By Danica Bennewies
Welcome back to another installment of Friday Finds on the CBLB. If you’re new to the blog, this is the weekly series where we share five corporate and securities law news stories from the past week that dominated the headlines, as well as our conversations. This week we have more updates for you on the Barrick/Newmont deal, the latest regulatory news regarding cryptocurrency, and more. Keep reading to find out which stories got us talking this week.
First up, lets check in on the latest developments in the Barrick Gold/Newmont Mining deal. We’ve been talking about this potentially massive acquisition for the past couple of weeks, ever since Barrick launched its hostile takeover bid for its rival, Newmont, back in February. On Monday, Barrick announced that it is abandoning its takeover plans and the two gold miners have instead agreed to a joint venture to consolidate their adjacent Nevada mines. The new deal would only merge the companies’ assets and operations in Nevada, rather than the entirety of the companies’ assets, as would have happened under Barrick’s original takeover bid. Under the joint venture, Barrick will take the lead in managing the Nevada operations, with Newmont in a supportive role. Barrick and Newmont are predicting half a billion (USD) in synergies in the first five years to result from the joint venture. Furthermore, this agreement leaves Newmont open to pursue its takeover of Goldcorp. Following announcement of the joint venture on Monday, Goldcorp issued a statement confirming its support for the deal and welcoming the news that Barrick has withdrawn its proposal to acquire Newmont. Newmont and Goldcorp shareholders have yet to vote on whether to approve the transaction – stay tuned to the blog find out what happens next.
Moving to the regulators, the Canadian Securities Administrators (CSA) released a proposal on Thursday concerning a new regulatory framework for crypto-asset trading platforms. The proposal seeks input from the fintech community and other market participants regarding new rules to limit the risks associated with cryptocurrency trading platforms and prevent users from losing access to their funds. The CSA highlighted a number of areas of concern in crypto-asset trading, including inadequate safeguarding of investors’ crypto-assets, lack of information about platforms and the crypto-assets available for trading on them, lack of transparency of order and trade information, and conflicts of interest between platform operators and participants. Following in the wake of the QuadrigaCX issues, these proposals are unsurprising. The CEO of Canada’s largest cryptocurrency exchange passed away in December, leaving customers of the platform unable to access $250-million. Since then, there has been a growing call for improved regulation of cryptocurrency trading platforms from both consumers and industry players alike. The CSA’s proposal will remain open for comment until May 15th, though its unclear at this point when any new regulations would come into effect.
The CSA also released a joint consultation paper with the Investment Industry Regulatory Organization of Canada (IIROC) this week, seeking industry feedback on the issue of internalization within the Canadian equity market. Broadly speaking, internalization refers to a trade where the dealer acts as both the buyer and the seller. In particular, the CSA and IIROC are looking into how internalization impacts the fairness and efficiency of markets, and the conflicts of interest that arise from broker preferencing practices (i.e. when incoming orders match and trade first with other orders from the same dealer, despite the existence of orders from other dealers at the same price with time priority). The consultation paper states that recent concerns about increasing levels of internalization are based on the view that “systems are being employed to segment and internalize predominantly retail orders, leaving significantly less opportunity for the broader market to trade with retail clients…”. No specific policy proposals are given in the paper, and both the CSA and IIROC have stated that they have not yet decided whether any rule changes will be necessary. The consultation paper remains open for comment until May 13th.
In news from the US this week, the Securities and Exchange Commission (SEC) is suing Volkswagen. In a press release issued on Thursday, the SEC announced that charges have been brought against the German carmaker, two of its subsidiaries, and its former CEO, Martin Winterkorn, for defrauding American investors. The complaint relates to USD$13-billion raised in bonds and other securities in 2014 and 2015, and alleges that Volkswagen made a series of “deceptive claims” about the environmental impact of its technology and its financial health. This allegedly fraudulent behaviour occurred around the same time as “dieselgate” – the major scandal in 2015 where Volkswagen admitted to installing specialized software in millions of its vehicles worldwide in order to cheat carbon dioxide emissions testing. The SEC’s complaint contends that senior executives at Volkswagen knew that 500,000 of its vehicles “grossly exceeded legal vehicle emissions limits” at the time that it was raising money from investors. Thus, by hiding this emissions scheme and issuing securities at more attractive rates, the SEC claims that Volkswagen gained hundreds of millions of dollars in benefit. If the lawsuit is successful, Volkswagen could face civil penalties, disgorgement of ill-gotten gains, and Winterkorn could be barred from serving as a company officer or director in the US. Today, Volkswagen made it clear that it plans to contest the lawsuit, calling the SEC’s claims “legally and factually flawed”.
While we’re on the topic of carbon dioxide emissions, lets talk about an initiative that UK regulators are launching to help protect the financial industry from looming climate change risks. The Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) held the inaugural meeting of the Climate Financial Risk Forum (CFRF) last Friday. The forum brought together major financial industry players, such as regulators, banks, and asset managers, to discuss and develop best practices for responding to the financial risks that climate change poses. While these risks are not yet fully realized, they are becoming more apparent. Firms are enhancing their approaches to managing climate change risks, however they often face barriers in implementing the forward-looking, strategic type of approach necessary to effectively minimize these risks. As such, the aim of the CFRF is to develop practical tools to address climate change-related financial risks and overcome these implementation barriers. In its first meeting, the CFRF set up four working groups to develop specific guidance on four main focus areas: risk management, scenario analysis, disclosure, and innovation. The CFRF’s initial membership boasts some big names from both the banking and asset management sectors, including HSBC, JP Morgan, and Blackrock. As climate change becomes an increasingly important topic of discussion around the world and across industries, the development of the CFRF is not unexpected and we’re interested to see what tools and practices come out of this new forum.
That wraps up this week’s Friday Finds. We hope you enjoyed this week’s post and maybe even learned something new! Join us back on the CBLB next week for another round up of the top corporate and securities law news stories.