Ontario’s Securities Act: an overview

To protect the public and the entities it deals with, corporations in Ontario are subject to a a number of laws and regulations, either federally or provincially.

One of these laws is the Ontario’s Securities Act and its Regulations, which applies to most corporations in the province.

What is the Ontario Securities Act?

Regulation of securities across Canada is under the jurisdiction of the provinces and territories. Since there’s no federal securities regulator nor a federal securities law, each province and territory has its own regulator and law.

The same applies to Ontario, which enacted its own Securities Act and established its provincial regulatory body, the Ontario Securities Commission (OSC).

Who does the Ontario Securities Act apply to?

The Ontario Securities Act, as with any other securities law of the other provinces or territories, applies to:

• any company that issues securities (called an “issuer”)
• any person or company in the business of trading or advising in securities

Companies may be exempt from the coverage of this law, depending on the transaction and its circumstances.

To know more about the work of the OSC in protecting investors, watch this video:

Reach out to the best corporate finance and securities lawyers in Ontario as ranked by Lexpert to know more about the Ontario Securities Act.

What does the Ontario Securities Act require from corporations?

The Securities Act of Ontario covers a lot of topics, but the more prevalent ones are its requirements from corporations when dealing with securities.

Here's a summary of some of these requirements:

Registration requirement

Under Part XI of the Securities Act of Ontario, any person or firm who engages in the business of advising on and trading in securities must register with the OSC.

This registration requirement also includes those who:

• manage investment funds
• advise on or trade in commodity futures contracts or commodity futures options
• act as an underwriter, as an investment fund manager, or on behalf of a registered dealer or adviser
• is a registered firm’s ultimate designated person or chief compliance officer

Exemptions from the registration requirement

Certain persons and firms are exempt from complying with this registration requirement:

• advisers who engage in the business of providing advice on investing in, or buying, or selling securities that are not claimed to be tailored to the advisee’s needs
• dealers who trade in, or distribute as an underwriter, a debt security issued by the government, province or territory, or municipal corporation
• financial institutions, such as banks, cooperative credit associations, loan corporations, trust companies, insurance companies, credit unions, etc.
• international advisers or dealers, as specified by the Act’s Regulations

Prospectus requirement

Section 53 (1) of Ontario’s Securities Act provides for the prospectus requirement.

Generally, all persons and corporations (called the issuer) must file a prospectus with the OSC before they can trade in or distribute a previously unissued security. In other words, securities that are offered to the public must be offered under a prospectus.

A receipt must also be issued to them by the OSC regarding the filing of this prospectus.

A prospectus is a detailed document, which is also called a disclosure, that provides all the information regarding the offered securities and the issuer.

Its purpose is to protect investors from misrepresentations and to help them make an informed decision about the offered investment.

Exemption from the prospectus requirement

There are exemptions to the prospectus requirement, which means that a corporation can issue securities to investors without a prospectus disclosure.

As provided in Part XVII of the Securities Act of Ontario, here are entities exempt from the prospectus requirement:

• debt securities issued or guaranteed:
  • by the government (federal, provincial or territorial)
  • by municipal corporations
  • by financial institutions
• distribution of securities under security agreements, as defined by Ontario’s Personal Property Security Act
• purchase of securities by accredited investors
• distribution of securities by private issuers to purchasing investors
• distribution of government incentive securities

OSC’s regulation also includes the following to be exempt from the prospectus requirement:

• distributions of securities with an acquisition cost of not less than $150,000
• family, friends, and business associates exemption
• crowdfunding exemption
• offering memorandum exemption

Continuous disclosure requirement

Reporting issuers are required by Ontario Securities Act to regularly and publicly disclose information related to their activities and financial status.

Some examples are:

• disclosure of a material change in its affairs
• publication of financial reports and financial statements
• disclosure of forward-looking information (FLI)
• summary of material contracts it entered last financial year
• filing of annual information form (AIF)
• filing of business acquisition report (BAR) after an acquisition
• disclosure of information circular when appointing a shareholder proxy
• disclosure of compensation for executive officers and directors
• specified disclosure for restricted securities
• disclosure reports by reporting insiders of reporting issuers

What is the limitation period for the Ontario Securities Act?

The Securities Act of Ontario outlines civil and criminal liabilities for certain acts of those who are covered by the Act. If found guilty, violators may face imprisonment, or a fine, or both.

However, the enforcement of these liabilities, such as the filing of a case in court or before the OSC, is subject to its appropriate limitation periods. It means that after the period specified by the Act, the right of the government or offended party to sue is lost.

Generally, the limitation period for violation of the Act and for misleading or untrue statements is six (6) years from the last event on which the case is based on.

This includes misrepresentations in a document submitted to the OSC, prospectus, take-over bid circular, among other documents required by the Act.

Here are the other actions under the Act and their corresponding limitation periods:

Reach out to any Lexpert-ranked best corporate finance lawyers in Canada to know more about the Ontario Securities Act or other similar laws of the other provinces or territories.