National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions – reporting insider party to automatic securities disposition plan – relief granted from section 3.3 of NI 55-104 and subsection 107(2) of the Securities Act (Ontario), provided that reporting insider file reports with respect to dispositions under the plan during the year by March 31 of the next calendar year.
Applicable Legislative Provisions
Securities Act, R.S.O. 1990, c. S.5, as am., s. 107(2).
National Instrument 55-104 Insider Reporting Require-ments and Exemptions, s. 3.3.
Citation: Re Source Energy Services Ltd., 2018 ABASC 3
January 2, 2018
IN THE MATTER OF
THE SECURITIES LEGISLATION OF
ALBERTA AND ONTARIO
IN THE MATTER OF
THE PROCESS FOR EXEMPTIVE RELIEF
APPLICATIONS IN MULTIPLE JURISDICTIONS
IN THE MATTER OF
SOURCE ENERGY SERVICES LTD.
(McMahon) (collectively, the Filers)
The securities regulatory authority or regulator in each of the Jurisdictions (each a Decision Maker) has received an application from the Filers for a decision (the Exemption Sought) under the securities legislation (the Legislation) of the Jurisdictions exempting Mr. McMahon, a director of Source, from the requirement in Section 3.3 of National Instrument 55-104 Insider Reporting Requirements and Exemptions (NI 55-104) and Subsection 107(2) of the Securities Act (Ontario) (the Ontario Act) to file an insider report within five days following the disposition of securities under his ASDP (as defined below), subject to certain conditions.
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a dual application):
(a) the Alberta Securities Commission is the principal regulator for this application;
(b) the Filers have provided notice that Sub-section 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in British Columbia, Saskatchewan, Manitoba, Quebec, New Brunswick, Nova Scotia, Newfoundland, Prince Edward Island, Northwest Territories, Yukon and Nunavut; and
(c) this decision is the decision of the prin-cipal regulator and evidences the deci-sion of the securities regulatory authority or regulator in Ontario.
Terms defined in National Instrument 14-101 Definitions, MI 11-102 or NI 55-104 have the same meaning if used in this decision, unless otherwise defined herein.
This decision is based on the following facts represented by the Filers:
1. Source is a corporation existing under the laws of the Province of Alberta and is a reporting issuer under the securities legislation of each of the provinces and territories of Canada. Source is not in default of securities legislation in any jurisdiction.
2. The head office of Source is located in Calgary, Alberta.
3. The authorized share capital of Source consists of an unlimited number of common shares (Com-mon Shares), an unlimited number of preferred shares, issuable in series, and an unlimited number of Class B Shares. As at November 30, 2017, Source had 61,551,712 Common Shares, 1,300,154 Class B Shares and no preferred shares of any series issued and outstanding.
4. The Common Shares are listed and posted for trading on the Toronto Stock Exchange under the symbol "SHLE".
5. McMahon is a director of Source and is a reporting insider. McMahon is not in default of securities legislation in any jurisdiction.
6. As at November 30, 2017, McMahon beneficially owned, controlled or directed 8,197,903 Common Shares (representing approximately 13% of the then outstanding Common Shares) and 8,571 deferred cash units.
7. McMahon wishes to sell up to a total of 170,000 Common Shares pursuant to the ASDP (as defined below).
The Automatic Securities Disposition Plan
8. RBC Dominion Securities Inc. (the Adminis-trator), Source and McMahon entered into an automatic securities disposition plan (the ASDP) dated effective November 17, 2017 to facilitate the automatic sale of up to 170,000 Common Shares beneficially owned by McMahon that have been deposited into an account managed by the Administrator in accordance with the trading parameters and other instructions set out in the ASDP.
9. McMahon can only make changes to the trading parameters and other instructions set out in the ASDP or voluntarily terminate the ASDP if all of the following conditions are met:
(a) McMahon has obtained the prior written consent of Source in accordance with Source's disclosure policy;
(b) McMahon has provided notice to the public of the proposed change by describing it in a filing on the System for Electronic Disclosure by Insiders (SEDI) and in a news release, which shall include a representation that at the time of the amendment or voluntary termi-nation he was not aware of or in possession of a undisclosed material fact or material change about Source or any securities of Source; and
(c) McMahon has provided the Administrator with a certificate from Source confirming that Source has pre-cleared the amendment or voluntary termination of the ASDP in accordance with Source's disclosure policy.
10. The ASDP does not provide for any waiting period following the voluntary termination of the ASDP by McMahon before he can enroll in a new ASDP. However, this decision does not provide the Requested Relief in respect of any new ASDP or beyond the time specified in 20(a).
11. The Administrator is a securities broker that is at arm’s length to Source and McMahon.
12. The Administrator has been appointed as an independent broker to effect sales of the Common Shares pursuant to the terms and conditions of the ASDP. The dispositions under the ASDP will be effected by the Administrator in accordance with the pre-determined instructions as to the number and dollar value of the Common Shares to be sold, and other relevant information, all as set out in the ASDP.
13. Excluding block trades, the maximum number of Common Shares that can be sold pursuant to the ASDP on any trading day shall not exceed 10% of the average daily trading volume in such Common Shares over the previous 20 days.
14. Except to set trading parameters in the manner described, McMahon does not have the authority to make investment decisions or influence or control any disposition effected by the Administrator pursuant to the ASDP and the Administrator and McMahon will not consult regarding any disposition.
15. McMahon will not disclose to the Administrator any information concerning Source that might influence the execution of any disposition under the ASDP.
16. The ASDP includes a waiting period of 30 days between the date of adoption of the ASDP and the date that the first disposition may be made under the ASDP.
17. The ASDP has been structured to comply with applicable securities legislation and guidance, including Paragraph 147(7)(c) of the Securities Act (Alberta) (the Alberta Act), Paragraph 175(2)(b) of the General Regulation under the Ontario Act and Ontario Securities Commission Staff Notice 55-701 Automatic Securities Disposition Plans and Automatic Securities Purchase Plans (OSC Notice 55-701).
18. At the time of execution of, and entering into the ASDP, McMahon represented that he was not aware of or in possession of material non-public information about Source or any securities of Source and that he was entering into the ASDP in good faith and not as part of a plan or scheme to evade the insider trading prohibitions under applicable Canadian securities legislation.
19. The Common Shares are not subject to any liens, security interests or other impediments to transfer (except for limitations imposed by any applicable laws).
20. The ASDP will automatically terminate on the earliest to occur of the following:
(a) 4:00 p.m. Eastern Time on February 17, 2018;
(b) 4:00 p.m. Eastern Time on the date the Administrator receives notice of McMa-hon's death;
(c) in the case where McMahon's tenure as a director of Source should cease for any reason, 4:00 p.m. Eastern Time on the 30th day after the date such tenure ceases;
(d) the time no Common Shares remain in the account managed by the Admini-strator;
(e) 4:00 p.m. Eastern Time on the date on the which Administrator or the Admini-strator's investment advisor responsible for executing the ASDP receives notice (in the case of clause (e)(i) below, from McMahon, and in the case of clause (e)(ii) below, from McMahon or his legal representative) of (i) a publicly an-nounced take-over bid or exchange offer with respect to the Common Shares or merger, amalgamation, arrangement, ac-quisition, reorganization, recapitalization or comparable transaction affecting the securities of the Issuer as a result of which the Common Shares are to be exchanged or converted into cash and/or securities of another entity, or (ii) the commencement or impending com-mencement of any proceedings in respect of or triggered by McMahon's bankruptcy;
(f) 4:00 p.m. Eastern Time on the third business day following the date that the ASDP is terminated voluntarily by McMahon in accordance with paragraph 9 of this decision.
21. McMahon will not amend or terminate the ASDP with knowledge of a material fact or material change that has not been generally disclosed and will only do so in good faith and not as part of a plan or scheme to evade the prohibitions of Section 147 of the Alberta Act, Section 76 of the Ontario Act or comparable prohibitions in other securities legislation.
Each of the Decision Makers is satisfied that the decision meets the test set out in the Legislation for the Decision Maker to make the decision.
The decision of the Decision Makers under the Legislation is that the Exemption Sought is granted, provided that McMahon shall file a report through SEDI, by March 31 of each calendar year, of all dispositions under the ASDP during the prior calendar year not previously disclosed in a SEDI filing, disclosing either of the following:
(a) each disposition on a transaction-by-transaction basis;
(b) all dispositions as a single transaction using the average unit price of the securities.
“Tom Graham, CA”
Director, Corporate Finance
Alberta Securities Commission