Insider reporting

Ontario’s securities legislation generally requires a reporting insider of a reporting issuer to file reports disclosing information about transactions involving the issuer’s securities or related financial instruments, unless the reporting insider is eligible for an exemption from the insider reporting requirements.

Reporting insiders are generally required to file insider reports online through SEDI.

Insider reporting serves 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 prospectus). Insider reporting also helps prevent illegal or otherwise improper activities involving stock options and similar equity-based instruments, 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 financial practices. These include:

  • stock option backdating
  • option repricing
  • opportunistic timing of option grants (spring-loading or bullet-dodging)

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

Requirements for insider reporting are set out in full in National Instrument 55-104 Insider Reporting Requirements and Exemptions.

Determining insider status

An insider is generally someone who has routine access to material undisclosed information concerning a reporting issuer and significant influence over the reporting issuer.

The actual persons who meet the definition of insider or reporting insider are contained in securities law:

Contents of an insider report

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

  • 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 issues
  • any change in any of the above information

Separate and supplementary insider reporting requirements exist for derivatives (which are outlined in Part 4 of NI 55-104). 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
  • 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.

Deadlines for filing insider reports

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 allow reporting insiders to file reports on a deferred basis in circumstances where the policy rationale for "real time" reporting does not apply.

Consequences of not filing an insider report

It is an offence in Ontario:

  • to fail to file an insider report in accordance with the deadlines outlined in NI 55-104
  • to submit information in an insider report that, in a material respect, is misleading or untrue

The penalties for these offences may include one or more of the following:

  • a late filing fee
  • the reporting insider being identified as a late filer on a public database
  • the issuance of a cease trade order that prohibits the reporting insider from trading in securities and related financial instruments until the failure to file is corrected
  • in appropriate circumstances, enforcement proceedings

Exemptions to insider reporting requirements