The Canadian Securities Administrators (CSA) have issued new guidance on setting up, operating and disclosing automatic securities disposition plans (ASDPs).
Last year, the CSA launched a review of ASDPs, citing concerns about corporate insiders possibly using the plans to trade on inside information. The CSA initiative followed a review by the Autorité des marchés financiers (AMF) of the ASDP adopted by Bombardier Inc. in 2018.
The AMF concluded that there was no wrongdoing by Bombardier or its executives, but the episode highlighted the lack of requirements for operating ADSPs.
In a Thursday notice, the CSA said that the use of ASDPs has raised “important concerns” about corporate governance and investor confidence.
“Insiders generally control the timing of the adoption of ASDPs, which can raise questions about whether the plans are made in good faith and whether insiders are in possession of material non-public information at the time the plans are adopted,” the CSA said.
Additionally, as insiders typically control whether plans are amended, suspended or terminated, there’s a potential for misuse, the regulators noted.
The CSA’s new guidance on ASDPs sets out best practices for issuers and insiders. It includes recommendations regarding issuer oversight, waiting periods for transactions made under the plan and restrictions for revising, suspending or terminating plans.
“This guidance will help issuers and insiders understand how they can reduce the potential for improper insider trades under automatic securities disposition plans,” said Louis Morisset, chair of the CSA and president and CEO of the AMF, in a release.
“The recommended best practices set out in the guidance are also intended to enhance the transparency of trading by insiders, which assists issuers and insiders in managing market perception of trades made under these plans,” Morisset added.
The CSA also reiterated that regulators’ staff are “unlikely to recommend insider reporting relief for trades under ASDPs.”