By Danica Bennewies
Welcome back to Friday Finds on the CBLB – the weekly series where we discuss five of the top corporate and securities law news stories that have been dominating the headlines recently. We’re back from our brief break and have a lot of news to catch up on, so let’s jump right into this week’s stories.
In line with the burden reduction efforts we’ve been talking about lately, the Canadian Securities Administrators (CSA) laid out a plan for a new integrated national information and filing system for Canadian capital markets. This new system would replace a number of existing systems, including the System for Electronic Document Analysis and Retrieval (SEDAR), the System for Electronic Disclosure by Insiders (SEDI), and the National Registration Database (NRD). The CSA intends their new system to be a single point of access for market participants, making document filing and access more user friendly and cost effective, and hopefully reducing the administrative burden for market participants. Along with introducing the new system, the CSA is also proposing a new system fee structure and new filing requirements that would require all documents (with certain exceptions) to be transmitted electronically to securities regulators using the new system. According to its latest news release, the CSA will roll out the new system in three phases, with the first phase focused on replacing issuer-related systems and filings expected in 2021.
This isn’t the only burden reduction initiative the CSA has undertaken recently. On Thursday, the CSA published proposed rule changes that would enable issuers to more easily access capital through “at-the-market” (ATM) offerings. ATM offerings are secondary distributions of securities made by an issuer under a base shelf prospectus and typically require the issuing firm to seek certain reporting exemptions before making a distribution. These distributions are seen more frequently in the United States than Canada, and industry players point to the higher Canadian regulatory requirements as a key factor in this difference. However, under the proposed rule changes, the CSA would codify these exemptions, making it faster and easier for these issuers to access capital. By reducing this regulatory burden, the CSA hopes to improve issuers’ abilities to access alternative forms of capital. These changes would bring Canada’s regulatory regime for ATM offerings more in line with the U.S., and we may see more of these securities distributions in Canadian capital markets as a result. The proposals are open for comment until August 7th.
Moving to enforcement news , the Ontario Securities Commission (OSC) is considering a settlement in an action against the former blockchain investment firm, NextBlock Global Ltd, and its founder, Alex Tapscott. In the Statement of Allegations released on Thursday, the OSC alleges that NextBlock and Tapscott misled prospective investors through the use of inaccurate slide decks presented as part of NextBlock’s offering memoranda. The slide presentations were presented to over 100 potential investors and allegedly presented “certain prominent figures” in the blockchain industry as advisors to NextBlock, when in fact no such relationships existed. On top of this, one of the advisor’s photos included in the slide deck was incorrect. NextBlock and Tapscott used the slide deck to raise approximately $20 million. While the investment ultimately worked out for these investors – their money has since been returned plus a profit – the OSC claims that the false offering memoranda denied investors the opportunity to make a fully informed investment decision. A hearing is scheduled for next Monday to determine whether the settlement should be approved, the terms of which have not yet been made public.
Turning our focus to industry news now, on Tuesday, Statistics Canada released its first-ever assessment of the gender composition of different Canadian corporate boards, with underwhelming results. The report found that women were underrepresented on boards, with less than 20% of board seats being held by women in 2016. The report is based on 2016 data gathered through the Corporations Return Act and analyzes corporate board diversity across public, private, and government corporations. The results highlight the need for improved gender diversity on Canadian corporate boards, with 56% of boards filled entirely by men and only 15% having more than one woman. This under-representation of women is also concerning when you consider recent studies indicating that more diverse boards are more effective, consider different kinds of risks, and boost innovation. Thus, improving board diversity is also an important step in enhancing firm performance and strengthening corporate governance.
Finally, Toronto-based private equity firm Onex Corp. announced on Monday that it has signed a deal to buy WestJet Airlines Ltd. and operate it as a private company. Under the friendly all-cash deal, Onex will pay $31 per WestJet share – an approximately 67% premium on the airline’s current share price. This premium can be attributed in part to WestJet’s recent growth and its ongoing efforts to transition from a regional budget airline to a full-service international airline. The deal isn’t closed yet though; court, regulatory, and shareholder approvals are still required before the transaction is complete. While shareholder opinions have not yet been made clear, given the pricing premium it seems likely that the deal will be approved. A shareholders meeting is expected in July, at which WestJet’s board of directors has already unanimously recommended shareholders vote in favour of the transaction. Assuming all of the conditions are met and approvals received, the deal is expected to close in late 2019 or early 2020.
That wraps up today’s post! Thanks for getting caught up on the latest major corporate and securities law news with us. Be sure to come back to the CBLB on Friday for another round-up of the biggest headlines.