TSX Company Manual:

TSX Company Manual
Part I Introduction
Part II Why List on the Toronto Stock Exchange?
Part III Original Listing Requirements
Part IV Maintaining a Listing — General Requirements
Part V Special Requirements for Non-Exempt Issuers
Part VI Changes in Capital Structure of Listed Issuers
Part VII Halting of Trading, Suspension and Delisting of Securities
Part VIII Fees Payable by Listed Companies
Part IX Dealing with the News Media
Part X Special Purpose Acquisition Corporations (SPACs)
Part XI Requirements Applicable to Non-Corporate Issuers
Provisions Respecting Conflict of Interest and Competitors of TMX Group Limited
Notices of Approval
Requests for Comments
Staff Notices to Applicants, Listed Issuers, Securities Lawyers and Participating Organizations
Location: TSX Company Manual > Part IV Maintaining a Listing — General Requirements > B. Timely Disclosure > Insider Trading > Restrictions on Employee Trading > Sec. 423.8.

Restrictions on Employee Trading Electronic Communications Disclosure Guidelines

Sec. 423.8.

The Disclosure Rules require that employees with access to material information be prohibited from trading until the information has been fully disclosed and a reasonable period of time has passed for the information to be disseminated. This period may vary, depending on how closely the company is followed by analysts and institutional investors.

This prohibition applies not only to trading in company securities, but also to trading in other securities whose value might be affected by changes in the price of the company's securities. For example, trading in listed options or securities of other companies that can be exchanged for the company's securities is also prohibited.

In addition, if employees become aware of undisclosed material information about another public company such as a subsidiary, they may not trade in the securities of that other company.

In the case of pending transactions, the circumstances of each case should be considered in determining when to prohibit trading. In some cases, prohibition may be appropriate as soon as discussions about the transaction begin. The definition of materiality helps determine when trading should be prohibited in the case of pending transactions. Trading must be prohibited once the negotiations have progressed to a point where it reasonably could be expected that the market price of the company's securities would materially change if the status of the transaction were publicly disclosed. As the transaction becomes more concrete, it is more likely that the market will react. This prohibition on trading will often come into effect before the point in time when it must be disclosed publicly. In all situations, it is a judgment call as to when employee trading should be restricted.


The Exchange suggests that a company's policy address trading blackouts. Trading blackouts are periods of time during which designated employees cannot trade the company's securities or other securities whose price may be affected by a pending corporate announcement. A trading blackout:

•  prohibits trading before a scheduled material announcement is made (such as the release of financial statements)
•  may prohibit trading before an unscheduled material announcement is made, even if the employee affected doesn't know that the announcement will be made
•  prohibits trading for a specific period of time after a material announcement has been made.

It is easiest to implement a policy on trading blackouts that applies to scheduled announcements, such as the release of financial statements. In this case the policy might:

•  prohibit trading by employees for a certain number of days before and after the release of financial statements
•  provide "open windows", which are limited periods of time following the release of financial statements during which employees may trade.

It is more problematic to implement a policy on trading blackouts for unscheduled announcements. A company should make the following decisions about its policy on trading blackouts according to its particular circumstances:

•  should the policy apply to employees other than those already prevented from trading by insider trading rules (for example, senior employees not directly involved in the material transaction)?
•  would telling an employee not to trade tip them off as to the content of the pending announcement?

If a company decides to implement a preannouncement blackout policy, it might want to consider one of the following options:

•  without giving a reason, instruct employees not to trade until further notice if there is a pending undisclosed material development
•  require employees to obtain approval before trading, on the understanding that this approval will be denied if any material information has not been disclosed.

A company policy on post-announcement trading blackouts should:

•  state whether the blackout rules apply to all staff or only to those involved in the material transaction
•  allow the market time to absorb the information before employees can resume trading. The amount of time that the market needs to absorb the information and set a new price level will depend upon the size of the company and to what extent it is tracked by analysts and investors.

The Exchange also suggests that a company:

•  circulate some basic do's and don'ts about employee trading to all their staff
•  designate a contact person who is familiar with the disclosure rules and who can help employees determine whether or not they may trade in a given circumstance
•  set expiry dates for the exercise of stock options and other such compensation plans so that the expiry dates normally would fall after the release of financial statements
•  educate employees about any additional specific trading restrictions that may apply to them (for example, section 130 of the Canada Business Corporations Act generally prohibits insiders of CBCA companies from selling that company's shares short, or from buying or selling put or call options on the shares. Insiders of companies which have to report under the U.S. Securities Exchange Act of 1934 may be subject to other restrictions, such as liability to account (for short swing profits.)
•  decide whether employees who are subject to more stringent trading restrictions, and who are not required by law to file insider trading reports, should have to report details of their trading to the company
•  decide whether the company should review insider trading reports to make sure that employees have complied with company policy and disclosure rules.

Restrictions on Employee Trading Electronic Communications Disclosure Guidelines

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