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Letter Summary:
The CSA is consulting on a proposed amendment to Part 9 of National Instrument 55-104 – Insider Reporting Requirements and Exemptions. The amendment is intended to clarify the insider reporting regime applicable to transactions involving investment funds and certain structured products (including structured notes, American Depositary Receipts and Canadian Depositary Receipts) that are based on securities of the reporting insider’s reporting issuer.
Overview of Comments:
The CAC supported the CSA’s proposed amendment to NI 55-104, agreeing that insiders should not avoid reporting requirements by obtaining economic exposure to their own reporting issuer through investment funds, structured products, or other wrappers. The CAC recommended that the CSA define “material component” using an effective-exposure approach that captured leveraged and inverse products, and suggested a 10% bright-line threshold, a broad-based index carve-out, and a knowledge qualifier. It also urged the CSA to clarify that product examples were illustrative only and that reporting obligations should turn on economic substance rather than product labels. The CAC recommended a reasonable transition period and post-implementation monitoring to ensure the rule was administrable and consistently applied.