Companies

Insider Reporting


Under the Securities Act (Ontario) and National Instrument 55-104 Insider Reporting Requirements and Exemptions, a reporting insider of a reporting issuer is generally required to file reports disclosing information about transactions involving the company's securities or related financial instruments, unless the reporting insider is eligible for an exemption from the insider reporting requirement.

All insiders, including insiders who are not reporting insiders, are subject to the provisions in Canadian securities legislation prohibiting improper insider trading.

Why does the OSC require reporting insiders to file insider reports?

The insider reporting requirements serve a number of functions, including deterring improper insider trading based on material undisclosed information and increasing market efficiency by providing investors with information concerning the trading activities of insiders of an issuer, and, by inference, each insider's views of the issuer's prospects.

Insider reporting also helps prevent illegal or otherwise improper activities involving stock options and similar equity-based instruments, including stock option backdating, option repricing, and the opportunistic timing of option grants (spring-loading or bullet-dodging), since the requirement for timely disclosure of option grants and public scrutiny of such disclosure will generally limit opportunities for insiders to engage in improper dating practices.

Who is an insider?

An insider of a reporting issuer is defined in section 1(1) of the Securities Act (Ontario) and a reporting insider of a reporting issuer is defined in National Instrument 55-104 Insider Reporting Requirements and Exemptions.

Generally, a person or company is a reporting insider of a reporting issuer if the person or company has routine access to material undisclosed information concerning a reporting issuer and significant influence over the reporting issuer.

Where can I find exemptions from the insider reporting requirement?

Ontario securities law includes a number of exemptions from the insider reporting requirement. These exemptions can be found in the following regulation and rules:

What information is required in an insider report?

The insider reporting requirement for securities and related financial instruments can be found in sections 106 to 109 of the Securities Act (Ontario) and Part 3 of National Instrument 55-104 Insider Reporting Requirements and Exemptions.

A reporting insider of a company is generally required to file insider reports disclosing:

  • any direct or indirect beneficial ownership of, or control or direction over, securities of the reporting issuer;
  • any interest in, or right or obligation associated with, a related financial instrument involving a security of the reporting issuer; and
  • any change in any of the above information.

Supplementary insider reporting requirements for derivatives that are not covered by the primary insider reporting requirement can be found in Part 4 of National Instrument 55-104 Insider Reporting Requirements and Exemptions. Under Part 4, a reporting insider is generally required to file a report about a derivative transaction involving securities of the reporting issuer if:

  • the transaction directly or indirectly alters the insider's economic interest in a security of the reporting issuer or economic exposure to the reporting issuer; and
  • the insider is not otherwise required to file an insider report about the transaction.

A reporting insider who is required to file an insider report about a derivative transaction must disclose the existence and material terms of the transaction in the insider report.

What are the deadlines for filing an insider report?

A reporting insider is generally required to file an initial insider report within 10 calendar days of becoming a reporting insider. Any subsequent insider reports reflecting changes in their holdings must be filed within five calendar days.

Canadian securities legislation contains a number of exemptions that permit reporting insiders to file reports on a deferred basis in circumstances where the policy rationale for "real time" reporting does not apply.

For more information on exemptions for insider reporting see Part 5 and 6 of National Instrument 55-104 Insider Reporting Requirements and Exemptions.

How to file an insider report

Reporting insiders are generally required to file insider reports in electronic format in accordance with National Instrument 55-102 System for Electronic Disclosure by Insiders (SEDI).

More information about SEDI can be found at www.sedi.ca.

Consequences of not filing an insider report

It is an offence to fail to file an insider report in accordance with the filing deadlines prescribed by Ontario securities law or to submit information in an insider report that, in a material respect, is misleading or untrue.

A failure to file an insider report in a timely manner, or the filing of an insider report that contains information that is materially misleading, may result in one or more of the following:

  • the imposition of a late filing fee;
  • the reporting insider being identified as a late filer on a public database of late filers maintained by certain securities regulators;
  • the issue of a cease trade order that prohibits the reporting insider from trading in securities and related financial instruments of the applicable reporting issuer, whether direct or indirect, until the failure to file is corrected; or
  • in appropriate circumstances, enforcement proceedings.

Where to find more information

For more information, see: