating to the physical handling and storage of bullion.
18. The Mint is established pursuant to the Royal Canadian Mint Act (Canada) (the "Mint Act") and is a Canadian Crown corporation. Pursuant to section 5 of the Mint Act the Mint is an agent of His Majesty the King and, as such, its obligations generally constitute unconditional obligations of the Government of Canada. The Mint is responsible for the minting and distribution of Canada's circulation coins. As part of its operations, the Mint maintains secure storage facilities located in Canada that it owns and operates, and provides storage space to third parties.
19. The Mint had shareholders' equity of (i) C$ 168,341,000 as at December 31, 2024, the date of its most recent audited annual financial statements that have been made public, and (ii) C$ 188,289,000 as at September 27, 2025 the date of its most recent interim unaudited financial statements that have been made public, each significantly in excess of the requirement in section 6.2 of NI 81-102.
20. The Mint is not in default of securities legislation in any of the Jurisdictions.
Appointment of the Sub-Custodian to the Mint
21. Due to physical storage capacity constraints and having regard to the amount of bullion which the Funds may acquire, there may not be sufficient space in the vault facilities of the Mint to store all of the Funds' physical bullion. As a result, the Mint may be required to use the services of sub-custodians to store and hold all or a portion of each Fund's physical bullion.
22. The number of entities in Canada which are eligible to act as sub-custodians for the physical storage of bullion is limited. Of these eligible entities, some already have exclusive relationships with other investment funds for storage purposes whereas others simply may not have the excess capacity that the Funds may need to store physical bullion. These capacity constraints have been intensified due to the increased demand for physical commodities and the corresponding need to arrange for safekeeping.
23. In accordance with the terms of the Previous Decision, the Mint appointed IDSC as Sub-Custodian to the Mint. The custody arrangements with respect to the holding of the Funds' physical bullion by IDSC as the Sub-Custodian to the Mint were governed by the terms of an agreement between the Mint and IDSC (the Mint -- IDSC Agreement) which complied with the requirements of Part 6 of NI 81-102, other than the matters covered in the Previous Decision.
24. CIBC Mellon and the Mint have received notice of a transaction with respect to the acquisition (the Acquisition) by Loomis International (CA) of the secure storage and custody business of IDSC. As a result of the Acquisition, Loomis International (CA) will replace IDSC as Sub-Custodian to the Mint. The Mint -- IDSC Agreement will be assigned, unamended, to Loomis International (CA)), which is now a Sub-Custodian to the Mint.
25. The custody arrangements with respect to the holding of the Funds' physical bullion by the Sub-Custodian to the Mint will be governed by the terms of the agreement between the Mint and the Sub-Custodian to the Mint, which includes the assigned Mint -- IDSC Agreement (the Mint Sub-Custodian Agreement), the terms of which comply or will comply with the requirements of Part 6 of NI 81-102, other than the matters covered in the Requested Relief.
26. The Mint and the Sub-Custodian to the Mint are not entities that are currently approved to act as a sub-custodian for portfolio assets held in Canada, as neither the Mint nor the Sub-Custodian to the Mint is, among other things, a bank listed in Schedule I, II or III of theBank Act (Canada) or a trust company incorporated under the laws of Canada.
27. The Sub-Custodian to the Mint has experience in the precious metals storage business. The Sub-Custodian to the Mint is a leading provider of secure logistics for valuables, including diamonds, jewellery, precious metals, securities, currency and secure data, serving banks, retailers, governments, mines, refiners and metal traders. Specifically, Loomis International (CA) is or will be a Sub-Custodian to the Mint and operates vaults in Toronto, Canada. Loomis International (CA) is a custodian and depository of precious metals globally. Loomis International (UK) Limited is a member of the London Bullion Market Association (LBMA) and London Platinum and Palladium Market (LPPM), and Loomis International (US) LLC acts as a Weighmaster and Depository for COMEX/CME. Membership in these organizations is limited to entities operating in the relevant countries. However, all Loomis International entities, including Loomis International (CA), comply with and adhere to the rules and standards of the LBMA, LPPM, COMEX, and CME, as applicable.
28. The Sub-Custodian to the Mint has either: (i) not less than the amount of shareholder's equity required under NI 81-102 (the Shareholder Equity Threshold) for entities qualified to act as a sub-custodian for portfolio assets held in Canada or (ii) an affiliate that does meet the Shareholder Equity Threshold which has, or will before the Sub-Custodian to the Mint acts as the Sub-Custodian to the Mint under this order, guaranteed all of the custodial obligations of the Sub-Custodian to the Mint (a Guaranteed Sub-Custodian). Schedule "A" identifies which of the above requirements the Sub-Custodian to the Mint currently meets.
29. The Storage and Custody Agreement provides that the Mint will monitor the Sub-Custodian to the Mint on a regular basis (at least annually) to ensure that the Sub-Custodian to the Mint either meets the Shareholder Equity Threshold or is a Guaranteed Sub-Custodian.
30. The Representative Manager, each Manager, the Custodian and the Mint believe that the Sub-Custodian to the Mint has the resources and experience required and is an appropriate sub-custodian for the Funds' physical bullion held in Canada, because the Sub-Custodian to the Mint is experienced in providing bullion storage and custodial services, and is familiar with the requirements relating to the physical handling and storage of bullion.
Custodial Arrangements
31. All physical bullion owned by each Fund will be stored in the vault facilities of either the Mint located in Canada or the Sub-Custodian to the Mint located in Canada on a fully allocated and segregated basis. The Custodian, the Mint and the Sub-Custodian to the Mint shall at all times record and identify in the books and records of the Custodian, the Mint and the Sub-Custodian to the Mint that such bullion constitutes the property of the Funds, which in the case of the Custodian, the Mint and the Sub-Custodian to the Mint will be done through the use of a unique account identifier on a per Fund basis.
32. Under the Storage and Custody Agreement and the Mint Sub-Custodian Agreement, the custodial arrangements will be structured in a descending order such that monitoring, instructions, directions, information and other communications will flow from the Custodian, to the Mint and then to the Sub-Custodian to the Mint and vice versa in the case of reporting, instructions, directions, information and other communications ascending up through the custodial structure.
33. If a Fund's bullion is to be stored at the Mint's or the Sub-Custodian to the Mint's facility, under the Storage and Custody Agreement, the Custodian will give written notice to the Mint of its intention to have bullion delivered to and stored at the Mint's or the Sub-Custodian to the Mint's facility, as the case may be. Then a written notice to the same effect will be given by the Mint to the Sub-Custodian to the Mint, if applicable. The notice will specify the amount, weight, type, assay characteristics, bar numbers and bar brands of the precious metal being delivered. The Mint reserves the right to refuse delivery in the event of storage capacity limitations at either its own vault or at the vault facilities of the Sub-Custodian to the Mint. Upon receiving the bullion, the Mint or the Sub-Custodian to the Mint, as applicable, will verify the characteristics of the bullion against the information on the notice. After verification, the Mint will issue a "receipt of deposit" that confirms the count, weight, type, assay characteristics (as identified on the respective bars, and, with respect to other forms of precious metal, on the respective packaging), bar numbers and bar brands of the bullion received (each, a Receipt of Deposit). In the event of a discrepancy arising during the verification process, the Mint will promptly notify the Custodian and will also provide prompt notice to the Manager.
34. The Mint or the Sub-Custodian to the Mint will be required by the Storage and Custody Agreement or the Mint Sub-Custodian Agreement, as applicable, to keep each Fund's fully allocated bullion identifiable as the Fund's property under specifically identified account numbers as directed by the Custodian and will keep it physically segregated at all times from any other property belonging to the Mint or any of its customers. The Mint will provide a monthly inventory statement to the Custodian, and the Custodian and the Manager will reconcile the inventory statement with its records of the Fund's bullion holdings.
35. The Mint is not authorized to deliver stored bullion out of safekeeping by the Mint or to authorize the delivery of stored bullion out of safekeeping by the Sub-Custodian to the Mint, without first receiving written instruction from the Custodian or obtaining the written approval of the Custodian to such delivery based on forms specified by the Mint or the Sub-Custodian to the Mint indicating the purpose of the delivery and giving direction with respect to the specific amount. The Sub-Custodian to the Mint is not authorized to deliver stored bullion out of safekeeping by the Sub-Custodian to the Mint without first receiving a written instruction from the Mint or obtaining the written approval of the Mint to such delivery based on forms specified by the Mint or the Sub-Custodian to the Mint indicating the purpose of the delivery and giving direction with respect to the specific amount. In each case, such instructions and approvals are referred to as a Delivery Direction.
36. The Custodian will not issue a Delivery Direction to the Mint unless it is directed by the Manager and the Fund, in the form specified in the agreement between the Fund and the Custodian.
37. Under the Storage and Custody Agreement, the Mint has the right to reject bullion delivered to it if the bullion contains a hazardous substance or if such bullion is or becomes unsuitable or undesirable for metallurgical, environmental or other reasons.
38. All bullion bars purchased by the Funds will be certified by the relevant vendor as bullion conforming to the good delivery standards of the LBMA, the LPPM or another internationally recognized bullion trading body.
39. The Representative Manager, each Manager and the Custodian believe that the Fund Custodian Agreement is consistent with industry practice. The Representative Manager, each Manager, the Custodian and the Mint believe that the Storage and Custody Agreement, the Mint Sub-Custodian Agreement and the custodial arrangements with the Custodian, the Mint and the Sub-Custodian to the Mint in connection with the Funds' bullion are consistent with industry practice.
Supervision of the Custodian, the Mint and the Sub-Custodian to the Mint
40. The Manager is responsible for oversight of the work performed by the Custodian relating to the custody of portfolio assets of the Fund. In this regard, each Manager will oversee the Custodian, including, through the Custodian, any custodial functions that are performed by any sub-custodians appointed by the Custodian or any sub-custodians, and the selection and appointment of any sub-custodian by the Custodian, and will conduct ongoing reviews of the quality of the Custodian's services. Each Manager will have the same access to the records of the Custodian as it would if the Manager itself performed the activities and maintained the records.
41. The Custodian may appoint sub-custodians to hold the portfolio assets of the Funds from time to time. The Custodian is responsible for oversight of the sub-custodians in accordance with its standard of care, relating to the custody of portfolio assets of the Fund. The Custodian will have the same access to the records of the sub-custodian as it would if the Custodian itself performed the activities and maintained the records.
42. The Custodian operates a Continuous Risk Assessment Model, which evaluates its sub-custodians by reviewing legal, financial, agent bank, market, operational and other areas of risk to ensure both the safety of assets and the efficient processing of same is maintained at all times. The model is evaluated on an ongoing basis by internal and external audit teams and applicable regulatory bodies.
43. The relationship between the Custodian and the Mint will be primarily one whereby the Custodian is (a) responsible for oversight of the work performed by the Mint and (b) sub-contracts the vault facilities of the Mint for the purposes of storing a Fund's bullion. The Mint will be appointed the sub-custodian of the applicable Fund in Canada, pursuant to a written agreement between the Custodian and the Mint that complies with the requirements of Part 6 of NI 81-102, other than the matters covered in the Requested Relief. The Custodian will be responsible for ensuring that, with regard to the Mint, adequate safeguards are in place, including, in the experience and judgment of the Custodian, satisfactory insurance arrangements. Under the relevant Fund Custodian Agreement, the Custodian is required to use reasonable care in the selection and monitoring of sub-custodians. Pursuant to this obligation, the Custodian has engaged in, and on a periodic basis (at least every two years) thereafter, will engage in a review of the facilities, procedures, records, creditworthiness and level of insurance coverage of the Mint to satisfy itself as to the continuing appropriateness of using the Mint as sub-custodian of the Funds' physical bullion. The Funds will rely upon the Custodian to satisfy itself as to the appropriateness of the use or continued use of the Mint as a sub-custodian of each Fund's bullion.
44. The relationship between the Mint and the Sub-Custodian to the Mint will be primarily one whereby the Mint is (a) responsible for oversight of the work performed by the Sub-Custodian to the Mint and (b) sub-contracts the vault facilities of the Sub-Custodian to the Mint for the purposes of storing a Fund's bullion. The Sub-Custodian to the Mint will be appointed the sub-custodian of the applicable Fund in Canada pursuant to a written agreement between the Mint and the Sub-Custodian to the Mint that complies with the requirements of Part 6 of NI 81-102, other than the matters covered in the Requested Relief. The Mint must have obtained the consent of the Custodian prior to a Sub-Custodian to the Mint being appointed. The Mint will remain responsible for ensuring that, with regard to the Sub-Custodian to the Mint, adequate safeguards are in place, including, in the experience and judgment of the Mint, satisfactory insurance arrangements. Under the Storage and Custody Agreement, the Mint is required to use reasonable care in the selection and monitoring of Sub-Custodian to the Mint. Pursuant to this obligation, the Mint has engaged in, and on a periodic basis (at least every two years) thereafter, will engage in a review of the facilities, procedures, records, creditworthiness and level of insurance coverage of the Sub-Custodian to the Mint to satisfy itself as to the continuing appropriateness of using the Sub-Custodian to the Mint as sub-custodian of the Funds' physical bullion. The Funds and the Custodian will rely upon the Mint, which is in the business of precious metals storage, to satisfy itself as to the appropriateness of the use or continued use of the Sub-Custodian to the Mint as a sub-custodian of each Fund's bullion.
45. Under the Storage and Custody Agreement, the Mint is required to use reasonable care in the selection and monitoring of the Sub-Custodian to the Mint. Pursuant to this obligation, the Custodian and the Mint will monitor the most recent audited financial statements of the Sub-Custodian to the Mint or their respective affiliates or subsidiaries, in order to ensure that the shareholders' equity of such entities is sufficient with what the Custodian and the Mint believe to be appropriate for an entity acting as custodian of physical bullion and, in any event at sufficient levels in order to meet the Custodian and the Mint's own internal requirements as though the Custodian and the Mint were seeking to deposit their own physical bullion with such sub-custodians. The Custodian and the Mint will also consider the insurance coverage obtained by the Sub-Custodian to the Mint in connection with the Sub-Custodian to the Mint's bullion custody activities.
46. The Mint is required under the Storage and Custody Agreement to ensure that the terms of the agreement between itself and the Sub-Custodian to the Mint are consistent with the terms of the Storage and Custody Agreement.
Audit Rights
47. In relation to each Fund, the sub-custodial activities of the Mint and the Sub-Custodian to the Mint will be limited to holding the Fund's bullion.
48. Each of the Custodian and the Manager will exercise their audit rights under the Storage and Custody Agreement on an on-going basis in order to satisfy itself that the Mint is in substantial compliance with the terms of the Storage and Custody Agreement, and, in particular, that the bullion of the Funds held by the Mint (i) is held by the Mint at vault facilities that are accepted as warehouses for the LBMA or are, in the opinion of the Mint, of a similar standard, (ii) is physically segregated and specifically identified as specified in paragraphs 31 and 34, (iii) has not sustained loss, damage or destruction, and (iv) remains the subject of a subsisting policy of insurance which covers the Mint's liability for the loss, damage or destruction of such bullion in amounts which the Mint deems appropriate in its experience and judgement acting reasonably.
49. Each of the Custodian and the Mint will exercise their audit rights under the Storage and Custody Agreement and the Mint Sub-Custodian Agreement, respectively, on a periodic basis (at least every two years, or more frequently should any material fact come to the Mint or the Custodian's attention that leads it to reasonably conclude that further evaluation should be undertaken) in order to satisfy itself that the Sub-Custodian to the Mint is in substantial compliance with the terms of the Mint Sub-Custodian Agreement, and, in particular, that the bullion of the Funds that the Mint has transferred to the Sub-Custodian to the Mint on behalf of the Fund (i) is held by the Sub-Custodian to the Mint at vault facilities that are accepted as warehouses for the LBMA, or are, in the opinion of the Mint and the Custodian, of a similar standard, (ii) is physically segregated and specifically identified as specified in paragraphs 31 and 34, (iii) has not sustained loss, damage or destruction, and (iv) remains the subject of a subsisting policy of insurance which covers the Sub-Custodian to the Mint's liability for the loss, damage or destruction of such bullion in amounts which the Mint deems appropriate in its experience and judgment acting reasonably. For the sake of clarity, it is understood that the Custodian's audit rights with respect to the Sub-Custodian to the Mint, as specified in the Storage and Custody Agreement, have been arranged by the Mint under the Mint Sub-Custodian Agreement; the Custodian does not have a direct contractual relationship with the Sub-Custodian to the Mint providing for such audit rights.
50. Each Fund will have the right to physically count and have the Fund's auditor subject the Fund's bullion to audit procedures at the vault facilities at the Mint and the Sub-Custodian to the Mint upon request on any Mint Business Day during the Mint's or the Sub-Custodian to the Mint's regular business hours, provided that the Fund has given the Mint, who shall make arrangements with the Sub-Custodian to the Mint, where required, a minimum of five business days' prior written notice and that such physical count or audit procedures do not interrupt the routine operation of the Mint's or the Sub-Custodian to the Mint's facility. The Mint has the right to reschedule the physical audit in the event that the Mint or the Sub-Custodian to the Mint, as the case may be, determines, acting reasonably, that the audit would disrupt the routine operation of the Mint's or the Sub-Custodian to the Mint's facility.
51. The Manager and the Custodian will ensure that bullion held by the Mint or the Sub-Custodian to the Mint will be subject to a physical count and inventory reconciliation by a representative (including an agent) of the Manager and the Custodian, as applicable, annually and periodically on a spot-inspection basis (subject to the notice provisions described in paragraph 50), as well as subject to audit procedures by each Fund's external auditor on at least an annual basis on prior notice.
52. The Storage and Custody Agreement requires that if a Fund's representative (including a director or officer or representative, including an agent, of the Manager) is accessing the Mint's or the Sub-Custodian to the Mint's facility, such representative must be accompanied by at least one representative of the Custodian or at least one representative of the Mint or of the Sub-Custodian to the Mint, as applicable, or if bullion is held by another custodian or sub-custodian, that custodian or its sub-custodians, as the case may be.
Insurance
53. The Custodian's ability to recover from the Mint is not contingent upon the Mint's ability to claim on its own insurance or the Sub-Custodian to the Mint's ability to claim on its own insurance.
54. Each Manager believes that the insurance carried by the Custodian, the insurance carried by the Mint, together with its status as a Canadian Crown corporation with its obligations generally constituting unconditional obligations of the Government of Canada, and the insurance carried by the Sub-Custodian to the Mint, provides each Fund with such protection in the event of loss or theft of the Fund's bullion stored at the Mint or at the Sub-Custodian to the Mint that is consistent with the protection afforded by other custodians that store precious metals bullion commercially and is sufficient.
55. The Mint has confirmed that it has arranged for insurance coverage in respect of any bullion held by the Mint in amounts which the Mint deems appropriate in its experience and judgment, acting reasonably. The Mint has confirmed that pursuant to the terms of its existing relationship with the Sub-Custodian to the Mint, the Sub-Custodian to the Mint has arranged for insurance coverage in respect of any bullion held by the Mint through the vault facilities of the Sub-Custodian to the Mint in amounts which the Mint deems appropriate in its experience and judgment, acting reasonably. The Custodian has discussed with the Mint the level of insurance coverage obtained by the Mint and the Sub-Custodian to the Mint, and the risks insured against by the Mint and the Sub-Custodian to the Mint, and believes that the level of insurance will be sufficient and appropriate for the applicable Fund.
56. By no later than the date of the final receipt of the next simplified prospectus of the Fund (after a Fund first relies on this decision), each Fund will disclose, in its annual information form, the material details of the Fund's custodial and sub-custodial arrangements.
57. Each of the Custodian, the Mint and the Sub-Custodian to the Mint is required to ensure that its own insurance coverage is in an amount that it deems appropriate.
Liability and Standard of Care
58. The Custodian shall indemnify and hold harmless the Fund in respect of all direct loss, damage or expense (a Loss) arising out of any negligence, willful misconduct, fraud or lack of good faith or breach of the standard of care by the Custodian in respect of the services contemplated under the Fund Custodian Agreements. The Custodian has the right under the Storage and Custody Agreement to seek recourse against the Mint in the event such Loss was as a result of a failure by the Mint or the Sub-Custodian to the Mint, to comply with the standard of care, subject to the limitations of liability set out in the Storage and Custody Agreement. The Mint has the right under the Mint Sub-Custodian Agreement to seek recourse against the Sub-Custodian to the Mint in the event such Loss was as a result of a failure by the Sub-Custodian to the Mint to comply with the standard of care, subject to the limitations of liability set out in the Mint Sub-Custodian Agreement.
59. Pursuant to the Fund Custodian Agreements, the Custodian has agreed to exercise (i) the same degree of care, diligence and skill that a reasonably prudent person would exercise in the circumstances or (ii) at least the same degree of care as it exercises with respect to its own property of a similar kind if this is a higher degree of care than the degree of care described in (i) hereto.
60. Pursuant to the Storage and Custody Agreement, the Mint has agreed to exercise (i) the same degree of care, diligence and skill that a reasonably prudent person would exercise in the circumstances or (ii) at least the same degree of care as it exercises with respect to its own property of a similar kind if this is a higher degree of care than the degree of care described in (i) hereto. The Custodian has satisfied itself that the degree of care to which the Mint is subject under the Storage and Custody Agreement is no less than the degree of care to which the Custodian is subject under the Custodial Services Agreement.
61. The agreement pursuant to which the Mint appoints the Sub-Custodian to the Mint to act as sub-custodian includes a similar standard of care in respect of the obligations of the Sub-Custodian to the Mint as the standard of care set out for the Mint in the Storage and Custody Agreement. The Mint has satisfied itself that the degree of care to which the Sub-Custodian to the Mint is subject under such agreement is no less than the degree of care to which the Mint is subject under the Storage and Custody Agreement.
62. Upon the Mint sending a Receipt of Deposit to the Custodian, the Mint's liability to the Custodian will commence with respect to such bullion and the Mint will bear all risk of loss, destruction and/or damage to the bullion owned by the Fund in the Mint's custody (or in the custody of the Sub-Custodian to the Mint), subject to certain limitations generally based on events beyond the Mint's reasonable control, including, without limitation, acts or omissions or the failure to cooperate by the Custodian and/or third parties, chemical, biological, electromagnetic or nuclear weapons or incidents, terrorism, government confiscation, fire or other casualty, act of God, strike, lockout or other labour disturbance, riot, war or other violence, or any law, order or requirement of any governmental agency or authority. To the extent that the Mint is liable, the Mint has contractually agreed to replace or pay for lost, damaged or destroyed bullion in the Fund's account while in the Mint's or the Sub-Custodian to the Mint's care, custody and control. Under the Storage and Custody Agreement, the Mint's liability terminates with respect to any bullion: (i) at the expiration of the 90 day prior notice of termination for convenience of the Storage and Custody Agreement, whether or not the Fund's bullion thereafter remains in the Mint's or the Sub-Custodian to the Mint's possession and control; (ii) 90 days following the termination of the Storage and Custody Agreement for default, whether or not the Fund's bullion thereafter remains in the Mint's or the Sub-Custodian to the Mint's possession and control; (iii) upon transfer of such bullion to a different customer's account at the Mint or the Sub-Custodian to the Mint; or (iv) upon remittance of the bullion to the Custodian's carrier or representative in the event that the Mint returns the bullion for the reasons specified in the Storage and Custody Agreement.
63. Upon the Sub-Custodian to the Mint sending a Receipt of Deposit to the Mint, the Sub-Custodian to the Mint's liability to the Mint will commence with respect to such bullion and the Sub-Custodian to the Mint will bear all risk of loss, destruction and/or damage to the bullion owned by the Fund in the Sub-Custodian to the Mint's custody, subject to certain limitations generally based on events beyond the Sub-Custodian to the Mint's reasonable control, including, without limitation, acts or omissions or the failure to cooperate by the Mint and/or third parties, chemical, biological, electromagnetic or nuclear weapons or incidents, terrorism, government confiscation, fire or other casualty, act of God, strike or labour dispute, war or other violence, or any law, order or requirement of any governmental agency or authority. To the extent that the Sub-Custodian to the Mint is liable, the Sub-Custodian to the Mint has contractually agreed to replace or pay for lost, damaged or destroyed bullion in the Fund's account while in the Sub-Custodian to the Mint's care, custody and control. Under the Mint Sub-Custodian Agreement, the Sub-Custodian to the Mint's liability terminates with respect to any bullion: (i) at the expiration of the 90 day prior notice of termination for convenience of the Mint Sub-Custodian Agreement, whether or not the Fund's bullion, thereafter remains in the Sub-Custodian to the Mint's possession and control; (ii) 90 days following the termination of the Mint Sub-Custodian Agreement for default, whether or not the Fund's bullion thereafter remains in the Sub-Custodian to the Mint's possession and control; (iii) upon transfer of such bullion to a different customer's account at the Sub-Custodian to the Mint; or (iv) upon remittance of the bullion to the Mint's carrier or representative in the event that the Sub-Custodian to the Mint returns the bullion for the reasons specified in the Mint Sub-Custodian Agreement.
64. Each Fund will not be responsible for any losses or damages to the Fund arising out of any breach of standard of care by the Custodian, the Mint or the Sub-Custodian to the Mint.
65. The Custodian, the Mint and the Sub-Custodian to the Mint are not entitled to an indemnity from the Funds in the event that any of the Custodian, the Mint and the Sub-Custodian to the Mint breaches its standard of care.
66. Should the Custodian discover a physical loss, damage or destruction of a Fund's bullion in the Mint's custody, care and control, the Custodian must give written notice to the Mint within five business days after the discovery of any such loss, damage or destruction and will also give written notice to the Fund's Manager. For any discrepancy in the quantity of bullion on an inventory statement, the Custodian must give the Mint written notice of the loss regarding such discrepancy within 60 days after the receipt of the inventory statement in which the discrepancy first appears and will also give written notice to the Fund's Manager. The Mint will, at its discretion, as soon as practicable (subject to applicable limitations of liability as referred to in paragraph 62): (i) replace, or restore to its original state in the event of partial damage, as the case may be, the Fund's bullion that was lost, destroyed or damaged based on the advised weight and assay characteristics provided in the initial notice; (ii) compensate the Custodian for the monetary value of the bullion that was lost or destroyed based on the advised weight and assay characteristics provided in the initial notice and the market value of such bullion that was lost or destroyed as of the first trading date following the discovery by the Mint of the loss, damage or destruction or, if first discovered by the Custodian, the date of receipt by the Mint of the relevant notice of loss from the Custodian; or (iii) replace a portion of the lost or damaged bullion and compensate the Custodian for the monetary value of the remaining portion of the lost or damaged bullion based on the advised weight and assay characteristics provided in the initial notice and the market value of such bullion that was lost or destroyed as of the first trading date following the discovery by the Mint of the loss, damage or destruction or, if first discovered by the Custodian, the date of receipt by the Mint of the relevant notice of loss from the Custodian. If the Custodian fails to give such notice in accordance with the terms of the Storage and Custody Agreement, all claims against the Mint will be deemed to have been waived. In addition, no action, suit or other proceeding to recover any loss, damage or destruction may be brought against the Mint if a notice of loss, damage or destruction has been given in accordance with the terms of the Storage and Custody Agreement but an action, suit or proceeding has not been commenced within 24 months from the time of discovery of the loss, damage or destruction. The above represents the Custodian's sole and exclusive remedy with respect to any and all claims, demands, losses, costs, destruction and/or damage for the physical loss, destruction and/or damage of a Fund's bullion. The Storage and Custody Agreement also provides that the Mint will not be responsible for any special, incidental, consequential, indirect or punitive losses or damages (including lost profits or lost savings), whether or not the Mint had knowledge that such losses or damages might be incurred.
67. Should the Mint discover a physical loss, damage or destruction of a Fund's bullion in the Sub-Custodian to the Mint's custody, care and control, the Mint must give written notice to the Sub-Custodian to the Mint within five business days after the discovery of any such loss, damage or destruction and will also give written notice to the Custodian who will give written notice to the Fund's Manager. For any discrepancy in the quantity of bullion on an inventory statement, the Mint must give the Sub-Custodian to the Mint written notice of the loss regarding such discrepancy within 60 days after the receipt of the inventory statement in which the discrepancy first appears and will also give written notice to the Custodian who will give written notice to the Fund's Manager. The Sub-Custodian to the Mint will, at its discretion, as soon as practicable (subject to applicable limitations of liability referred to in paragraph 63): (i) replace, or restore to its original state in the event of partial damage, as the case may be, the Fund's bullion that was lost, destroyed or damaged based on the advised weight and assay characteristics provided in the initial notice; (ii) compensate the Mint for the monetary value of the bullion that was lost or destroyed based on the advised weight and assay characteristics provided in the initial notice and the market value of such bullion that was lost or destroyed as of the first trading date following the discovery by the Sub-Custodian to the Mint of the loss, damage or destruction or, if first discovered by the Mint, the date of receipt by the Sub-Custodian to the Mint of the relevant notice of loss from the Mint; or (iii) replace a portion of the lost or damaged bullion and compensate the Mint for the monetary value of the remaining portion of the lost or damaged bullion based on the advised weight and assay characteristics provided in the initial notice and the market value of such bullion that was lost or destroyed as of the first trading date following the discovery by the Sub-Custodian to the Mint of the loss, damage or destruction or, if first discovered by the Mint, the date of receipt by the Sub-Custodian to the Mint of the relevant notice of loss from the Mint. If the Mint fails to give such notice in accordance with the terms of the Mint Sub-Custodian Agreement, all claims against the Sub-Custodian to the Mint will be deemed to have been waived. In addition, no action, suit or other proceeding to recover any loss, damage or destruction may be brought against the Sub-Custodian to the Mint if a notice of loss, damage or destruction has been given in accordance with the terms of the Mint Sub-Custodian Agreement but an action, suit or proceeding has not been commenced within 24 months from the time of discovery of the loss, damage or destruction. The Sub-Custodian to the Mint will not be responsible for any special, incidental, consequential, indirect or punitive losses or damages (including lost profits or lost savings), whether or not the Sub-Custodian to the Mint had knowledge that such losses or damages might be incurred.
Termination and Changes to the Custodial Arrangements
68. The Custodian may terminate the sub-custodial relationship with the Mint by giving written notice to the Mint of its intent to terminate the Storage and Custody Agreement if (i) the Mint is in default in carrying out any of its obligations under the Storage and Custody Agreement that is not cured within ten business days following the Custodian giving written notice to the Mint of such default; (ii) the Mint is dissolved or adjudged bankrupt, or a trustee, receiver or conservator of the Mint or of its property is appointed, or an application for any of the foregoing is filed; or (iii) the Mint is in breach of any representation or warranty contained in the Storage and Custody Agreement. The obligations of the Mint with respect to each Fund include, but are not limited to, maintaining an inventory of the Fund's bullion stored with the Mint, providing a monthly inventory to the Custodian, maintaining the Fund's bullion physically segregated, allocated and specifically identifiable as the Fund's property under specifically identified account numbers as directed by the Custodian, and taking good care, custody and control of the Fund's bullion.
69. The Custodian believes that all of the obligations of the Mint as described in paragraph 68 are material and anticipates that it would terminate the Mint as sub-custodian if the Mint breaches any such obligations and does not cure such breach within ten business days of the Custodian giving written notice to the Mint of such breach. Prior to terminating the sub-custodial relationship with the Mint, the Custodian or the Fund will appoint a replacement sub-custodian for bullion that complies with the requirements under NI 81-102.
70. The Manager has determined that it would be in the best interests of each Fund to receive the Requested Relief.
The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to make the decision.
The decision of the principal regulator under the Legislation is that the Requested Relief is granted provided that:
(a) The Mint meets the Shareholder Equity Threshold and, as noted on Schedule A, the Sub-Custodian to the Mint either: (i) meets the Shareholder Equity Threshold, or (ii) is a Guaranteed Sub-Custodian. The Mint will monitor the Sub-Custodian to the Mint on a regular basis (at least annually) to ensure that it either meets the Shareholder Equity Threshold or is a Guaranteed Sub-Custodian.
(b) The Custodian will provide to the principal regulator for the Funds on an annual basis beginning 60 days after the date upon which the Requested Relief is first relied upon by the Funds, either (i) a current list of all such Funds that are relying on the Requested Relief, or (ii) an update to the list of such Funds or confirmation that there has been no change to such list.
(c) The Funds and the Mint are limited to using the Mint or the Sub-Custodian to the Mint as sub-custodian for the Funds' bullion only, which will be held by the Mint or the Sub-Custodian to the Mint.
(d) The Custodian will obtain, at least annually, a report from the Mint, confirming that the Mint has, to the best of its ability, monitored the most recent audited financial statements of the Sub-Custodian to the Mint and is satisfied that the shareholders' equity of such entities is sufficient with what the Mint believes to be appropriate for an entity acting as custodian of physical bullion and, in any event at sufficient levels in order to meet the Mint's own internal requirements as though the Mint were seeking to deposit its own physical bullion with the Sub-Custodian to the Mint.
(e) In respect of the periodic compliance reports to be prepared by the Custodian pursuant to paragraphs 6.7(1)(b), 6.7(1)(c)(ii) and 6.7(2)(c) of NI 81-102, as such paragraphs will not be applicable given the nature of the relief granted herein, the Custodian shall include a statement in such reports regarding the completion of its review process for the Mint and the Mint's review process for the Sub-Custodian of the Mint and that the Custodian is of the view that the Mint, and the Mint is of the view that the Sub-Custodian to the Mint, continue to be appropriate sub-custodians to hold the Funds' bullion in Canada.
(f) Prior to a Fund relying on this decision, the Custodian provides to the Fund:
(i) a copy of this decision;
(ii) a disclosure statement informing the Fund of the implications of this decision; and
(iii) a form of acknowledgment of the matters referred to in paragraph (g) below, to be signed and returned by the Fund to the Custodian.
(g) A Fund and its Manager seeking to rely on this decision will, prior to doing so:
(i) acknowledge receipt of a copy of this decision providing the Requested Relief;
(ii) appoint the Custodian as its custodian under NI 81-102;
(iii) consent to the Custodian providing to staff of the principal regulator for the Fund on an annual basis the name of the Fund so long as it relies on this decision; and
(iv) deliver to the Custodian a signed acknowledgement and agreement binding the Fund to the foregoing.
Application File #: 2026-55
SEDAR+ #: 6390614
Name of Parent Company |
Name of Sub-Custodian to the Mint which is the Subsidiary operating the vault in question |
Location of Vault Facilities |
Loomis AB {1} |
Loomis International (CA) Inc.{2} |
Toronto, Canada 3300 Caroga Drive Mississauga, ON |
{1} Meets the Shareholder Equity Threshold requirement.
{2} Does not meet the Shareholder Equity Threshold requirement and is a Guaranteed Sub-Custodian with guarantee provided by Loomis AB.
Temporary, Permanent & Rescinding Issuer Cease Trading Orders
Company Name |
Date of Temporary Order |
Date of Hearing |
Date of Permanent Order |
Date of Lapse/Revoke |
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THERE IS NOTHING TO REPORT THIS WEEK. |
||||
Company Name |
Date of Order |
Date of Revocation |
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SOL Global Investments Corp. |
April 6, 2026 |
__________ |
Temporary, Permanent & Rescinding Management Cease Trading Orders
Company Name |
Date of Order |
Date of Lapse |
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DeFi Technologies Inc. |
April 1, 2026 |
__________ |
|
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Enthusiast Gaming Holdings Inc. |
April 6, 2026 |
__________ |
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FuelPositive Corporation |
January 29, 2026 |
April 2, 2026 |
Outstanding Management & Insider Cease Trading Orders
Company Name |
Date of Order or Temporary Order |
Date of Hearing |
Date of Permanent Order |
Date of Lapse/Expire |
Date of Issuer Temporary Order |
|
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Performance Sports Group Ltd. |
19 October 2016 |
31 October 2016 |
31 October 2016 |
__________ |
__________ |
Company Name |
Date of Order |
Date of Lapse |
|
||
Agrios Global Holdings Ltd. |
September 17, 2020 |
__________ |
|
||
Sproutly Canada, Inc. |
June 30, 2022 |
__________ |
|
||
iMining Technologies Inc. |
September 30, 2022 |
__________ |
|
||
Alkaline Fuel Cell Power Corp. |
April 4, 2023 |
__________ |
|
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mCloud Technologies Corp. |
April 5, 2023 |
__________ |
|
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FenixOro Gold Corp. |
July 5, 2023 |
__________ |
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||
HAVN Life Sciences Inc. |
August 30, 2023 |
__________ |
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||
Perk Labs Inc. |
April 4, 2024 |
__________ |
|
||
DeFi Technologies Inc. |
April 1, 2026 |
__________ |
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||
Enthusiast Gaming Holdings Inc. |
April 6, 2026 |
__________ |
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||
FuelPositive Corporation |
January 29, 2026 |
April 2, 2026 |
CSA Notice and Request for Comment -- Proposed Amendment to National Instrument 55-104 Insider Reporting Requirements and Exemptions Relating to Investment Funds and Certain Structured Products
April 9, 2026
The Canadian Securities Administrators (the CSA or we) are publishing for a 60-day comment period a proposed amendment (the Proposed Amendment) to Part 9 of National Instrument 55-104 Insider Reporting Requirements and Exemptions (NI 55-104).
The comment period will end on June 8, 2026.
The text of the Proposed Amendment is contained in Annex A of this notice and will also be available on websites of CSA jurisdictions, including:
www.osc.cawww.asc.cawww.bcsc.bc.cawww.fcaa.gov.sk.cawww.fcnb.cawww.lautorite.qc.cawww.mbsecurities.canssc.novascotia.ca
The Proposed Amendment is intended to clarify the insider reporting regime applicable to transactions involving investment funds, and certain structured products, such as structured notes, American Depositary Receipts (ADRs) and Canadian Depositary Receipts (CDRs), that are based on securities of the reporting insider's reporting issuer.
The Proposed Amendment would clarify that the existing exemption in paragraph 9.7(g) of NI 55-104 cannot be relied upon by reporting insiders in connection with transactions in investment funds or certain structured products.
We are publishing the Proposed Amendment at this time following recent interest in certain investment funds for which securities of a reporting issuer would be expected to form a material component of the investment fund's market value, such as single-issuer exchange traded funds. Single-issuer exchange traded funds were launched in the Canadian market in August 2025. Since that time, other funds have been launched that track major Canadian reporting issuers.
In addition, structured products that provide alternative means to obtain economic exposure to a reporting issuer that is equivalent to investing in the securities of a reporting issuer have been made available. For example, structured notes, ADRs and CDRs have been launched for a wide variety of issuers.
The insider reporting exemption in paragraph 9.7(f) of NI 55-104 is intended for reporting insiders who acquire or dispose of securities of an investment fund that may hold securities of the reporting insider's reporting issuer. This exemption includes the important condition that "securities of the reporting issuer do not form a material component of the investment fund's market value". The exemption in paragraph 9.7(g) of NI 55-104 was not intended to be available for investment funds. The Proposed Amendment would exclude investment funds from the exemption in paragraph 9.7(g). As a result, the exemption in paragraph 9.7(f) would be the relevant exemption for acquisitions or dispositions of securities of investment funds by reporting insiders.
In addition, the Proposed Amendment would clarify that the insider reporting exemption in paragraph 9.7(g) does not apply in respect of certain structured products in respect of which the value or market price of the product is derived from, referenced to or based on an underlying security, interest, benchmark or formula that is, or includes as a material component, a security of the reporting issuer or a related financial instrument involving a security of the reporting issuer, such as structured notes, ADRs or CDRs. This is consistent with the policy intent underlying the exemption.
Annex B is being published in any local jurisdiction that is proposing related changes to local securities laws, including local notices or other policy instruments in that jurisdiction. It also includes any additional information that is relevant to that jurisdiction only.
Please submit your comments in writing on or before June 8, 2026.
Submit your comments here: https://www.securities-administrators.ca/consultations/csa-notice-and-request-for-comment-proposed-amendment-to-national-instrument-55-104-insider-reporting-requirements-and-exemptions-relating-to-investment-funds-and-certain-structured-products/. By using the link, your comments will be submitted to the following CSA members.
British Columbia Securities CommissionAlberta Securities CommissionFinancial and Consumer Affairs Authority of SaskatchewanManitoba Securities CommissionOntario Securities CommissionAutorité des marchés financiersFinancial and Consumer Services Commission of New BrunswickSuperintendent of Securities, Department of Justice and Public Safety, Prince Edward IslandNova Scotia Securities CommissionOffice of the Superintendent of Securities, Service NLNorthwest Territories Office of the Superintendent of SecuritiesOffice of the Yukon Superintendent of SecuritiesSuperintendent of Securities, Nunavut
By submitting your comments through the link above, you are also submitting your comments to:
Me Philippe LebelCorporate Secretary and Executive Director, Legal AffairsAutorité des marchés financiersPlace de la Cité, tour PwC2640, boulevard Laurier, bureau 400Québec (Québec) G1V 5C1Fax: 514 864-8381E-mail: consultation-en-cours@lautorite.qc.ca
We cannot keep submissions confidential because securities legislation in certain provinces requires publication of the written comments received during the comment period. Comments received will be posted on the websites of each of the Alberta Securities Commission at www.asc.ca, the Autorité des marchés financiers at www.lautorite.qc.ca and the Ontario Securities Commission at www.osc.ca. You should not include personal information directly in comments as the comments will be published and publicly available. It is important that you state on whose behalf you are making the submission.
Annex A: Proposed Amendment to National Instrument 55-104 Insider Reporting Requirements and Exemptions
Annex B: Local Matters
Please refer your questions to any of the following:
Ontario Securities Commission |
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Paul Hayward |
Tegan Raco |
Senior Legal Counsel |
Legal Counsel II |
Corporate Finance Division |
Corporate Finance Division |
416-593-8288 |
416-263-7717 |
phayward@osc.ca |
traco@osc.ca |
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British Columbia Securities Commission |
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Noreen Bent |
James Leong |
Chief, Corporate Finance Legal Services |
Senior Legal Counsel, Corporate Finance |
604-899-6741 |
604-899-6681 |
nbent@bcsc.ca |
jleong@bcsc.bc.ca |
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Alberta Securities Commission |
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Lanion Beck |
Melissa Yeh |
Senior Legal Counsel, Corporate Finance |
Legal Counsel, Corporate Finance |
403-355-3884 |
403-355-4181 |
lanion.beck@asc.ca |
melissa.yeh@asc.ca |
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Financial and Consumer Affairs Authority of Saskatchewan |
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Caroline Smith |
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Senior Legal Counsel, Securities Division |
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306-787-9492 |
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caroline.smith@gov.sk.ca |
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Manitoba Securities Commission |
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Patrick Weeks |
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Deputy Director -- Corporate Finance |
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204-945-3326 |
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patrick.weeks@gov.mb.ca |
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Autorité des marchés financiers |
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Livia Alionte |
Charlotte Verdebout |
Senior Continuous Disclosure Coordinator, Supervision of Issuers and Insiders |
Senior Policy Advisor, Regulatory Policy |
514 395-0337, ext. 4336 |
514-395-0337, ext. 4339 |
livia.alionte@lautorite.qc.ca |
charlotte.verdebout@lautorite.qc.ca |
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Nova Scotia Securities Commission |
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Jack Jiang |
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Securities Analyst, Corporate Finance |
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902-424-7059 |
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jack.jiang@novascotia.ca |
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Financial and Consumer Services Commission of New Brunswick |
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Ray Burke |
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Manager, Corporate Finance |
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(506) 643-7435 |
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ray.burke@fcnb.ca |
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1. National Instrument 55-104 Insider Reporting Requirements and Exemptions is amended by this Instrument.
2. Part 9 is amended by adding the following section after section 9.7:
Exemption not available
9.8 Paragraph 9.7(g) does not apply to the acquisition or disposition of a security, or an interest in a security, of an issuer if
(a) the issuer is an investment fund, or
(b) the value or market price of the security, or the interest in a security, is derived from, referenced to or based on an underlying security, interest, benchmark or formula that is, or includes as a material component, a security of the reporting issuer or a related financial instrument involving a security of the reporting issuer..
3. This Instrument comes into force on •.
As set out in the CSA Notice and Request for Comment (CSA Notice), the CSA is publishing the following for a 60-day comment period:
• Proposed amendment (Proposed Amendment) to Part 9 of National Instrument 55-104 Insider Reporting Requirements and Exemptions (NI 55-104) relating to Investment Funds and certain structured products.
In this Annex, the Ontario Securities Commission (the Commission) supplements the CSA Notice and presents the qualitative and quantitative assessment of the anticipated costs and benefits of the Proposed Amendment to the rules governing Ontario's capital markets. The scope of the Proposed Amendment is limited and it is anticipated that limited costs will be imposed on stakeholders. Therefore, the Commission has taken a proportionate, streamlined approach to conducting an analysis of impacts.
Unless otherwise defined in this Annex, defined terms or expressions used in this Annex share the meanings provided in the CSA Notice. Please refer to the main body of the CSA Notice for additional details.
NI 55-104 sets out the principal insider reporting requirements and exemptions for insiders of reporting issuers. The insider reporting requirements serve a number of functions. These include deterring improper insider trading based on material undisclosed information and increasing market efficiency by providing investors with information concerning the trading activities of insiders of an issuer, and, by inference, the insiders' views of their issuer's prospects. Insider reporting also helps prevent illegal or otherwise improper activities involving stock options and similar equity-based instruments, including stock option backdating, option repricing, and the opportunistic timing of option grants (spring-loading or bullet-dodging). This is because the requirement for timely disclosure of option grants and the public scrutiny of such disclosure will generally limit opportunities for issuers and insiders to engage in improper dating practices.
There is a potential gap in NI 55-104 in that an insider may take the position that they can rely on the exemption in paragraph 9.7(g) of NI 55-104 to enter into transactions involving single-issuer exchange traded funds (single issuer ETFs) or certain structured products that are based on securities of the insider's reporting issuer without having to report such transactions. This interpretation is contrary to the policy rationales of NI 55-104 described above, and so the Proposed Amendment seeks to clarify that the insider reporting exemption in paragraph 9.7(g) of NI 55-104 is not available in respect of a security of an issuer if:
(c) the issuer is an investment fund, or
(d) the value or market price of the security, or the interest in a security, is derived from, referenced to or based on an underlying security, interest, benchmark, or formula that is, or includes as a material component, a security of the reporting issuer or a related financial instrument involving a security of the reporting issuer.
Insiders should comply with insider reporting requirements in respect of transactions involving investment funds and issuers of certain other structured products that derive their value from underlying interests that are, or include as a material component, a security of the insider's reporting issuer or a related financial instrument involving a security of the reporting issuer.
The stakeholders that will be primarily affected include:
• Insiders and issuers
• Investors
The Commission considers the impact of the Proposed Amendment on the Commission's mandate to:
• provide protection to investors from unfair, improper or fraudulent practices;
• foster fair, efficient and competitive capital markets and confidence in the capital markets;
• foster capital formation; and
• contribute to the stability of the financial system and the reduction of systemic risk.
The Proposed Amendment will impact confidence in capital markets and investor protection components of the Commission's mandate by:
• providing regulatory certainty as to insider reporting obligations in NI 55-104; and
• addressing the concern that the introduction of certain new types of financial products to Canadian markets that reference securities of an issuer, such as single issuer ETFs, CDRs and ADRs, may create opportunities for insiders to enter into transactions involving financial products that derive their value from underlying interests that are, or include as a material component, a security of the insider's reporting issuer or a related financial instrument involving a security of the reporting issuer without filing insider reports for such transactions. These product segments have grown rapidly with many new listings in 2025. Currently, there are approximately 200 CDRs and 70 single-issuer ETFs listed in Canada.{1}
D. Anticipated Costs and Benefits
The Proposed Amendment does not impose any additional insider reporting requirements on insiders; rather, it seeks to clarify that insiders may not rely on the exemption in paragraph 9.7(g) of NI 55-104 to enter into transactions involving securities of investment funds or issuers of certain structured products that derive their value from underlying interests that are, or include as a material component, a security of the insider's reporting issuer or a related financial instrument involving a security of the reporting issuer without filing insider reports for such transactions. This analysis focuses on the direct cost and benefits arising from the Proposed Amendment.
Insiders and Issuers
• Costs -- As the Proposed Amendment is intended solely to address a potential drafting gap in the insider reporting exemption under paragraph 9.7(g) of NI 55-104, and to enhance clarity regarding the insider reporting obligations applicable to transactions involving investment funds and issuers of certain structured products, no additional costs to insiders or reporting issuers are anticipated.
• Benefits -- The Proposed Amendment aims to reduce uncertainty as to the insider reporting obligations in NI 55-104 and improve the effectiveness of the insider reporting system. This amendment will allow for more efficient allocation of legal and compliance resources by impacted stakeholders.
Investors
• Costs -- We do not anticipate that the Proposed Amendment will result in additional costs to investors, reporting issuers, or insiders.
• Benefits -- Clarifying the relevant insider reporting requirement will:
• Improve the effectiveness of the insider reporting system and will provide certainty as to insider reporting obligations in NI 55-104.
• Enhance market integrity and increase confidence in the capital markets by reducing the likelihood of illegal or improper insider activities through clearer guidance on disclosure exceptions.
The Proposed Amendment is intended to clarify existing insider reporting obligations without introducing new reporting requirements. We do not anticipate that this will result in material legal or compliance costs for insiders or issuers. The primary objective is to enhance the effectiveness of the insider reporting regime by addressing a potential gap in the drafting of Part 9 of NI 55-104. While it is not reasonably practicable to quantify this benefit, we believe that the costs associated with the Proposed Amendment are proportionate to the expected benefits.
• No Action -- This alternative would risk diminishing the effectiveness of the insider reporting regime and NI 55-104, as insiders may take the position that they can rely on the exemption in paragraph 9.7(g) of NI 55-104 to enter into transactions involving single issuer ETFs, or certain structured products that involve the insider's reporting issuer, without having to report such transactions. This approach is not consistent with the original intent of the existing rules and would create a gap in the insider reporting regime.
• Providing guidance -- This alternative would be of questionable effectiveness and would not provide the certainty of the Proposed Amendment.
The Commission has not relied on any significant unpublished study, report or other written material in proposing the Proposed Amendment.
In Ontario, the following provisions of the Securities Act (Ontario) (the Act) provide the Commission with authority to make the Proposed Amendment as an amendment to a rule:
• Paragraph 143(1)30.1 of the Act authorizes the Commission to regulate the disclosure or furnishing of information to the public or the Commission by insiders, including,
• prescribing filing requirements for the reporting by insiders of their respective direct or indirect beneficial ownership of, or control or direction over, securities of a reporting issuer or changes in ownership, control or direction,
• prescribing requirements respecting the reporting by insiders of any interest in or right or obligation associated with a related financial instrument or changes in such interests, rights or obligations, and
• prescribing requirements respecting the reporting by insiders of any agreement, arrangement or understanding that alters, directly or indirectly, an insider's economic interest in a security or an insider's economic exposure to a reporting issuer or changes in such agreements, arrangements or understandings.
• Paragraph 143(1)30.2 of the Act authorizes the Commission to prescribe requirements in respect of a reporting issuer to facilitate compliance by insiders of the reporting issuer with the Act and with the rules made under paragraph 143(1)30.1 of the Act.
{1} CBOE Canada, Listing Directory, https://www.cboe.com/ca/equities/market-activity/listing-directory/, TMX Group, Current Market Statistics, https://www.tsx.com/en/listings/current-market-statistics, February 2025.
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Canadian Investment Regulatory Organization (CIRO) -- Housekeeping Amendments to Dealer Member Fee Model -- Notice of Commission Deemed Approval
The Ontario Securities Commission did not object to CIRO's proposed housekeeping amendments to the CIRO Fee Model to end the transitionary measures for Mutual Fund Dealers (MFDs) operating in Québec, effective July 1, 2026 (Housekeeping Amendments). As a result, the Housekeeping Amendments were deemed approved or non-objected to.
The Housekeeping Amendments will take effect on July 1, 2026.
In addition, the Alberta Securities Commission; the Autorité des marchés financiers; the British Columbia Securities Commission; the Financial and Consumer Affairs Authority of Saskatchewan; the Financial and Consumer Services Commission of New Brunswick; the Manitoba Securities Commission; the Northwest Territories Office of the Superintendent of Securities; the Nova Scotia Securities Commission; the Nunavut Office of the Superintendent of Securities; the Office of the Superintendent of Securities, Digital Government and Services, Newfoundland and Labrador; the Office of the Yukon Superintendent of Securities; and the Prince Edward Island Office of the Superintendent of Securities (together with the Ontario Securities Commission, the Recognizing Regulators) did not object to the classification of the Housekeeping Amendments and therefore the Housekeeping Amendments were deemed approved or non-objected to.
A copy of the CIRO Notice of Approval/Implementation, including text of the approved Housekeeping Amendments, is also published on our website at www.osc.ca.
Alpha Exchange Inc. -- Proposed Amendments -- Notice and Request for Comments
Alpha Exchange Inc. ("Alpha") is publishing this Notice of Proposed Amendments and Request for Comments in accordance with the "Process for the Review and Approval of Rules and the Information Contained in Form 21-101F1 and the Exhibits Thereto" regarding amendments to the Alpha Trading Policy Manual (the "Alpha Rules") to propose certain amendments to introduce new undisplayed (or "dark") order types on Alpha, as described below (the "Amendments").
Market participants are invited to provide comments. Comments should be in writing and delivered by May 11, 2026 to:
Linda ZhangLegal Counsel, Regulatory AffairsTMX Group100 Adelaide Street West, Suite 300Toronto, Ontario M5H 1S3Email: tsxrequestforcomments@tsx.com
A copy should also be provided to:
Trading & Markets DivisionOntario Securities Commission20 Queen Street WestToronto, Ontario M5H 3S8Email: TradingandMarkets@osc.gov.on.ca
Comments will be made publicly available unless confidentiality is requested. Upon completion of the review by staff at the Ontario Securities Commission ("OSC"), and in the absence of any regulatory concerns, a notice will be published to confirm approval by the OSC.
Alpha is comprised of the TSX Alpha Exchange ("Alpha Classic"), Alpha X, and Alpha DRK order books. In today's market environment, retail firms are increasingly seeking priced improved interaction to enhance their execution quality. Many competing venues now provide midpoint price improvement through internal dark pools or dark-lit interaction models. Alpha Classic does not currently support an equivalent functionality.
To address this structural gap and maintain Alpha Classic's competitive positioning within TMX's broader ecosystem, Alpha is proposing to introduce certain undisplayed (or "dark") order types within the Alpha Classic order book (collectively, the "Alpha Classic DRK Order Types").
Introduction of Dark Order Types on Alpha Classic
The Alpha Classic DRK Orders Types will utilize a new non-displayed functionality operating under the Alpha Classic order book. This new functionality is being introduced into the Alpha Classic order book only, and is distinct from the operation of Alpha DRK (Alpha's non-visible or "dark" order book), which operates on a stand-alone dark book. This functionality will not disseminate visible quotes or contribute to the NBBO. However, all executions of the new order types will ensure consistency with the applicable provisions of the Universal Market Integrity Rules ("UMIR") and National Instrument 23-101 Trading Rules.
This structure will allow Alpha Classic to offer priced improved interaction while leveraging its existing inverted framework and order processing delay (or "speedbump"). Alpha Classic DRK Orders resting will reference protected market prices for all pegging and execution decisions, ensuring compliance and market integrity.
The Alpha Classic DRK Order Types will serve as an extension of Alpha's value proposition by:
• Providing price-improving execution options for retail and algorithmic order flow.
• Enhancing Alpha Classic liquidity ecosystem through dark-lit interaction.
• Applying the existing 1-ms static speedbump to resting dark liquidity.
• Maintaining alignment with protected market prices while expanding execution flexibility.
Dark Order Types Supported on Alpha Classic
In addition to the existing order types currently available on Alpha Classic and set out in the Alpha Rules, the following order types, which are currently available within the Alpha DRK order book, will be adopted and available on Alpha Classic:
• Mid Point Peg -- Undisplayed mid point peg order that automatically sets the order price to the midpoint of the National Best Bid and Offer (NBBO).
• Minimum Price Improvement Peg -- Undisplayed order that prices the order to provide the minimum price improvement required by UMIR for undisplayed orders.
• Undisplayed (Limit/Market): An undisplayed order that prices the order to its limit or market price.
Generally, all dark order types on Alpha Classic will interact with each other as well as with visible orders on Alpha Classic.
The Alpha Classic DRK Order Types will be available between 9:30 a.m. and 4:00 p.m. ET, consistent with the trading hours applicable to dark order interaction models existing in other Canadian marketplaces.
Minimum Trade Requirements and Order Size
Orders utilizing the Alpha Classic DRK Order Types are subject to any applicable minimum quantity and minimum interaction size or other conditions under the Alpha Rules.
Day and FOK Alpha Classic DRK Orders are restricted to board lot sizes only. IOC Alpha Classic DRK orders will accept both board lots and mixed lots.
Allocation of Trades -- Establishing Price and Time Priority
The allocation of trades on Alpha Classic will be amended so that orders will be given trading priority in the following order:
1. Price (best price gets priority, i.e. highest bid and lowest offer)
2. Broker (Broker preference whereby incoming orders will match with other orders (excluding displayed orders marked as anonymous) from the same dealer ahead of similarly priced orders from other dealers, before time priority is considered)
3. Time (orders entered first get priority over orders entered after them)
Trades on dark orders are subject to any applicable minimum quantity and minimum interaction size or other conditions under the Alpha Rules.
The allocation of trades on the Alpha X and Alpha DRK trading books will remain unchanged.
A blackline of the Amendments against the existing Alpha Rules is attached as Appendix A hereto.
(i) Expected impact on the market structure, members and, if applicable, on investors, issuers and capital markets
It is anticipated that the Amendments will have a positive impact on the market structure, members, investors, issuers and the capital markets. Alpha believes that the Amendments are fair and reasonable, and will not create barriers to access.
Alpha anticipates that participants will need to adjust their trading strategies generally to account for the introduction of the Alpha Classic DRK Order Types.
(ii) Expected impact of the Amendments on Alpha's compliance with Ontario securities law and in particular on requirements for fair access and maintenance of fair and orderly markets
The Amendments will not impact Alpha's compliance with applicable securities law and in particular the requirements for fair access and maintenance of fair and orderly markets. As noted above, Alpha is of the view that the Amendments will support the maintenance of fair and orderly markets.
(iii) Public Interest
For the reasons mentioned above, Alpha is of the view that the Amendments are not contrary to the public interest.
In formulating the Amendments, the internal governance process for Alpha was followed, which included receipt of the appropriate management-level approval, and all applicable internal groups at Alpha were consulted.
Alpha also received feedback from certain retail firms and liquidity providers, who were generally supportive of the Amendments.
No alternatives were considered.
Similar dark order interaction models exist on other Canadian marketplaces.
Alpha intends to implement the Amendments in Q3 2026, subject to regulatory approval and participant readiness.
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Mid Point Peg |
Undisplayed mid point peg order that automatically sets the order price to the midpoint of the National Best Bid and Offer (NBBO). |
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Minimum Price Improvement Peg |
Undisplayed order that prices the order to provide the minimum price improvement required by UMIR for undisplayed orders. |
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(1) An order entered in the CLOB at a particular price will be executed in priority to all orders at inferior prices.
(2) Broker preference whereby incoming orders will match with other orders
from the same dealer(excluding displayed orders marked as anonymous) from the same dealer ahead of similarly priced orders from other dealers, before time priority is considered.(3) An order at a particular price will be executed prior to any orders at the same price entered subsequently in time, and after all orders at the same price entered previously ('time priority').
(4) An undisclosed portion of an order does not have time priority until it is disclosed.
(5) An order loses its time priority if its disclosed volume is increased.
[...]
Nasdaq CXC Limited -- Proposed Changes -- Notice and Request for Comment
Nasdaq CXC Limited (Nasdaq Canada) has announced plans to implement the two changes (the Significant Change subject to Public Comment and the Fee Change subject to Public Comment) described below subject to regulatory approval. Nasdaq Canada is publishing this Notice of Proposed Changes in accordance with the requirements set out in the Process for the Review and Approval of Rules and the Information Contained in Form 21-101F1 and the Exhibits Thereto (Exchange Protocol). Pursuant to the Exchange Protocol, market participants are invited to provide the Commission with comment on the proposed changes.
Comment on the proposed changes should be in writing and submitted by May 11, 2026 to:
Trading and Markets DivisionOntario Securities Commission20 Queen Street West, 22nd FloorToronto, ON M5H 3S9Email: tradingandmarkets@osc.gov.on.ca
And to
Matt ThompsonChief Compliance OfficerNasdaq CXC Limited25 York St., Suite 900Toronto, ON M5J 2V5Email: matthew.thompson@nasdaq.com
Comments received will be made public on the OSC website. Upon completion of the review by OSC staff, and in the absence of any regulatory concerns, notice will be published to confirm the completion of Commission staff's review and to outline the intended implementation date of the changes.
A member must subscribe for an order entry port to send orders directly to a Nasdaq Canada Trading Book (CXC, CX2, or CXD). Order entry ports serve as communication gateway channels communicating order information from a member to the Exchange Systems{1} and in turn receiving information about the status of an order after interacting with the Exchange Systems. A port resides in a core or computer processing unit (or CPU Core). In the past, one server was able to only support a single CPU Core. However, because of technological advancements a single server can now support multiple individual CPU Cores. From a hardware perspective multiple ports reside in, and are supported by, each CPU Core. In turn, multiple CPU Cores reside in, and are supported by, each server.
Nasdaq Canada is proposing to offer members and their Direct Electronic Access (DEA) clients the option to subscribe for the use of their own individual dedicated CPU Core(s) which will provide autonomy over the use of all available ports in that CPU Core ("Dedicated Core" and "Proposed Change"). Currently, the use of all CPU Cores is shared between members where order entry ports from different members have been randomly assigned across different CPU Cores or different members.
When Dedicated Cores are introduced, members will continue to have the option to use order entry ports on shared CPU Cores as they do today. Members may either use Dedicated Cores, shared CPU Cores or a combination of the two. The use of a combination of Dedicated Cores and shared CPU Cores can provide additional risk and capacity management, particularly in volatile market conditions where resulting message traffic can be high.
The diagram above depicts the architecture of the systems involved when order messages are sent, processed and received by a server supporting a combination of Dedicated Cores and shared CPU Cores. As illustrated above, there is no difference how orders are handled when instructions are sent from clients via a Dedicated Core or a shared CPU Core. All instructions are sent to FIX order entry ports before messages are sent to the matching engine. The matching engine in turn produces status messages about the order that are then sent back to the ports and market data that is disseminated to members, vendors, other marketplaces and the Information Processor through an independent server from any CPU Core or order entry port.
Expected Date of Implementation
It is expected that the Proposed Change will be introduced on the first of the month following regulatory approval.
Rationale and Relevant Supporting Analysis
We are introducing Dedicated Cores to offer members the ability to enhance trading performance and more effectively manage risk. The introduction of Dedicated Cores will provide members with the full processing power of a CPU Core which in turn, depending on how it is used, may result in less "jitter"{2} across all ports in the Dedicated Core and increase throughput depending on how it is used. While each individual port is designed to have the same identical response time on its own, total activity (number of messages) across the entire number of ports in a CPU Core may influence the response time of any single port in that CPU Core sending or receiving information at any one time. When a high number of messages are communicated through certain ports in a CPU Core, this high volume of messages may influence, or delay, the response or receipt time of other ports in the same CPU Core sending or receiving messages. The use of a Dedicated Core can therefore be used to mitigate this uncertainty.
The value of using a Dedicated Core will vary by member and depend on their trading strategies. The benefit of using a Dedicated Core which can lower overall latency by processing order messages faster (generated and received) will only primarily benefit trading strategies that depend on speed. Trading performance for trading strategies that are not latency sensitive will not benefit in the same way. The number of members using strategies that prioritize speed is small and highly concentrated.
As discussed above, the use of Dedicated Cores is entirely optional and is not necessary for members to trade. Members will continue to be offered the option to use a shared CPU Core at no additional cost, which we anticipate will be the choice made by most members. We anticipate that members will only choose to use a Dedicated Core if they have a justifiable business reason for using either only a single point or many ports in the Dedicated Core.
As an exchange operator, we believe the introduction of Dedicated Cores complementing the use of shared CPU Cores today will benefit all members. For those members subscribing to use a Dedicated Core, they will see the benefits noted above (enhanced trading performance and more effective risk management). For those members continuing to use a shared CPU Core we anticipate they will also see benefits from the same levels of message traffic that is processed today being redistributed across a larger number of CPU Cores that will increase performance for all.
Expected Impact on Market Structure, Members and the Capital Markets
The Proposed Change will result in providing an additional connectivity option for members which may assist them in improving trading performance and better managing risk. Any additional cost to a member from the introduction of Dedicated Cores will be the result of a decision made by a member who is willing to pay for the value they see from the service. However, as noted earlier, we expect all members to benefit from the introduction of Dedicated Cores whether they subscribe to a Dedicated Core directly or continue to use a shared CPU Core as the current level of message traffic will be distributed across a larger number of CPU Cores which in turn should provide an improvement in latency for all members.
Expected Impact on the Exchange's Compliance with Ontario Securities Law
There is no impact from the Proposed Change on Nasdaq Canada's compliance with Ontario securities law and in particular fair access. All members and their respective DEA Clients will be eligible to subscribe for the service on the same basis and on equal terms and subscription is entirely optional and not a requirement.
The use of a Dedicated Cores may result in faster processing times and lower latency. However, as discussed previously, this benefit will only be valuable to those members using trading strategies dependent on speed which represent only a small number of highly competitive firms. Therefore, while the use of a Dedicated Core will be made available to all members at a reasonable cost that in our view is fair and equitable, we expect only a few members will subscribe for the new service as we anticipate its value will be limited to only a few members.
The Proposed Change does not alter order handling priority, matching logic, or information access for any participant.
Consultation and Review
Consultations were undertaken with a variety of members to explore interest and receive feedback. The Proposed Change was also approved by the Nasdaq Canada Regulatory Oversight Committee prior to submission.
Estimated Time Required by Subscribers and Vendors (or why a reasonable estimate is not provided)
The use of Dedicated Cores is entirely optional so there is no time that will be required by members to make changes to their systems because of the Proposed Change. However, for those participants electing to subscribe for a Dedicated Core, it is anticipated that some time will be needed to set up the new connection. The length of this time will depend on a number of factors including the number of other members subscribing for the same service.
Will Proposed Fee Change or Significant Change introduce a Fee Model or Feature that Currently Exists in other Markets or Jurisdiction
Yes, a similar service is supported in many jurisdictions by CBOE in Canada, the United States, Europe, United Kingdom and Australia. In addition, Nasdaq supports a similar service in the United States.
Nasdaq Canada is proposing to introduce new fees associated with the introduction of Dedicated Cores (Proposed Fees). The Proposed Fees are outlined in the following tiered pricing model.
NUMBER OF CORES |
PRICE (per month/per core) |
|
|
1 -- 2 |
$500 |
|
|
3 -- 15 |
$750 |
|
|
16 -- 30 |
$1,000 |
There will be a limit of 10 ports made available for use with each Dedicated Core. There is a maximum number of 30 Dedicated Cores that can be ordered by a member or vendor and there is a maximum of 30 Dedicated Cores that a Direct Electronic Access (DEA) client can order across multiple sponsoring members. A Dedicated Core that is ordered by a DEA client of a member does not count toward that member's maximum 30 Dedicated Cores. In addition, the number of Dedicated Cores that are ordered by a member's DEA client do not count toward the number of total Dedicated Cores ordered by that member for the purposes of determining which pricing tier will apply.{3}
The use of a Dedicated Core is an optional service and is not a requirement for a member to trade. When ordering a Dedicated Core, a member is entitled to the use of all 10 ports made available in that Dedicated Core. However, a member is not obligated to use all 10 ports. Instead, a member can use a single port or multiple ports at their discretion.
Expected Date of Implementation
It is expected that the Proposed Change will be introduced on the first of the month following regulatory approval.
Rationale and Relevant Supporting Analysis
Nasdaq Canada is introducing the Proposed Fees for the following reasons: i) to charge a reasonable price that is commensurate with the value of the service provided, ii) to recuperate potential lost revenue for ports in a CPU Core that are not used and otherwise would have generated a fee; and iii) to recuperate a portion of the cost of new servers needing to be purchased as a result of demand for Dedicated Cores.
The added value of a Dedicated Core for certain members warrants a commensurate fee. Dedicated Cores may result in better trading outcomes for trading strategies relying on speed because of faster average message processing times and the ability to more effectively manage risk. Second, the Proposed Fees are being introduced to recuperate for the lost revenue of ports that otherwise will not be used. Members are charged $125 today for each logical connection or port (to a maximum of $5000). If a member ordering a Dedicated Core chooses to only use 4 ports of the 10 ports that are made available, the inactivity of the other 6 ports represents a loss of $750 ($125 X 6) in revenue. Finally, the Proposed Fees are being introduced to recuperate some of the anticipated cost to purchase new servers that will be required to satisfy demand for Dedicated Cores. The cost of new servers and their associated maintenance and support are not negligible and can amount to tens of thousands of dollars. Should sufficient demand for Dedicated Cores develop when they are made available, Nasdaq Canada will need to purchase new servers to satisfy this demand.
Expected Impact on Market Structure, Members or the Capital Markets
We expect the Proposed Fees to have no material impact on market structure, members or the capital markets. The Proposed Fees will not be imposed on any member that elects to continue to use a CPU Core that is shared with other members. For those members electing to subscribe for a Dedicated Core, we believe that the benefit of the service is commensurate with its price and recognizing that the evaluation of what level of benefit this will be is different for each member, we leave this decision to be determined by them.
Expected Impact on the Exchange's Compliance with Ontario Securities Law
There is no impact from the Proposed Fees on Nasdaq Canada's compliance with Ontario securities law and in particular fair access or a fair and orderly market. All members and their respective DEA Clients will be eligible to subscribe for the service on the same basis and on equal terms and subscription is entirely optional and not a requirement.
The use of a Dedicated Core may result in faster processing times and lower latency. However, as discussed previously, this benefit will only be valuable to members using trading strategies dependent on speed which represent only a small number of highly competitive firms. Therefore, while the use of a Dedicated Core will be made available to all members at a reasonable price that in our view is fair and equitable, we expect only a few members will subscribe to the new service as we anticipate its value will be limited to only a few members.
Consultation and Review
Consultations were undertaken with a variety of members to explore interest and receive feedback. The Proposed Change was also approved by management prior to submission.
Additional Information for the Proposed Fee subject to Public Comment
1. Expected number of marketplace participants likely to be subject to the new fees and a description of the cost.
While it is not possible to know the demand for Dedicated Cores when they are offered, we estimate that up to 10% of members may elect to subscribe for the new service and pay the corresponding fee.
2. If the proposed Fee Change subject to Public Comment applies differently across types of marketplace participants, a description of this difference, how it impacts each class of affected marketplace participant, including, where applicable, numerical examples, and any justification for the difference in treatment.
The Proposed Fees will apply equally and on the same terms to all types of marketplace participants.
Will Proposed Fee Change or Significant Change introduce a Fee Model or Feature that Currently Exists in other Markets or Jurisdictions
Yes, a similar service is supported in most jurisdictions by CBOE in Canada, the United States, Europe, United Kingdom and Australia. In addition, Nasdaq supports a similar service in the United States.
Any questions regarding these changes should be addressed to Matt Thompson, Nasdaq CXC Limited: matthew.thompson@nasdaq.com, T: 647-243-6242
{1} As defined in the Nasdaq CXC Limited Trading Rules and Policies Exchange Systems are the electronic systems operated by the Exchange for providing access to trading on the Exchange.
{2} Any variation or inconsistency in response time is called "jitter".
{3} For example, if a member subscribed for 2 Dedicated Cores and had a DEA client subscribe for 2 Dedicated Cores, that member would pay the Dedicated Core fee for each Dedicated Core associated with the first pricing tier (or $500) and not the fee for each Dedicated Core associated with the second tier ($750).