The Co-Directors of the U.S. Securities and Exchange Commission (SEC) Division of Enforcement recently issued a Public Statement emphasizing the importance of maintaining market integrity and following corporate controls and procedures in the context of the COVID-19 pandemic. According to them, in the current circumstances, corporate insiders are regularly learning new material non-public information that may hold an even greater value than under normal circumstances, and a greater number of people may have access to material non-public information than in less challenging times, and those with such access – including, for example, directors, officers, employees, and consultants and other outside professionals – should be mindful of their obligations to keep this information confidential and to comply with the prohibitions on illegal securities trading.
This statement from the SEC Division of Enforcement comes at a time when, according to the Wall Street Journal, senior executives and directors are buying their company’s shares at a pace not seen in years, in a signal of corporate optimism after a coronavirus-induced rout.
Even though the Canadian Securities Administrators have not yet published a similar statement, insiders of Canadian reporting issuers should also be mindful of the insider trading and tipping prohibitions under applicable securities legislation and should conduct a proper analysis to satisfy themselves that they do not have any privileged information or material undisclosed information, including any material information regarding the impacts of the COVID-19 pandemic on the issuer’s business, operations or capital, prior to trading in securities or changing an economic interest in a related financial instrument.
The same degree of caution should be used when buying back shares under the issuer’s normal course issuer bid, as certain issuers may be interested in capitalizing on the temporary relief granted by the Toronto Stock Exchange enabling an increased maximum of shares to be repurchased on any trading day under a normal course issuer bid.
It is also crucial that issuers intending to take advantage of CSA’s blanket relief orders to provide relief from reporting deadline during COVID-19 observe the conditions thereof, including the need for the issuer’s management and other insiders to be subject to an insider trading black-out policy that reflects the principles in section 9 of National Policy 11-207 Failure-to-File.