The OSC and CSA Respond to the COVID-19 Crisis


Governments and regulators are holding press conferences and issuing statements on a head-spinning basis regarding the COVID-19 pandemic.


The Federal government yesterday announced the unprecedented closing of the border in Canada to everyone except Canadian citizens, Canadian permanent residents, and other exempt categories including U.S. citizens and diplomats.  Ontario today declared a state of emergency and ordered bars, restaurants, daycares, recreation centres, private schools and others to close immediately and remain closed until March 31 at the earliest. On a more positive note, John Tory, the Mayor of Toronto, asked everyone to stay home today instead of going to St. Patrick’s Day celebrations and promised “to proclaim a nice spring day after #COVID19 has been vanquished as St. Patrick’s Day 2 in Toronto”.

Yesterday, of particular interest to our clients, the Canadian Securities Administrators (the “CSA”) and the Ontario Securities Commission (“OSC”) issued their first statements on COVID-19.  The regulators understand the challenges facing market participants and have offered to be flexible in their regulatory expectations.

The landscape is shifting as we speak. Planning ahead as much as possible and communicating directly with regulators will help issuers ease the burden during this time.

COVID-19 Update from the CSA

Amidst ongoing concerns about the COVID-19 outbreak, the CSA announced yesterday that reporting issuers should contact their principal regulator to discuss any potential effects of the coronavirus on their ability to meet their securities laws obligations, including disclosure and filing requirements and delivery of meeting materials.

The CSA recommended that issuers which foresee delays in filing their financial statements by their prescribed deadline because of COVID-19 consider applying for a management cease-trade order (a “MCTO”).

     What is a Management Cease Trade Order?

MCTOs restrict the trading of an issuer’s chief executive officer and chief financial officer, and could be extended at the regulator’s discretion to include the issuer’s directors and other persons or companies.  MCTOs may be issued by a regulator instead of a failure-to-file cease-trade order, which can apply more broadly to restrict trading in, or purchasing of, securities of a reporting issuer.

Conditions for granting an MCTO are provided in National Policy 12-203 – Management Cease Trade Orders (“NP 12-203”). If an MCTO is issued, the issuer must comply with alternative information guidelines as provided in NP 12-203 until the required documents are filed.  Such information guidelines may include a news release and possibly a material change report regarding the issuer’s non-compliance with its regulatory obligations.

After the announcement of the default, and during the period of the MCTO, the reporting issuer must issue bi-weekly default status reports in the form of news releases, containing certain prescribed information, including any changes to the default announcement or status reports, a description of all actions taken to remedy the default, and any other material information concerning the affairs of the reporting issuer not otherwise disclosed.

     Changes due to the COVID-19 outbreak

The CSA confirmed the MCTOs issued pursuant to the COVID-19 outbreak will not be considered required disclosure in future documents.  Applications for MCTO should be filed at least two weeks before the due date for the require filings, however the CSA will work to accommodate shorter periods where necessary.

The CSA is continuing to monitor the impact of COVID-19 on Canadian capital markets and may issue further guidance in due course.

Operational Changes from the OSC in Response to COVID-19

Also yesterday, the OSC announced that it was making operational changes in order to take all necessary precautions as it responded to challenges due to COVID-19, including having most of its staff work from home.

     Increased Flexibility

The OSC confirmed that it understood that many market participants had also started to work remotely, and that this could make business more challenging.  “We support your efforts as we all weather these changes and will be flexible in our regulatory expectations during this difficult time,” the OSC stated.

     Other Operational Changes

While all essential and core operations will continue, including normal-course registration and compliance activities (although the OSC will be flexible on deadlines for information), the OSC confirmed such changes as:

  • all in-person outreach, including Registrant Outreach sessions, OSC LaunchPad information days and OSC in the Community information sessions will be cancelled;
  • in-person consultation with the OSC’s advisory committees, market participants and investors will be re-scheduled as teleconference meetings;
  • on-site compliance reviews and the OSC’s planned Risk Assessment Questionnaire are postponed until further notice;
  • upcoming Registrant Outreach and SME Institute webinars will be re-scheduled for a later date; and
  • no in-person hearings will be held until at least April 30, 2020.

The OSC stated that it continues to collaborate with the CSA to coordinate their approach for market participants on filing deadlines, expectations for Annual General Meetings and other compliance expectations, and that it is actively monitoring market operations and working collaboratively with the Investment Industry Regulatory Organization of Canada (commonly known as IIROC).

We expect further updates and adaptations from both the CSA and OSC as the situation develops.