Friday News Finds – November 9, 2018

By Danica Bennewies

The weekend is right around the corner, but first let’s get caught up on what was happening in the news this week with Top Five Friday Finds. This is a weekly series on the CBLB where we round up five of the corporate and securities law headlines from the past week that grabbed our attention.

First up, we have news from the Supreme Court of Canada (SCC). This morning, the SCC unanimously found that the implementation of pan-Canadian securities regulation by a single national securities regulator is constitutional. This ruling is good news for Ottawa and Ontario, B.C., Saskatchewan, New Brunswick, P.E.I., and Yukon, as it allows them to move ahead with instituting their proposed Cooperative System, should they so choose. The proposed system includes two model statutes – the Capital Markets Act and the Capital Markets Stability Act. The Capital Markets Act focuses on day-to-day securities trade while the Capital Markets Stability Act deals with managing risk in financial markets and establishes a national securities regulator that would be overseen by the federal minister of Finance. The Court was careful to note that its advisory opinion was limited to the constitutionality of the Cooperative System, but did not take into consideration future political or practical complications that may arise. Furthermore, it is up to each jurisdiction to determine if it is in their best interests to participate. Though the SCC has now approved this regulatory model, it still remains to be seen where the government will stand on the idea of a cooperative regulator. In an article for the Financial Post, Professor Anita Anand commented, “[t]hey [the Liberal Government] have been conspicuously quiet on the issue of securities regulation in this country, which is surprising given that over 50 per cent of adult Canadians are invested in the capital markets.”

Let’s turn to another big topic of the week: the U.S. midterm elections. Wednesday’s headlines were dominated by reactions to Tuesday night’s election results, including the reactions of the stock markets. Canadian and U.S. stock markets both closed higher on Wednesday, thanks to gains from health-care stocks. The Democratic Party won control of the House of Representatives, which signalled that the Republicans will be unlikely to succeed in repealing Obamacare. A number of the large insurers saw significant gains on the Dow Jones in response to this good news. Cannabis stocks also experienced significant gains in both Canadian and U.S. markets after pro-legalization results in the midterms. Voters approved changes in three states that would get rid of cannabis legalization barriers. Furthermore, in Texas, Democrat and medical marijuana supporter, Colin Allred, took over Republican Pete Sessions’ seat in the House of Representatives. Finally, resignation of U.S. attorney-general Jeff Sessions, an avid marijuana critic, has made both investors and legalization advocates optimistic. In particular, shares of B.C.’s Tilray closed 30% higher on the Nasdaq, while, on the TSX, Aurora Cannabis gained nearly 9%.

In securities regulator news, the Ontario Securities Commission (OSC) held its annual policy conference in Toronto this week, where Chairwoman Maureen Jensen announced the launch of a new internal task force. The new task force’s goal will be to look for ways to make regulation less prescriptive and reduce the regulatory burden on the industry, while still maintaining strong investor protection. This is a change in approach for the OSC, which comes in response to the provincial government’s change in approach toward securities regulation. The Ontario government made a sharp shift in the regulatory environment when it opposed the CSA’s proposed ban on deferred sales commissions on mutual funds back in September. At the conference on Thursday, Ms. Jensen emphasized the importance of having government support for the regulator’s actions and that this should be seen as an opportunity to review the rules and regulatory framework of the OSC.

The Canadian Securities Administrators (CSA) launched a campaign this week to raise investor awareness of the new Exchange-Traded Funds (ETF) Facts document, which will be provided by dealers to investors when they invest in an ETF. Starting on December 10th of this year, dealers will be required to provide these Facts to investors whenever they purchase ETF securities. This new document is modeled off of Fund Facts, a similar fact document delivered to investors when they purchase mutual funds. Similar to Fund Facts, the purpose of ETF Facts is to give investors clear information on their purchased ETF, including fees, expenses, and the ETF’s performance. Dealers will have two days following the sale to deliver ETF Facts to investors, unlike Fund Facts which is required to be delivered at the time of the sale. The CSA hopes that this campaign, which includes a new webpage and ETF Facts sample, will enlighten investors of the benefits of reading these facts and empower them to have informed conversations with their dealers.

Lastly, we discussed the MEG/Husky takeover bid last week, but another oil takeover bid has also been making headlines. In October, Precision Drilling Corp made a friendly all-stock takeover offer to acquire Trinidad Drilling Ltd. The offer was worth $550 million at the time, out-bidding a hostile bid from Ensign Energy Services Inc valued at $470 million. However, energy shares have fallen dramatically over the past month, with Precision’s stock price falling over 28%. As a result, the value of Precision’s bid for Trinidad (0.445 of one of its shares for each Trinidad share) has decreased since the announcement of the deal. In fact, Precision’s bid has fallen below Ensign’s original bid, giving Ensign the upper hand. Precision has not yet announced whether it will increase its bid or not. However, even if it increases its bid, shareholders may require Precision to add cash to the deal for added stability, given the current shaky market conditions.

Thanks for getting caught up with us on this week’s headlines. Come back next Friday for another installment of Top Five Friday Finds.