Some Reflections on The “Responsible Issuer” Definition and Jurisdictional Aspects of Securities Class Actions

The statutory secondary market liability provisions in Part XXIII.1 of the Ontario Securities Act and parallel provisions in the securities acts of other Canadian provinces have been the subject of recent judicial analysis, in particular, regarding the provisions’ jurisdictional scope. Whether a foreign issuer1 is subject to one of these provincial statutory regimes will depend on whether it has a “real and substantial connection” to the province. What will constitute a real and substantial connection in such contexts remains an open question, but it will no doubt be considered in light of the Supreme Court of Canada’s recent decision in Club Resorts Limited v Van Breda and the Ontario Court of Appeal’s decision in Abdula v Canadian Solar. The authors contend that any analysis of the nexus between an issuer and a jurisdiction for the purposes of determining whether the “responsible issuer” definition is met should focus on the substantive claims being advanced by plaintiff investors and the objects of the legislation — in particular, the making of misstatements or omissions that affect the price of an issuer’s securities on secondary markets. In other words, connections between an issuer and the jurisdiction that are unrelated to allegations of misrepresentation (or omission) should not be considered real and substantial. This approach would not only be consistent with the analytical framework for the assumption of jurisdiction by Canadian courts that was articulated by the Supreme Court of Canada in Van Breda, but it would also help to minimize the significant and undesirable disparity that could develop between Canadian and US approaches to jurisdiction over secondary market misrepresentation claims.