Headnote
NP 11-203 – Relief granted from insider reporting requirements for insiders in respect of an automatic share disposal plan.
Applicable Legislative Provisions
National Instrument 55-101 – Insider Reporting Exemptions
OSC Staff Notice 55-701 – Automatic Disposition Plans and Automatic Securities Purchase Plans
September 14, 2009
IN THE MATTER OF
THE SECURITIES LEGISLATION OF
ONTARIO
(the Jurisdiction)
AND
IN THE MATTER OF
THE PROCESS FOR EXEMPTIVE RELIEF
APPLICATIONS IN MULTIPLE JURISDICTIONS
AND
IN THE MATTER OF
KINROSS GOLD CORPORATION
(the Filer)
DECISION
Background
The principal regulator in the Jurisdiction has received an application from the Filer for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) for an exemption pursuant to section 121(2)(a)(ii) of the Securities Act (Ontario) (the Act) from the requirements set out in section 107(2) of the Act that certain senior executives of the Filer and its subsidiaries (the Insiders) file an insider report within 10 days of the disposition of securities pursuant to an automatic securities disposition plan (the Exemption Sought), subject to certain conditions.
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):
the Ontario Securities Commission is the principal regulator for this application; and
the Filer has provided notice that section 4.7(1) of Multilateral Instrument 11-102 - Passport System (MI 11-102) is intended to be relied upon in British Columbia, Alberta, Saskatchewan, Manitoba, Quebec, New Brunswick, Nova Scotia, Prince Edward Island and Newfoundland and Labrador.
Interpretation
Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.
Representations
This decision is based on the following facts represented by the Filer:
The Filer is a corporation incorporated under the Business Corporations Act (Ontario), is a reporting issuer in each of the provinces of Canada and is not in default of securities legislation in any jurisdiction.
The Filer’s head office is located at 40 King Street West, Toronto, Ontario.
The authorized share capital of the Filer consists of an unlimited number of common shares (Common Shares). The Common Shares are listed for trading on the Toronto Stock Exchange and the New York Stock Exchange.
Restricted share units (RSUs) are granted by the board of directors to certain employees of Kinross and its subsidiaries pursuant to the Kinross restricted share plan (the RSU Plan). RSUs vest according to a fixed schedule in an amount of one-third of the total grant on the first anniversary of the grant, one-third on the second anniversary of the grant and one-third on the third anniversary of the grant. On vesting of RSUs held by a participant in the RSU Plan, one Common Share is issued by Kinross for each vested RSU without payment of additional consideration.
On August 12, 2009, Kinross announced that it had implemented an automatic securities disposition plan (the “ASDP”), pursuant to which the Insiders would be permitted to participate in a plan for the automatic sale of Common Shares issued under the RSU Plan.
The ASDP is designed to facilitate sales of Common Shares for the Insiders. Absent such an automatic disposition process, the Insiders have a limited number of opportunities to dispose of their Common Share holdings due to insider trading restrictions under securities laws and the Filer’s insider trading policies.
The parameters of the ASDP and other instructions are set out in a written plan document which outlines the restrictions on sales of Common Shares. The plan document also outlines the mechanics of transfer and sale of the Common Shares by an independent third-party securities broker (the Broker).
The ASDP has been structured to comply with applicable securities legislation and guidance, including, inter alia, clause 175(2) of Regulation 1015 under the Act, Ontario Commission Staff Notice 55-701 – Automatic Securities Disposition Plans and Automatic Securities Purchase Plans (OSC Notice 55-701) and similar rules and regulations in other applicable Canadian securities laws, and accordingly, with the intent that sales under the ASDP shall be exempt from subsection 76(1) of the Act and from liability under section 134 of the Act and from the corresponding provisions in other applicable Canadian securities laws.
Insiders are required to complete an election to participate and accede to the ASDP including making certain representations to both the Filer and the Broker.
Insiders who elect to participate in the ASDP (Participating Insiders) will be permitted to sell up to 25% of the Common Shares issuable to them under the RSU Plan in a given year. Sales of Common Shares subject to the ASDP will be effected in accordance with a fixed trading schedule.
As part of the ASDP enrolment form required to be provided by an Insider to participate, the Insider is required to elect the amount of Common Shares issuable on vesting of RSUs in a given calendar year to be sold, up to a maximum of 25% of the Common Shares issuable to the Insider in that year. In addition, the Insider is permitted to set a minimum price for their Common Shares, below which the Common Shares will not be sold by the Broker.
The ASDP contains meaningful restrictions on the ability of the Insiders to enrol, terminate or modify their participation in the ASDP as provided by OSC Notice 55-701.
At the time of enrolment, an Insider must be able to represent that they are not in possession of material undisclosed information about the Filer and that they are not entering the ASDP as part of a plan to evade the prohibitions against trading with material undisclosed information contained in applicable Canadian securities law.
If an Insider elects to enrol in the ASDP, once such enrolment is accepted by the Filer, the Participating Insider’s instructions will not take effect until 60 days following receipt by the Filer of the Participating Insider’s enrolment form and receipt by the Broker of all documentation required to execute sales under the ASDP.
A Participating Insider may amend their trading instructions to modify the minimum price in a given year or terminate their participation in the ASDP by submitting a revised enrolment form to the Filer. In order to submit a revised enrolment form, the Participating Insider must represent that they are not in possession of material undisclosed information about the Filer. Any amendment or termination will only become effective at least 30 days following receipt by the Filer and the Broker of the revised ASDP enrolment form. In addition, if the Participating Insider voluntarily terminates their participation in the ASDP, any subsequent enrolment by such Participating Insider will not take effect for at least 60 days following termination of their participation.
For any enrolment, amendment or termination by a Participating Insider in the ASDP, the Filer will be required to certify that, to the best of the Filer’s knowledge, the Participating Insider is not in possession of material undisclosed information concerning the Filer and is in compliance with the Filer’s insider trading policy.
On vesting of the Common Shares issuable on conversion of the RSUs, the number of Common Shares issuable on vesting will be transferred to a sole-purpose brokerage account with the Broker. Up to 25% of the Common Shares held in the plan account (as determined by the Participating Insider) will be sold during four trading periods in a given year on a quarterly basis, such that, subject to certain exceptions, Common Shares subject to the ASDP held in the plan account will be fully sold by the year end. The remaining Common Shares (at least 75% of the Common Shares issuable on conversion of the RSUs) may be sold or transferred by the Participating Insider outside of the ASDP, subject to the applicable requirements of securities laws in Ontario and the Passport Jurisdictions.
Decision
The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to make the decision.
The decision of the principal regulator under the Legislation is that the Exemption Sought is granted, provided that each Participating Insider shall file a report, in the form prescribed for insider trading reports under the Legislation, disclosing on a transaction-by-transaction basis or in acceptable summary form (as such term is defined in National Instrument 55-101 Insider Reporting Exemptions) all dispositions of Common Shares under the ASDP that have not been previously disclosed by or on behalf of the Insider during a calendar year within 90 days of the end of the calendar year.
“James Turner” “Mary Condon”
VICE-CHAIR Commissioner
Ontario Securities Commission Ontario Securities Commission