Staying Off The Hook For Secondary Market Liability: Court Of Appeal Clarifies Issuer Disclosure Requirements For "Material Changes"

Published date12 July 2023
Subject MatterCriminal Law, White Collar Crime, Anti-Corruption & Fraud
Law FirmBabin Bessner Spry LLP
AuthorMs Emily Thompson and Zachary Pringle


The Ontario Court of Appeal recently released a pair of decisions1 considering whether events give rise to a "material change" in the "business, operations or capital" of publicly traded companies, triggering immediate reporting obligations under the Securities Act.

In SNC, the question was whether a material change had occurred when it received a telephone call from the Public Prosecution Service of Canada ("PPSC") sufficiently informed SNC-Lavalin Group Inc. ("SNC-Lavalin") that it would be the subject of prosecution in relation to its activities in Libya. In LMC, the question was whether Lundin Mining Corporation ("Lundin") was required to disclose forthwith a report of an unstable pit wall and subsequent rockslide at its open-pit mine.

In both cases, the Court of Appeal confirmed that whether an event constitutes a "material change" broadly depends on whether the event gives rise to a qualitative "change" to the "business, operations, and capital", and if so, whether the change is material, such that it would reasonably be expected to have a significant effect on the value of the issuer's market capitalization.

Peters v SNC-Lavalin: "material change" includes the risk of change


In 2015, the Royal Canadian Mounted Police charged SNC-Lavalin with one count of fraud and corruption under the Criminal Code2 and the Corruption of Foreign Public Officials Act.3 The evidence indicated that a conviction concerning either of these charges would have a devastating impact on SNC-Lavalin's business.

By telephone call on September 4, 2018, the PPSC informed SNC-Lavalin that it would not be invited to negotiate a remediation agreement which, if granted, would have resolved the pending prosecution; however, the PPSC agreed to receive further submissions on the issue.

On October 9, 2018, the PPSC informed SNC-Lavalin that the decision to refuse a remediation agreement was final. SNC-Lavalin issued a press release the next day, and its share value plummeted by 13%, resulting in a loss of over $600 million in market capitalization.4

The Decision Below:

The plaintiff sought leave under s. 138.8, Part XXIII.1, of the Securities Act5 to bring a statutory cause of action against SNC-Lavalin for its alleged failure to forthwith disclose its call on September 4, 2018 with the PPSC as a "material change" to its "business, operations or capital".6

The motion judge disagreed with the plaintiff,7 because:

  • the prospect of achieving a remediation agreement...

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