Friday News Finds – June 14, 2019

By Danica Bennewies

Its time for another Friday Finds on the CBLB – this is the weekly series where we share five of the top corporate and securities law news stories from the past week. So, if your attention was more focused on the NBA finals this week don’t worry, the CBLB is here to get you caught up on the biggest headlines, including industry and regulatory updates.

Since our last post, the Ontario Government has launched a new financial services regulator. On June 8th the Financial Services Regulatory Authority (FSRA) officially started regulating financial services and pensions in Ontario, replacing the Financial Services Commission of Ontario (FSCO) and the Deposit Insurance Corporation of Ontario (DICO). This new, self-funded regulator is an independent and integrated solution that oversees provincially regulated insurers, credit unions, trusts, and pensions. The FSRA is a key player in the government’s burden reduction goals. Some of its priorities include improving auto insurance to increase access and affordability of insurance for Ontario drivers and establishing title protection for financial planners and advisors. In a statement preceding the launch of the FSRA, finance minister Vic Fedeli highlighted the importance of this new regulator: “…making Ontario open for business means making sure financial services are efficient, responsive to consumers and businesses — FSRA will play a vital role in helping businesses grow while protecting consumers.” The government will continue to administer the FSCO’s dispute resolution services until the end of June, though no new proceedings will commence during this transitionary period.

In enforcement news, an Ontario court has upheld an earlier Ontario Securities Commission (OSC) disciplinary decision. Four former Sino-Forest Corp executives appealed two OSC hearing panel decisions that found them in violation of securities laws, banned them from the industry, and imposed $80 million in disgorgement and monetary penalties. Sino-Forest, previously a Chinese forestry giant listed on the Toronto Stock Exchange, collapsed in 2011 following questions surrounding the legitimacy of its assets and the accuracy of its accounting practices. The executives raised a number of questions on appeal, including whether the OSC’s rulings were reasonable and whether the panel took “Chinese business and cultural practices” into account when reaching its decision. However, the court dismissed all of the executives’ arguments, finding that the OSC panel considered Chinese cultural practices and that the final decision was unbiased and reasonable. In a statement on Tuesday, the OSC emphasized the importance of the court’s decision, stating that it “…further strengthens our resolve to work across international borders to investigate and prosecute those who seek to harm our markets and investors.”

We also have regulatory news from the Canadian Securities Administrators (CSA) this week. On Thursday, the CSA published a report on its achievements from 2016 to date as well as its plan for 2019 through 2022.  Over the past three years the CSA has completed the majority of its planned initiatives, for example the development of the Regulatory Sandbox, and is spending the next few months finalizing the remaining ones.  In its plans for the coming years, the CSA is maintaining a strong focus on retail investor protection initiatives, and will be proposing a number of client-focused rule reforms and changes to fund-industry commission structures. Regulatory burden reduction also features prominently in the report, with the regulator looking into ways to maintain investor protections while improving the efficiency of Canada’s capital markets. The report also highlights some more novel initiatives, with a focus on better managing emerging technologies and improving regulation of innovations like blockchain and crypto assets.

In industry news, Barrick Gold Corp is encountering roadblocks to its buyout proposal of Acacia Mining PLC. On Thursday, British hedge fund and Acacia investor Odey Asset Management said that it plans to reject any offer from Barrick for its stake in Acacia that is presented as a “best and final” offer. In a statement on Thursday, Acacia made clear that Odey’s rejection was not to any firm specific offer but instead a pre-emptive commitment to reject a particular style of offer from Barrick. Barrick’s original proposal to take control of the Tanzanian mining company was made last month and was valued at US$787-million, an amount 42% below Barrick’s own valuation of Acacia. According to Barrick’s chief executive, this discount reflects the risk that the company would be taking on by taking over Acacia and increasing its exposure in Tanzania. This is the second Acacia investor to publicly oppose Barrick’s buyout proposal, and the window for Barrick to make an offer is closing. The Canadian mining giant has until June 18th to make a formal bid for Acacia, or else walk away from the deal entirely.

Lastly, lets finish off with some global regulatory news. Cyber crime in the financial sector around the world is a growing concern that has a number of regulators worldwide teaming up to combat this risk. This week, the Monetary Authority of Singapore, the Bank of England, and the UK’s Financial Conduct Authority (FCA) announced plans to improve global cyber security. These plans include enhancing information sharing across countries and possibly even exchanging staff members. Global cooperation is key to improving cyber security in the financial sector, according to Bank of England governor Mark Carney. In a statement on Thursday, Carney said that “[c]yber risk is not constrained by geographic boundaries, making international cooperation essential to address this growing threat”. The regulators involved intend to formalize this collaboration through a memorandum of understanding, which is currently under development.

Thanks for joining us this week on the CBLB. We’ll be back next week with more of your corporate and securities law updates.