By Danica Bennewies
Welcome back to Friday Finds on the CBLB. If you’re new to the blog, this is the weekly series where we share five of the top corporate and securities law news stories that grabbed our attention this past week. In today’s installment, we’re talking about Lyft, climate change, and the latest regulatory news from across Canada. Now that we’ve got your interest peaked, let’s jump in to this week’s stories.
Tensions are rising between the Canadian electricity generator TransAlta Corp. and U.S. activist investors Mangrove Partners over TransAlta’s $750-million partnership deal with Brookfield Renewable Partners LP. Mangrove claims that the deal was thrown together hastily, undervalues TransAlta’s assets, and closes the power generator off to potentially better deals. With these concerns in mind, last week Mangrove applied to both the Ontario and Alberta securities commissions asking for TransAlta’s annual shareholder meeting to be pushed back from late April to early June and for a separate shareholder vote on the deal. A few days later, the Ontario Securities Commission (OSC) ruled that the application should be dealt with in Alberta. However, in a turn of events, Mangrove withdrew its application this week. Its not clear, though, whether this marks an end to Mangrove’s campaign against the Brookfield deal. In fact, Mangrove has also said that, along with their allies, they intend to put forward five board of director nominees at TransAlta’s annual board meeting, which will now go ahead as originally planned on April 26th. Despite Mangrove’s opposition, TransAlta is feeling confident in the deal. The partnership arrangement is backed by TransAlta’s largest shareholder, RBC Global Asset Management, as well as proxy advisory firms Institutional Shareholder Services Inc. and Glass, Lewis & Co.
In regulatory news, a number of Canadian securities regulators, including those in Alberta, British Columbia, Manitoba, New Brunswick, Nova Scotia, Québec and Saskatchewan, announced an agreement with the U.K.’s Financial Conduct Authority (FCA) to enhance cooperation between their “regulatory sandbox” initiatives. The goal of these sandboxes is to provide controlled environments for businesses to experiment with new and innovative tools that will promote efficiency in the financial sector. Given the international nature of fintech businesses, the Canadian Securities Administrators (CSA) says that it is in all of the jurisdictions’ best interests to share information in order to better evaluate market trends. The OSC signed a similar deal with the FCA to enable cooperation between their two fintech initiatives back in 2017. The Toronto Stock Exchange (TSX) is also launching its own sandbox initiative. The exchange announced a framework that will allow it to accept listing applications that don’t satisfy the standard TSX listing requirements, so long as certain eligibility criteria are met. The sandbox will also function as a testing ground to trial new policy initiatives prior to implementation. These various sandbox initiatives will hopefully be a step forward in fostering innovation in Canada’s financial sector.
Regulators also confirmed rule changes to improve market oversight this week. On Thursday, the OSC approved the Investment Industry Regulatory Organization’s (IIROC) proposed rules to introduce new client identifier requirements in trading data. The rule changes, which IIROC originally proposed in 2017 and then further revised in 2018, will require each order for a listed security that’s sent to a marketplace and each reportable trade in a debt security to include a client identifier. IIROC believes that expanding the use of client identifiers in trading data will “improve the risk management, surveillance and investigatory capabilities of regulators.” More specifically, this change will make IIROC’s market surveillance and investigations more efficient as well as increase the accuracy and speed of data analyses done for regulatory purposes. The implementation will be rolled out in three phases, with requirements for debt securities starting in October of this year, identifiers for certain clients trading listed securities being required in October of next year, and the final phase rolling out in April 2021.
Let’s move to the US now. Despite its successful IPO, things haven’t been looking great for Lyft this week. Lyft went public at the end of March at US$72 per share, well above its originally targeted IPO price. However, in the weeks following its public debut its stock has fallen 17% to just under $60. As a result of this huge dip in price, this week two investors sued Lyft for securities fraud. The two separate class-action lawsuits claim that Lyft misled investors by overstating its market position. On its prospectus, the ride-sharing company claimed it had a 39% market share. The investors allege that this number was exaggerated and, furthermore, that Lyft failed to disclose its plans to recall over 1,000 of the bikes in its ride-share program. This withheld information lead to the dramatic drop in Lyft’s share price, the investors argue. Lyft has not yet commented on either lawsuit.
Finally, let’s talk about climate change. Climate change is not just an environmental issue, its an economic one as well. On Wednesday, the Network for Greening the Financial System (NGFS), a coalition of 34 central banks and supervisors representing five continents, published its first comprehensive report. The report examines how climate change functions as a source of financial and economic risk and calls for globally coordinated action to reduce these climate-related financial risks. In particular, the NGFS highlights a number of recommendations that provide central banks, policy makers, and financial sectors around the world with deliverable goals to move the global economy toward a greener future. These recommendations include integrating the monitoring of climate-related risks into day-to-day financial stability monitoring, incorporating sustainability factors into portfolio management, and, more broadly, the implementation of internationally consistent climate-related disclosure. In an open letter following the release of the report, Bank of England governor Mark Carney stressed the important role that the international financial community plays in addressing climate change: “Climate change is a global problem, which requires global solutions, in which the whole financial sector has a central role to play.”
Thanks for joining us for this week’s Friday Finds. If you want to stay on top of the latest corporate and securities law news, be sure to come back to the CBLB next Friday for another round up of the top headlines.