With the rise of single-stock ETFs, structured products and notes, securities regulators are looking to tighten the trade reporting rules around corporate insiders.
In a notice published Thursday, the Canadian Securities Administrators (CSA) proposed changes to the insider reporting rules that aim to clarify the application of those rules to investment funds and other products — such as structured products, structured notes and depositary receipts — based around a particular stock.
Specifically, the regulators are seeking to clarify that an exemption from insider reporting requirements for investment vehicles that are typically broadly-diversified doesn’t apply in cases where the vehicle largely holds the securities of a particular issuer.
In its notice, the CSA said its proposals are being issued in response to the growth of investment funds, such as single-stock ETFs and other vehicles, that could give an insider the same exposure as holding a stock directly, without the same insider disclosure requirements.
The regulators noted that since single-stock ETFs were launched in Canada, a number of funds have been launched to track the stock of major issuers, and structured products that provide economic exposure that’s essentially equivalent to holding the stock directly have also been issued.
Clarifying that an exemption that’s intended for diversified funds doesn’t apply to narrowly-constructed investment products “is consistent with the policy intent underlying the exemption,” it noted.
The proposal is out for a 60-day comment period to June 8.