The Canadian Securities Administrators are publishing proposed amendments to its rule regarding insider reporting exemptions for public comment.

The CSA says it is proposing to make three substantive changes to the rules, which provide exemptions from the obligation to file insider reports where the policy reasons for insider reporting do not apply. The CSA adopted a rule in 2001 to make certain routine exemptions from the insider reporting requirement available automatically. It was amended in 2005 to add some additional routine exemptions.

“We believe the recent amendments have been successful,” the CSA says. “The most significant amendment introduced a new exemption for senior officers based on the CSA title inflation initiative.”

“Since the recent amendments, we have received comments from a number of issuers about the record-keeping requirements. These issuers have indicated that the present record-keeping requirements are unduly onerous, particularly for larger issuers that have a large number of subsidiaries. They have also expressed concern that, even after the most recent amendments based on the title inflation initiative, Canadian securities legislation continues to require too many persons to file insider reports, particularly when compared to the requirements of various foreign jurisdictions,” it adds.

“In view of these comments and further consideration of these requirements, we are proposing to delete the record-keeping requirements, and instead include these recordkeeping functions as an example of a best practice,” the CSA says. It also proposes to change the definition of “major subsidiary”, which may increase the number of insiders that can rely on existing exemptions; it proposes to repeal the section dealing with insider lists and policies; and, it would add a section to make it clear that certain insiders can rely on the automatic securities purchase plan exemption for grants of stock options and similar securities only if the reporting issuer has publicly disclosed certain information about the grant. Comments are due by January 25, 2007.

The CSA says that the currently proposed changes are an interim step. “As part of the CSA’s efforts to harmonize and streamline securities legislation, the CSA plan to adopt harmonized insider reporting requirements across Canada,” it explains. “As part of this initiative, we will review whether the current insider reporting requirements are appropriate or whether the insider reporting system would be more effective if it focused the reporting obligation on a smaller group of insiders. In addition, we may also consider accelerating the time frames for filing insider reports as we improve the viability of the System for Electronic Disclosure by Insiders (SEDI).”

The regulators say they plan to consider the proper definition of true insiders and conduct research that will compare their current insider reporting requirements with those in other countries. “This will help us to determine whether we can reduce the regulatory burden by requiring a smaller group of insiders to file insider reports, without compromising the market information that the insider reports provide or the objective of deterring improper insider trading.”