The AMF announced that, as of January 1, 2006, it will impose administrative penalties upon reporting issuers or insiders who fail to file, within the requisite delay, the documents or reports prescribed under the Securities Act (Quebec).  The AMF has indicated that it will automatically impose penalties with respect to the following: 

• reporting issuers who fail to file annual or quarterly financial statements, MD&A or annual information forms; and
• insiders who fail to file initial insider reports or change reports to disclose changes in their beneficial ownership of securities or the registration of the insider's securities in the name of a third party.

Currently, the legislation requires most reporting issuers to file annual financial statements, annual MD&A and annual information forms within 90 days of the end of their fiscal year.  Interim financial statements and the attendant MD&A must generally be filed within 45 days of the end of the issuer's relevant fiscal quarter.  Insider reports are typically required to be filed within 10 days of becoming an insider of a reporting issuer and within 10 days of any change in the insider's registered or beneficial ownership in securities of the issuer. 

The monetary penalties assessable under the amended Regulations to the Securities Act will be $100 per business day and per document against delinquent reporting issuers and $100 per day and per failure to report in the case of delinquent insiders.  In both cases, the maximum fine cannot exceed $5,000 per fiscal year, for reporting issuers or per failure to file, for insiders. 

No Hearing Provided

The new Regulations provide that penalties will be assessable by the AMF upon simple notification to the party in default.  The penalty can be imposed by the AMF without any hearing and it is unclear whether it is subject to review by the Bureau de décision et de révision en valeurs mobilières in the same manner as are AMF decisions.  In imposing penalties upon late filings by reporting issuers and insiders, securities regulators in Quebec have joined the ranks of their counterparts in Ontario and British Columbia, who recently began levying such late filing fees upon reporting issuers and insiders. 

Continued Emphasis on Enforcement Efforts 

The amendments to the Regulations are the latest in a series of enforcement measures which have been adopted by the AMF in the last two years in an effort to crack down on delinquent filers.  The AMF not only monitors compliance by reporting issuers and insiders with their filing requirements, but publishes a list of “delinquent filers” in the AMF's Weekly Bulletin.  In addition, the AMF has prosecuted frequent or repeat offenders before the criminal division of the Court of Quebec, seeking fines of up to $2,000 per infraction.  This is consistent with statements made by Mr. Jean St-Gelais, the AMF's President and CEO, to the effect that one of the main objectives of the AMF is to increase enforcement activities in the financial sector. 

Beginning in 2006, reporting issuers and insiders in Quebec should be particularly vigilant in fulfilling their disclosure and reporting obligations in a timely manner so as to avoid the monetary consequences attendant with failures to do so. 

If you have any questions regarding the foregoing, please contact Anthony Wilson (514-841-6572) or Maryse Bertrand (514-841-6460) in the Montréal office.  

Davies Ward Phillips & Vineberg LLP, with over 235 lawyers, practices nationally and internationally from offices in Toronto, Montréal, New York and an affiliate in Paris and is consistently at the heart of the largest and most complex commercial and financial matters on behalf of its North American and overseas clients. 

The information and comments contained herein are for the general information of the reader and are not intended as advice or opinions to be relied upon in relation to any particular circumstances.  For particular applications of the law to specific situations, the reader should seek professional advice.