By Danica Bennewies
Welcome back to the CBLB for another installment of Friday Finds. This is the weekly series where we talk about five of the major corporate and securities law news stories that made waves in the media over the past week. A number of stories have dominated the headlines lately, including cryptocurrency regulation, a major automaker merger, and more. Keep reading to find out what was filling our conversations this week.
Crypto assets, and the uncertainty surrounding their regulation, have been a big topic lately. The British Columbia Securities Commission (BCSC) published a new guide on the sector aiming to demystify cryptocurrencies, while also warning of the variety of risks they can pose to investors. In particular, the BCSC pointed to liquidity, volatility, and security risks of crypto assets, as well as the fact that crypto trading platforms are generally unregulated. While the Canadian Securities Administrators (CSA) and the Investment Industry Regulatory Organization of Canada (IIROC) have begun consultations to review crypto-related regulatory proposals, a lot of uncertainty still exists around the regulation of these assets. In the United States, the Securities and Exchange Commission’s (SEC) uncertain approach to cryptocurrency regulation has become a major point of concern for crypto companies. On Tuesday, the Canadian start-up Kik started a crowdfunding campaign to help it fight a potential SEC enforcement action. Kik made its initial coin offering in 2017, calling its token a currency. In a proposed action, the SEC disagreed and argued that Kik’s tokens are actually securities. Kik’s dispute with the SEC has drawn the attention of major investors and cryptocurrency exchanges. These major players claim that the uncertain regulation of crypto assets is hurting innovation in the sector and are hoping that a legal battle between Kik and the SEC will lead to clearer rules.
In other regulatory news, the Ontario Securities Commission (OSC) and Autorité des marchés financiers (AMF) have joined forces with a number of other global regulators to increase cross-border enforcement efforts. At the latest annual meeting of the International Organization of Securities Commissions (IOSCO) both Canadian and US regulators signed on to IOSCO’s enhanced multilateral memorandum of understanding (EMMoU). EMMoU expands the regulators’ enforcement powers for combatting misconduct and protecting investors, including powers such as the ability to obtain and share certain records relevant to enforcement actions (for example, audit work papers and telephone records) and the ability to freeze assets or provide advise and information on how to freeze assets. The SEC, the US Commodities Futures Trading Commission (CFTC), and regulators from both Korea and the Bahamas were among those that signed on to EMMoU, bringing the total signatories to 11. With EMMoU, IOSCO aims to improve investor protection across borders. At its annual meeting, the organization highlighted the importance of this goal, particularly in light of growing cross-border activity and technological developments in securities markets.
In industry news, Exxon Mobil Corp held its annual meeting this Wednesday. At the meeting, shareholders rejected a number of different proposals, including ESG-related proposals. Shareholders voted against measures that would require the board to create a special committee on climate change, improve climate change risk reporting, and report political contributions and lobbying, as well as a proposal that would make it easier for shareholders to call special meetings. A proposal to split CEO and board chairman roles was also rejected, winning 41% of the shareholder vote. Despite being unsuccessful, the independent board chair proposal won a record level of support, highlighting shareholders dissatisfaction with Exxon’s current governance. In a statement following the meeting, CEO Darren Woods said that the company would continue to engage with shareholders on these issues.
Airlines were also making headlines again this week. On Wednesday, Transat AT Inc’s $520-million deal to sell itself to Air Canada was called into question. Peter Letko of the Montreal-based investment management firm Letko, Brosseau & Associates urged Transat not to sell to Air Canada, saying that the Quebec-based airline should instead restore its profitability through higher air travel and vacation prices before considering any offers. Letko, Brosseau & Associates is Transat’s largest shareholder, owning about 20% of the airline. The Quebec Economy Minister also spoke hesitantly about the deal. In a statement on Wednesday, a spokesperson for the Minister said that the province favours a buyer that will allow Transat’s headquarters to remain in Quebec, keeping the province as the centre for jobs and decision-making. While this does not exclude Air Canada from the running, the province is also willing to support other possible buyers that offer a “Quebec solution”. Transat declined to comment on either opinion, saying instead that the two airlines are still in the negotiations and due diligence phase and any shareholder vote would take place a couple months following the signing of a definitive agreement.
Speaking of the latest M&A activity, a potential automaker merger hit the headlines this week. On Monday, Fiat Chrysler proposed a $35-billion tie-up to Renault, a deal which, according to analysts, is designed to address the rising costs of technological and regulatory changes in the automotive industry. The proposed merger would be an all-share deal resulting in investors in each firm holding half of the new entity. If successful, the merger would form the third largest automaker in the world behind Toyota and Volkswagen. Renault has expressed some interest in the merger proposal, which it considers to be friendly. However, there are potential complications associated with the deal, including questions about what it would mean for Renault’s existing alliance with Nissan. In a statement on Wednesday, Nissan CEO Hiroto Saikawa sounded lukewarm about the deal, saying only that he did not see “any particularly negative aspect” to it. As the merger discussions play out, be sure to stay tuned to find out what this could mean for Nissan and the automotive industry as a whole.
That wraps up this week’s Friday Finds. Have a great weekend and be sure to check back next week for more corporate and securities law news!