By Danica Bennewies
Welcome back to another installment of Friday Finds, the weekly series here on the CBLB where we round up five of the top corporate and securities law news stories that dominated the headlines over the past week. This week has not only been busy with holiday activities – a lot has happened in the securities law world as well. Let’s get caught up…
In industry news, Aphria Inc, one of Canada’s major cannabis market players based in Ontario, was faced with a hostile takeover bid on Thursday. The proposed $2.8-billion all-stock bid was made by the US company Xanthic Biopharma Inc, which does business as Green Growth Brands. Aphria claims that this hostile bid significantly undervalues the company and is based on a hypothetical inflated valuation of Green Growth’s own shares, with no relation to its current price. Furthermore, Aphria says that there are a number of risky conditions attached to Green Growth’s offer. Green Growth CEO, Peter Horvath, responded with a statement that the offer would create value for the shareholders of both companies by accelerating growth in Canada, the US, and internationally.
The Canada Pension Plan Investment Board (CPPIB), the largest public pension fund in Canada, is using its voting power to push for improved gender equality on boards of directors. The CPPIB recently announced a new voting policy, called the Global Diversity Voting Practice. Under this new practice, the CPPIB will vote against any chairman of a company’s director-nominating committee if there are no female members on the board. According to the CPPIB’s chief executive, Mark Machin, companies with female directors are likely to have better long-term financial performance, making driving these superior corporate behaviours an important part of the CPPIB’s mandate. Some improvement in board gender diversity has been made over the past year. In 2017, the CPPIB voted at the annual meetings of 45 Canadian companies with male-only boards. Since then, half of these companies have appointed at least one female director.
Moving now to market news, stock markets in both Canada and the US have experienced significant volatility lately. The Dow Jones Industrial Average dropped more than 650 points on Monday, making it the worst recorded Christmas Eve day of trading. The S&P 500 also dropped on Christmas Eve, falling more than 50 points and entering a bear market. Thursday saw an improvement, however, when markets reopened following the holiday. The S&P/TSX rose by nearly 3%, while the Dow and S&P 500 were up nearly 5%. Market volatility has been elevated for a number of weeks now, and this has been made even more pronounced by the lower volume of trading over the holiday season. With 2019 approaching quickly, analysts are making a number of market predictions for the new year. For example, Wall Street analysts have predicted that the increased volatility will continue into 2019, with markets seeing a rebound after a rough December.
In US news, the Securities and Exchange Commission (SEC) experienced a first last Friday, when it brought enforcement actions against two robo-advisory firms for making misleading statements to investors. The two firms, Wealthfront Advisers LLC and Hedgeable Inc, both agreed to settlements, though neither one admitted nor denied the SEC’s findings against them. In the allegations against Wealthfront the SEC found that, among other violations, the firm improperly retweeted prohibited client testimonials, failed to maintain a proper compliance program, and paid bloggers for client referrals without the necessary disclosure. In a separate action, the SEC found that Hedgeable also did not have an adequate compliance program, as well as shared misleading performance comparisons online. Wealthfront has agreed to pay a $250,00 penalty, while Hedgeable has agreed on a $80,000 penalty.
Lastly, Morgan Stanley faced some trouble this week. The financial giant has agreed to pay a fine of $10-million, following allegations of insufficient fraud monitoring from the Financial Industry Regulatory Authority (FINRA). FINRA claimed that for the past five years Morgan Stanley’s anti-money laundering program failed to sufficiently monitor transactions through brokerage accounts, in particular transactions involving transfers to and from countries with a known money-laundering risk. Morgan Stanley has neither admitted nor denied the allegations, but did release a statement that it is continuously working to strengthen its controls and enhance its anti-money laundering programme.
That concludes this week’s Friday Finds, as well as our final post of 2018. We will see you back in the new year with another weekly roundup of business law headlines!