New investment disclosure rules under Ontario’s Securities Act affect all reporting issuers — entities, whether or not incorporated, whose securities are held by the public at large. Real estate investment trusts, unit trusts, mortgage investment companies, commodity future mutual funds, tax-shelter issuers such as films and drilling funds, small business development corporations, banks, loan companies, trust companies and insurance companies, exempted for the most part from the old rules, are now included as reporting issuers.

An entity that is not a reporting issuer under the Securities Act may qualify as a private company if its charter restricts the right to transfer the company’s securities, limits the number of shareholders (excluding employees and former employees) to 50 and prohibits any invitation to the public to subscribe to the company’s securities. Entities that are neither private companies nor reporting issuers are termed non-reporting issuers. Private companies and non-reporting issuers are not subject to disclosure requirements, but trading in their securities is severely restricted.

Under the new rules, certain secondary trades involving the stock of reporting issuers cannot be made without a prospectus unless the reporting issuer is up to date in filing its disclosure documents. Reporting issuers must file six documents with the Ontario Securities Commission — (1) press releases reporting any material changes, (2) timely disclosure reports detailing material changes, (3) quarterly financial statements, (4) annual financial statements, (5) information circulars (sent to shareholders at the time notice of annual or special shareholder meetings is mailed) and (6) insider reports noting any purchase or sale by an insider of securities of a reporting issuer (which must be filed within 10 days after the end of the month in which the transaction occurred).