By Danica Bennewies
Welcome to the CBLB’s weekly series, Top Five Friday Finds. We’re back from our brief hiatus with another round up of five major corporate and securities law news stories that dominated this week’s headlines, as well as our conversations.
Let’s get started by catching up on some ongoing industry news from the past two weeks. Earlier in December, the Washington Utilities and Transportation Commission (WUTC) rejected Hydro One’s proposed $4.4-billion acquisition of Avista Corp. In its decision, the regulator cited the Ford government’s interference in Hydro One’s corporate governance as one of the reasons behind its rejection. You may recall that Premier Doug Ford forced Hydro One’s former CEO to retire over the summer (followed by the resignation of the board of directors), claiming that this would bring Ontario’s hydro rates down. In a recent article for the Globe and Mail, Professor Anita Anand highlighted the major issues with this governmental interference: “The Ford government is not acting as a majority shareholder but as a political overseer, poking its fingers into the governance of what is supposed to be a public corporation.” This week, Hydro One and Avista Corp made a formal request to the WUTC to reconsider its denial of the acquisition, stating that the regulator “misapprehended” the political risks to Avista associated with the Ontario government’s ownership stake in Hydro One. If the WUTC grants the rehearing, Hydro One and Avista have requested to have the proceedings expedited, concluding by the end of January.
Moving now to regulator news, on Tuesday, the Ontario Securities Commission (OSC) announced approval of a settlement with Katanga Mining Limited regarding disclosure violations. As part of the settlement, Katanga has agreed to pay $28.5 million (CAD) to the OSC, as well as an additional $1.5 million to cover costs of the investigation. Furthermore, under the settlement the mining company has admitted that it failed to ensure it had adequate internal controls over financial reporting, and failed to disclose any of these material weaknesses. As a result of these failed controls, Katanga made a number of materially misleading financial disclosures to investors. On top of the $30 million payment, current and former Katanga executives – including current CEO John Blizzard – are also required to pay penalties, and will face bans between two to six years from service as officers of public companies.
The Canadian Securities Administrators (CSA) has also been busy. This week the CSA published a notice regarding a proposed Trading Fee Rebate Pilot Study. The study seeks to examine the impact of trading fees and rebates on market participant behavior by temporarily prohibiting the payment of these rebates by Canadian marketplaces. Under the CSA’s proposal, the pilot would run concurrently with the Securities and Exchange Commission’s (SEC) Transaction Fee Pilot in the United States. The CSA’s pilot study would focus on a sample set of equity securities that includes both highly liquid and actively traded, medium-liquidity securities. The proposal is currently open for comment until February 1, 2019.
Speaking of studies, a new survey conducted by Edelman found that environmental, social and governance (ESG) risks are growing in importance for Canadian institutional investors. The survey polled 500 institutional investors from five countries (Canada, the US, the UK, Japan, and Germany) over the months of September and October. Included in the results was the finding that 91% of Canadian institutional investors would consider investing with a lower rate of return if that investment involved sustainable or impact investing considerations. Furthermore, 91% of Canadian institutional investors also said that their firm has changed voting strategies to be more attentive to ESG risks. In particular, the top three issues for Canadian investors were cybersecurity, globalization, and income inequality. The survey also found that the majority of institutional investors, both in Canada and over the entire study sample, are becoming more interested in taking an activist approach to investing. A full report of the survey findings can be found here.
Lastly, this week in the US, two congressman introduced a bill that would amend the Securities Exchange Act and introduce a new definition for “digital tokens”. Under this new bill, entitled the “Token Taxonomy Act”, securities laws would not apply to cryptocurrencies that form a fully functioning network. There has been ongoing debate regarding whether securities law applies to digital currencies, given that these digital assets do not fall cleanly under the traditional definition of a security. Over the past year, the SEC has clarified the law as it applies to cryptocurrencies and stated that ICOs and tokens are considered to be securities, while cryptocurrencies that serve as replacements for sovereign currencies do not fall under SEC jurisdiction. However, this new bill seeks to actually change the statutes that the SEC follows. The Token Taxonomy act has been in the works for a few months, and is largely the result of a roundtable hosted in Washington in September regarding the legislation of cryptocurrencies.
That’s all we have for this week’s top news stories. Check back here next week for another round up of Friday Finds, and until then have a safe and happy holiday!