Yahoo Finance Canadian securities watchdogs appeal to U.S. ambassador over pending insider trading law
Canadian securities regulators are appealing to the U.S. ambassador to Canada to intercede in legislation they say would create duplication, confusion and expense for insiders of Canadian companies that list their shares in the United States.
In a letter to U.S. ambassador David Cohen, Canadian Securities Administrators chair Stan Magidson said a proposed U.S. Senate bill on national defence will remove a key exemption for foreign issuers that saves directors, senior officers and significant shareholders at Canadian public companies from having to disclose their trades in both countries. The letter, dated Nov. 7, was posted on LinkedIn by Ontario Securities Commission chief executive Grant Vingoe on Nov. 13.
“As comparable insider reporting requirements already exist in Canada, removal of the … exemption would trigger significant and unnecessary additional reporting costs in the U.S. for Canadian companies that are foreign private issuers, typically after listing in both Canada and the United States,” Magidson said in the letter.
He added that this change leading to reporting in both countries could lead to “considerable confusion” and inconsistent filings across jurisdictions.
Magidson said Canadian regulators would appreciate any action Cohen could take in “conveying the potential impacts of this legislative change to the appropriate staff,” noting that it did not seem appropriate for the securities authorities to send their comments directly to the sponsor of the legislation.
The letter also went some way to explaining why the removal of the exemption governing foreign company insiders showed up in national defence legislation.
“We understand that this provision originated with the Holding Foreign Insiders Accountable Act introduced by Senators John Kennedy and Chris Van Hollen earlier in the year and was folded into the Senate Bill,” wrote Magidson, who is chair of the Alberta Securities Commission as well as the CSA, an umbrella organization for capital markets watchdogs across the country.
He told Cohen that Canadian regulators have been working with the U.S. Securities and Exchange Commission to reduce the cost of capital for companies by minimizing duplication and removing barriers to cross-border offerings and business combinations. In addition, he wrote, the Canadian and U.S. regulators have similar insider regimes in place including disclosure of trades by company directors, senior officers and significant shareholders with the aim, in part, of deterring improper insider trading.
The change in the proposed U.S. Senate bill would increase costs and administrative burden for foreign issuers yet “would not provide any meaningful additional disclosure to market participants and securities regulators,” Magidson said.
He noted that insiders at U.S. issuers who report their trades through regulators in the U.S. are not compelled to make duplicative disclosure in Canada.
Vingoe, CEO of the OSC, Canada’s largest capital markets regulator and a member of the CSA, said in his LinkedIn post that the regulators took their concerns to the U.S. Embassy in Ottawa because the legislation pending in Congress could lead to “a duplication of effort in insider reporting between Canada and the United States and the extra-territorial effect of certain trading restrictions on insiders.”
In the letter, Magidson suggested two possible remedies: leaving the current exemption in place in the United States or authorizing the SEC to grant exemptions for foreign issuers whose countries have comparable regulatory regimes.
“We at the CSA wanted to communicate our view that that long-standing tradition has served our respective capital markets well and should continue in our similar approaches to insider trading reporting through mutual recognition rather than creating unnecessary duplication and burden for our issuers,” Magidson said by email when reached late Monday. “We hope others will join us in expressing these views.”
• Email: bshecter@postmedia.com
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