By Danica Bennewies
Happy New Year and welcome to the first Friday Finds post of 2019! For those of you who are new to the blog, Friday Finds is the weekly series on CBLB where we share five of the top securities and corporate law news stories that dominated the headlines, and our conversations, over the past week. While we usually post on Fridays, we’re mixing it up with a Monday post to start your week off strong. Let’s jump right in to last week’s major stories.
You may recall that a few weeks ago we discussed Hydro One’s proposed $4.4-billion acquisition of Avista Corp, which was subsequently rejected by the Washington Utilities and Transportation Commission (WUTC). Last week, another state regulator blocked Hydro One’s acquisition attempt. On Thursday, the Idaho Public Utilities Commission (IPUC) rejected the proposed deal due to the “lack of independence” between Hydro One and the Ontario provincial government. This mirrors the WUTC’s decision issued in early December. This statement arises out of the fact that the Ontario government, which owns 47% of Hydro One, was able to pressure Hydro One’s CEO to resign after Premier Ford’s election in the summer. As part of the order released last Thursday, the IPUC stated that it was evident that “the province does not have to own 51% of Hydro One in order to effectively control the company”. Similar to the situation in Washington, Hydro One can petition the IPUC to reconsider the proposed deal and, if the petition is denied, the case may be taken to the Idaho Supreme Court.
Moving now to regulator news, the Ontario Securities Commission (OSC) and TMX Group have recently been disagreeing over the OSC’s regulation of clearing agencies. Last week, the OSC published an order exempting UK-based clearing house LME Clear Ltd from the requirement to be recognized as a clearing agency. Along with this order, the OSC also released a summary of comments received from TMX Group, paired with the OSC’s responses. According to the summary, TMX argues that the OSC’s regulation of clearing businesses puts domestic firms at a competitive disadvantage in comparison to foreign firms, as domestic firms are subject to prescriptive requirements from which foreign clearing firms are granted exemptions. The OSC responded that such exemptions are only granted when they do not pose a significant risk to Canadian capital markets and when the foreign firm faces similar regulatory oversight in its home jurisdiction. TMX also called for a more principles-based approach to clearing agency regulation, to which the OSC responded that it will “continue to be responsive to market evolution”.
This past Wednesday, the Alberta Securities Commission (ASC) published a list of the top five investment risks for 2019. The list warns about some of the most common investment scams that investors should be aware of in the new year, such as high-pressure sales tactics, sales of securities by non-registered individuals, and schemes built around new and emerging industries. Additionally, the ASC warns about affinity fraud – where victims invest in scams on the recommendation of someone they trust – and insider trading. The regulator also reminds investors of its new whistleblower program, which individuals should make use of if they suspect that securities misconduct has occurred. The bottom line of this list, which was compiled based on information from the ASC Enforcement Team, is that investors should be sure to conduct the necessary research before moving forward with an investment opportunity.
In other Canadian industry news, the robo-advisor firm Wealthsimple Inc. announced that it is launching a mutual fund dealer last week. The new firm, Wealthsimple Advisor Services Inc, is registered with the Mutual Fund Dealers Association (MFDA) of Canada and will give MFDA-licensed advisors access to Wealthsimple’s technology. In a news release, Wealthsimple for Advisors CEO J-F Courville stated that the purpose of the new firm is to free up advisors’ time so that they may focus on value-added services for their clients. The MFDA-licensed firm will provide support by automating front- and back-office operations, reducing time-consuming administrative tasks, and improving the overall client experience. According to the news release, Wealthsimple Advisor Services is an ideal solution for “growth-stage advisors”, as it allows these advisors to maintain ownership over and build their books of business, while outsourcing investment management.
Finally, in US economic news, Apple Inc CEO Tim Cook published a letter to investors last week, revising its projected revenue for the first fiscal quarter of 2019 to US$84-billion (down from the previously projected range of $89- to $93-billion). According to Apple, China’s slowing economy and the trade tensions with the US are to blame for the revenue slump. Following the announcement last Wednesday, Apple shares were down 10% at market close on Thursday. Apple isn’t the only corporation lowering its revenue projections – Delta Air Lines Inc, FedEx Corp, Starbucks Corp, and Tiffany & Co have all made downward adjustments to their profit forecasts. Furthermore, the S&P 500 fell 2.5% on Thursday, which makes the first two trading days of 2019 the worst start for US equities in 19 years.
Thanks for joining us for the latest installment of Friday Finds. We’ll see you back at the end of the week on the CBLB with another round-up of the latest securities and corporate law headlines!