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As of July 1, 2016, a new subsection came into force in the Securities Act (Ontario) (the Act) prohibiting a person in a “special relationship” with an issuer, with knowledge of material non-public information (MNPI), from recommending or encouraging a trade in that issuer’s securities. The new subsection 3.1 reads as follows:


(3.1)  No issuer, no person or company in a special relationship with an issuer, and no person or company that is considering or evaluating whether, or that proposes to take one or more of the actions described in clause (3) (a), (b) or (c)[1] shall recommend or encourage, other than in the necessary course of business, another person or company to purchase or sell securities of the issuer with the knowledge of a material fact or material change with respect to the issuer that has not been generally disclosed.

Before adding this new subsection, the Act only addressed “tipping” by prohibiting a person in a special relationship with an issuer from informing another person about MNPI of that issuer (except in the ordinary course of business). The Ontario Securities Commission (OSC) previously dealt with recommending or encouraging a trade by relying on its power to protect the public interest. This was particularly apparent in the Finkelstein decision where the OSC held certain respondents to have acted contrary to the public interest by recommending, with knowledge of MNPI, the purchase of shares. The purpose of adding this new subsection was to close the apparent gap in the insider trading rules and further address white collar crime.

[1]   3 (a) to make a take-over bid, as defined in Part XX, for the securities of an issuer; (b) to become a party to a reorganization, amalgamation, merger, arrangement or similar business combination with an issuer; or (c) to acquire a substantial portion of the property of an issuer.


This article contains general information only and is not intended to provide a legal opinion or advice. Please consult a lawyer for matters related to your situation before relying on any of the statements made in this article.