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Securities - Securities Act - Material Change/Fact. Lundin Mining Corp. v. Markowich
In Lundin Mining Corp. v. Markowich (SCC, 2025) the Supreme Court of Canada dismissed an appeal, this brought against the allowing of an appeal by the Ont CA against a Superior Court order which "dismissed the motions for leave to commence an action under the Securities Act and for class certification".
Here the court summarizes the case:[1] This appeal requires the Court to address what has been described as “perhaps the most difficult area of securities law” — the distinction between a “material fact” and a “material change” under the Ontario Securities Act, R.S.O. 1990, c. S.5, and equivalent legislation across Canada (Ontario Securities Commission, “Consolidation of Remarks of Peter J. Dey Concerning Disclosure Under the Securities Act Made to Securities Lawyers in Calgary and Toronto on June 7 and 9” (1983), 6 O.S.C. Bull. 2361 (“Dey Remarks”), at p. 2361). The appeal also requires the Court to clarify the test under s. 138.8(1) of the Securities Act for leave to commence an action for breach of an issuer’s disclosure obligations.
[2] A “material fact” is defined under the Securities Act as “a fact that would reasonably be expected to have a significant effect on the market price or value of the securities” (s. 1(1) (see Appendix)). Material facts need only be disclosed periodically under the legislation. By contrast, a “material change” is defined in relevant part as “a change in the business, operations or capital of the issuer that would reasonably be expected to have a significant effect on the market price or value of any of the securities of the issuer” (s. 1(1)). Material changes must be disclosed immediately, or in the words of the statute, “forthwith” (s. 75(1)), imposing an obligation to make timely disclosure. The test for leave to commence an action under the Securities Act for breach of an issuer’s disclosure obligations provides that the court should grant leave only where it is satisfied that “the action is being brought in good faith” and “there is a reasonable possibility that the action will be resolved at trial in favour of the plaintiff” (s. 138.8(1)).
[3] This case arises in the wake of a Canadian mining company detecting pit wall instability at its premier mine. Within days, the mine experienced a rockslide that required the company to shut down at least part of the mine for a time and to revise the mine’s production forecast downward by 20 percent for the next year. When the company disclosed these developments to investors about a month later, the company’s share price dropped 16 percent within a day, resulting in a loss of over $1 billion in market capitalization. Soon afterwards, an investor applied for leave to commence an action for breach of the company’s timely disclosure obligations and for certification of a class proceeding.
[4] The motion judge at the Ontario Superior Court of Justice accepted that the pit wall instability and rockslide may have been “material facts”, but ruled that there was no reasonable possibility that the investor could establish a “material change” in the company’s “business, operations or capital”. The motion judge relied on a dictionary definition of the word “change” as “a different position, course, or direction” (2022 ONSC 81, at para. 150, quoting the definition of “change” in the Merriam-Webster Dictionary (online)), and drew on case law to define the terms “business”, “operations”, and “capital”. He ruled that since the company continued its business and operations as a mining company, there was no reasonable possibility that either the pit wall instability or the rockslide resulted in a “change” in the company’s “business”, “operations”, or “capital”. As a result, the company had not been required to disclose the developments “forthwith”. Leave under s. 138.8(1) was therefore denied. The motion judge went on to determine that if there had been a change, then there was a reasonable possibility that the change would have been material.
[5] The Court of Appeal for Ontario allowed the appeal. It ruled that the motion judge misinterpreted the statutory test for a “material change” by adopting restrictive definitions of the terms at issue, which it said “have not yet been definitively interpreted in the jurisprudence” (2023 ONCA 359, 166 O.R. (3d) 732, at para. 7). The motion judge then erred by applying those restrictive definitions to the test for leave, which the Court of Appeal said required only a “plausible interpretation” of the statutory provisions at issue and sufficient evidence to support granting leave. In the Court of Appeal’s view, there was a reasonable possibility that the pit wall instability and rockslide involved “changes” in the company’s operations, given the undisputed evidence that these developments impacted the company’s phasing of the mine and reduced its next annual production forecast.
[6] I would dismiss the appeal. In my view, the motion judge erred by relying on restrictive definitions of “change”, “business”, “operations”, and “capital”, and then erred by applying those definitions to determine whether there was a reasonable possibility that there had been a material change. The Ontario legislature intentionally left these terms undefined to allow the legislation to be applied flexibly and contextually to a wide range of industries and corporate structures. The disclosure standards in the Securities Act should be applied to promote the statutory purpose of preventing and deterring informational asymmetry between issuers and investors, while recognizing that the statutory terms at issue acquire meaning by being applied in concrete factual circumstances. By contrast, adopting rigid definitions would ossify the Securities Act and would frustrate the statutory purpose.
[7] Moreover, as this Court has stated, the test for leave under s. 138.8(1) of the Securities Act requires a “plausible analysis of the applicable legislative provisions, and some credible evidence in support of the claim” (Theratechnologies inc. v. 121851 Canada inc., 2015 SCC 18, [2015] 2 S.C.R. 106, at para. 39 (emphasis added), quoted in Canadian Imperial Bank of Commerce v. Green, 2015 SCC 60, [2015] 3 S.C.R. 801, at para. 121). A “plausible analysis” is not a plausible statutory interpretation, but rather a plausible application of the legislation to the facts. Statutory interpretation is conducted in accordance with the modern principle, both on a motion for leave and at a trial on the merits. A plausible analysis must, however, show how the legislation applies to the facts by accounting for the limited evidence available on a motion for leave, which is brought before there has been documentary production or oral discovery.
[8] Here, the uncontested evidence on the motion was that the pit wall instability and rockslide impacted the company’s operations at its mine. Hence, the evidence showed that these events could have resulted in a “change”. No one challenges the conclusion of the courts below that there is a reasonable possibility these events could be shown at trial to be “material”. Accordingly, a plausible analysis of the applicable legislative provisions and evidence on the motion showed a reasonable or realistic chance that the action could succeed. . Lundin Mining Corp. v. Markowich
In Lundin Mining Corp. v. Markowich (SCC, 2025) the Supreme Court of Canada dismissed an appeal, this brought against the allowing of an appeal by the Ont CA against a Superior Court order which "dismissed the motions for leave to commence an action under the Securities Act and for class certification".
Here the court considers the Securities Act concepts of 'material change' and 'material fact' as they bear on securities disclosure:A. The Interpretation of a Material Change
(1) Legislative and Policy Background
(a) The Role of Disclosure in Securities Regulation
[33] Section 1.1 of the Securities Act identifies four purposes of the legislation: “(a) to provide protection to investors from unfair, improper or fraudulent practices; (b) to foster fair, efficient and competitive capital markets and confidence in capital markets; (b.1) to foster capital formation; and (c) to contribute to the stability of the financial system and the reduction of systemic risk”. Each purpose is promoted by the foundational role of disclosure in securities regulation.
[34] Businesses (“issuers”) issue a wide range of investment products (“securities”), including shares of stock in corporations, to raise capital from investors (Securities Act, s. 1(1) “issuer”, “security”). The integrity of the market for securities necessarily depends on the quality of the information disclosed by issuers to investors. As is well known, “[i]nvestors pay enormous amounts of money to strangers for completely intangible rights, whose value depends entirely on the quality of the information that the investors receive and on the sellers’ honesty” (D. Johnston, K. D. Rockwell and L. Levine, Canadian Securities Regulation (6th ed. 2025), at ¶1.1, quoting B. S. Black, “The Legal and Institutional Preconditions for Strong Securities Markets” (2001), 48 U.C.L.A. L. Rev. 781, at p. 782).
[35] This Court has recognized that “proper disclosure is the heart and soul of the securities regulations across Canada” and is pivotal for “an effective securities regime” (Kerr v. Danier Leather Inc., 2007 SCC 44, [2007] 3 S.C.R. 331, at paras. 5 and 64). Disclosure helps maintain a “level playing field” of information between investors and issuers, which has been described as “the most fundamental principle of securities regulation” (Theratechnologies, at para. 25, quoting Cartaway Resources Corp. (Re), 2000 BCSECCOM 88, [2000] B.C.S.C.D. No. 92 (Lexis), 2000 CarswellBC 3125 (WL), at para. 216, and Cornish v. Ontario Securities Commission, 2013 ONSC 1310, 306 O.A.C. 107 (Div. Ct.), at para. 40; see also Dey Remarks, at p. 2362; Johnston, Rockwell and Levine, at ¶8.13; M. R. Gillen, Securities Regulation in Canada (4th ed. 2019), at pp. 7-10 and 295-98; C. C. Nicholls, Securities Law (3rd ed. 2023), at pp. 362-63; S. Rousseau, Droit des valeurs mobilières: Théorie et pratique (2023), at pp. 45-50 and 292). This Court has also recognized that the Securities Act is “remedial legislation and is to be given a broad interpretation” (Kerr, at para. 32).
[36] As a result, preventing and deterring informational asymmetry between investors and issuers is essential “to maintain the integrity of the securities system and protect the public interest” (British Columbia Securities Commission v. Branch, 1995 CanLII 142 (SCC), [1995] 2 S.C.R. 3, at para. 77). This is the “core policy goal that underlies securities law” (D. Sarro, “Material Change Standards in Securities Law” (2025), 69 Can. Bus. L.J. 1, at p. 2, citing A. Anand and M. Condon, “Weather, Leather, and the Obligation to Disclose: Kerr v. Danier Leather Inc.” (2006), 44 Osgoode Hall L.J. 727, at pp. 735-36, and H. A. Sale, “Disclosure’s Purpose” (2018), 107 Geo. L.J. 1045, at pp. 1045-46; see also E. M. Iacobucci, “On Lemons and Leather: Liability for Misrepresentations of Forward-looking Information in Danier Leather” (2009), 48 Can. Bus. L.J. 3, at pp. 15-17).
[37] Disclosure also promotes the efficiency of capital markets by helping investors to identify and direct capital to the most deserving public companies. Armed with appropriate information, investors are more confident and participate more actively in securities markets, thereby enhancing the efficiency and competitiveness of capital markets more generally (Theratechnologies, at para. 26; Johnston, Rockwell and Levine, at ¶8.14; Gillen, at p. 295; Rousseau (2023), at pp. 42-44; J. Biron, “Gouvernance et assemblées d’actionnaires”, in Jurisclasseur Québec — Collection Droit des affaires — Valeurs mobilières (loose-leaf), fasc. 8, at No. 41).
(b) Disclosure of Material Facts in the Primary Market
[38] To illustrate the meaning of a material fact, it is useful to consider the disclosure required when an issuer first sells its securities directly to investors, known as an “initial public offering” or “IPO”. An issuer undertaking such an offering is said to be participating in the “primary market” for its securities (Johnston, Rockwell and Levine, at ¶12.69; Gillen, at pp. 238-40; Nicholls, at pp. 6-7; Rousseau (2023), at pp. 131-33 and 148-51). An issuer commonly becomes a “reporting issuer” by preparing a comprehensive disclosure document, known as a prospectus, filing it with securities regulators under the securities law of a jurisdiction, and delivering it to purchasers of the securities (Johnston, Rockwell and Levine, at ¶7.5; Gillen, at pp. 197-202; Nicholls, at pp. 7-8; Rousseau (2023), at pp. 148-51; Securities Act, s. 1(1) “reporting issuer”). A prospectus must provide “full, true and plain disclosure of all material facts relating to the securities issued or proposed to be distributed” (s. 56(1)).
[39] A “material fact” is defined under the Ontario Securities Act as “a fact that would reasonably be expected to have a significant effect on the market price or value of the securities” (s. 1(1)). Similar definitions are contained in provincial and territorial securities legislation across the country (see Securities Act, R.S.B.C. 1996, c. 418, s. 1(1)); Securities Act, R.S.A. 2000, c. S-4, s. 1(gg); The Securities Act, 1988, S.S. 1988-89, c. S-42.2, s. 2(1)(z); The Securities Act, C.C.S.M., c. S50, ss. 112(1) and 140.1; Securities Act, CQLR, c. V-1.1, s. 5; Securities Act, S.N.B. 2004, c. S-5.5, s. 1(1); Securities Act, R.S.N.S. 1989, c. 418, s. 2(1)(w); Securities Act, R.S.P.E.I. 1988, c. S-3.1, s. 1(1)(gg); Securities Act, R.S.N.L. 1990, c. S-13, s. 2(1)(x); Securities Act, S.N.W.T. 2008, c. 10, s. 1(1); Securities Act, S.Y. 2007, c. 16, s. 1(1); Securities Act, S. Nu. 2008, c. 12, s. 1(1)).
(c) Continuous Disclosure Obligations in the Secondary Market: Periodic Disclosure of Material Facts, but Timely Disclosure of Material Changes
[40] After an issuer has sold securities directly to investors in the primary market, subsequent trades of securities between investors occur in the “secondary market” (Johnston, Rockwell and Levine, at ¶12.69; Gillen, at pp. 293-95; Nicholls, at pp. 7-8; Rousseau (2023), at pp. 151-52). As elaborated below, a reporting issuer whose shares trade on the secondary market is subject to continuous disclosure obligations, which require regular, ongoing disclosure of certain information to investors and to the relevant provincial or territorial securities regulator.
[41] There are two categories of continuous disclosure obligations. The first is the obligation to make periodic disclosure of every “material fact”. By law, material facts must be disclosed at regular intervals, such as in annual and quarterly financial statements, annual information forms, and information and proxy circulars (Theratechnologies, at para. 23; Johnston, Rockwell and Levine, at ¶8.3; Gillen, at pp. 8 and 293-94; Nicholls, at p. 363; Rousseau (2023), at pp. 295-306).
[42] The second category of continuous disclosure obligation is the obligation to make timely disclosure of every “material change” in the issuer’s affairs. Material changes must generally be disclosed “forthwith” by issuing and filing “a news release authorized by a senior officer disclosing the nature and substance of the change” (s. 75(1); see also Theratechnologies, at para. 24; Johnston, Rockwell and Levine, at ¶¶8.3, 8.106 and 8.107; Gillen, at p. 293; Nicholls, at p. 388; Rousseau (2023), at pp. 320-22).
[43] As previously stated, a “material change” (in relation to an issuer other than an investment fund) is defined in relevant part as “a change in the business, operations or capital of the issuer that would reasonably be expected to have a significant effect on the market price or value of any of the securities of the issuer” (s. 1(1)). Decisions to implement such a change, made by the board of directors or by senior management where they believe that confirmation by the board of directors is probable, are also defined as material changes (s. 1(1)). Similar definitions are contained in the provincial and territorial securities legislation across Canada (Securities Act (B.C.), s. 1(1); Securities Act (Alta.), s. 1(ff); The Securities Act, 1988 (Sask.), s. 2(1)(y); The Securities Act (Man.), s. 1(1); Securities Act (Que.), s. 5.3; Securities Act (N.B.), s. 1(1); Securities Act (N.S.), s. 2(1)(v); Securities Act (P.E.I.), s. 1(1)(ff); Securities Act (N.L.), s. 2(1)(w); Securities Act (N.W.T.), s. 1(1); Securities Act (Yukon), s. 1(1); Securities Act (Nu.), s. 1(1)).
[44] As this Court has noted, the statutory definition of a “material change” has two components. First, there must be “a change in the business, operations or capital of the issuer”. A change in any one of the issuer’s business, operations or capital is sufficient. Second, the change must be material, which means that it “would reasonably be expected to have a significant effect on the market price or value of the securities” of the issuer. Both components are required to trigger an obligation of timely disclosure (Theratechnologies, at para. 40; Securities Act, s. 1(1); see also Cornish, at para. 46).
[45] Since 2004, most continuous disclosure obligations for Canadian reporting issuers have been consolidated in a national instrument adopted by securities regulators nationwide, which sets out harmonized disclosure obligations found in provincial and territorial legislation (Ontario Securities Commission, National Instrument 51-102, Continuous Disclosure Obligations (2004), 27 OSCB 3439 (“NI 51-102”); see also Johnston, Rockwell and Levine, at ¶8.2; Gillen, at p. 300; Nicholls, at p. 364; Rousseau (2023), at p. 291). Regulators have also issued a policy statement on disclosure standards that identifies examples of potentially “material information”, which encompasses both material facts and material changes (Ontario Securities Commission, National Policy 51-201, Disclosure Standards, (2002), 25 OSCB 4492, s. 4.3). However, this policy cannot, and does not, replace the statutory tests for identifying “material facts” and “material changes” (Theratechnologies, at para. 53; Sarro, at p. 8, fn. 47).
(2) The Distinction Between a “Material Fact” and a “Material Change”
[46] The distinction between a “material fact” and a “material change”, both of which are defined by legislation, must be resolved under the modern principle of statutory interpretation. A statutory provision is interpreted based on its text, context, and purpose to find a meaning that is harmonious with the legislation as a whole (Rizzo & Rizzo Shoes Ltd. (Re), 1998 CanLII 837 (SCC), [1998] 1 S.C.R. 27, at para. 21; Canada Trustco Mortgage Co. v. Canada, 2005 SCC 54, [2005] 2 S.C.R. 601, at para. 10; Canada (Minister of Citizenship and Immigration) v. Vavilov, 2019 SCC 65, [2019] 4 S.C.R. 653, at para. 117).
[47] The distinction between a material fact and a material change has been described as a “conundrum” (Anand and Condon, at p. 730), and sometimes causes “considerable uncertainty” (Johnston, Rockwell and Levine, at ¶6.9) and “considerable confusion” (Ontario, Five Year Review Committee Final Report — Reviewing the Securities Act (Ontario) (2003, Purdy Crawford, chair) (“Crawford Report”), at p. 142). Determining whether a material change has occurred is a contextual question of mixed fact and law (see Cornish, at paras. 51 and 53). Even so, several guiding principles from the case law and expert commentary help explain the distinction.
(a) A Material Fact Is Static; A Material Change Is Dynamic
[48] A material fact is “static”, because it provides a snapshot of an issuer’s affairs at a particular point in time. A material change is “dynamic”, because it necessarily compares an issuer’s affairs at two points in time (Johnston, Rockwell and Levine, at ¶6.8; see also Kerr, at para. 38, citing Dey Remarks, at p. 2368). For a material change to occur, “there must be a ‘change’ (as opposed to the existence of a ‘fact’)” (Crawford Report, at p. 143; see also J. D. Fraiberg and R. Yalden, “Kerr v. Danier Leather Inc.: Disclosure, Deference and the Duty to Update Forward-Looking Information” (2006), 43 Can. Bus. L.J. 106, at p. 109).
[49] The distinction between a material fact and a material change “is perhaps best understood from the perspective of the evolution of an issuer’s disclosure record” (Crawford Report, at p. 142). To illustrate, recall the role of a prospectus as a base disclosure document that must contain full, true, and plain disclosure of all material facts relating to the securities issued or proposed to be issued. Any fact will be a material fact, whether or not it is related to the issuer, if it would reasonably be expected to have a significant effect on the market price or value of the securities being issued. After a preliminary prospectus has been filed, the issuer must update its disclosure whenever there is a material change in its business, operations or capital (p. 142; see also Dey Remarks, at p. 2368).
(b) A Material Fact Is Defined More Broadly Than a Material Change
[50] A material fact is defined more broadly than a material change. “[O]nly changes in an issuer’s ‘business, operations or capital’ can be material changes, but any fact can be a material fact” (Johnston, Rockwell and Levine, at ¶6.8; see also Kerr, at paras. 35 and 38; Pezim v. British Columbia (Superintendent of Brokers), 1994 CanLII 103 (SCC), [1994] 2 S.C.R. 557, at p. 597). Put another way, “the ‘change’ must be in the business, operations or capital of the issuer”, while “a material ‘fact’ can be unrelated to an issuer’s business, operations or capital as long as it has a significant effect on the market price or value of the securities being issued” (Crawford Report, at p. 143; see also Fraiberg and Yalden, at p. 109).
(c) A Material Change Is Internal to the Issuer; A Material Fact Can Be Internal or External to the Issuer
[51] A material change must be internal to the issuer — there must be a change “in the business, operations or capital of the issuer” (s. 1(1)). External political, economic, and social developments cannot give rise to a material change, unless the development results in a change in the business, operations or capital of the issuer, and unless the change is material.
[52] In Kerr, this Court applied the distinction between internal and external developments and held that Danier Leather Inc., a leather apparel company, was not required to update its prospectus to make timely disclosure of poor intra-quarterly financial results caused by unseasonably warm weather — an external factor — because it did not involve a change in the company’s business, operations or capital. The company was entitled to wait until its next round of periodic disclosure before disclosing what was accepted to be a material fact. Poor intra-quarterly results, the Court explained, may reflect a material change in business operations, even though the results themselves would not amount to a material change:
It almost goes without saying that poor intra-quarterly results may reflect a material change in business operations. A company that has, for example, restructured its operations may experience poor intra-quarterly results because of this restructuring, but it is the restructuring and not the results themselves that would amount to a material change and thus trigger the disclosure obligation. Additionally, poor intra-quarterly results may motivate a company to implement a change in its business, operations or capital in an effort to improve performance. Again, though, the disclosure obligation would be triggered by the change in the business, operations or capital, and not by the results themselves. [Emphasis in original; para. 47.]
[53] By comparison, in Pezim, this Court held that information contained in drilling results for a company’s mine, an internal development, could amount to a material change in the “business, operations, assets or ownership of the issuer” (pp. 574-75, quoting Securities Act (B.C.), s. 1(1)), and thus would have to be disclosed on a timely basis. As the Court explained, “from the point of view of investors, new information relating to a mining property (which is an asset) bears significantly on the question of that property’s value”, and thus “a change in assay and drilling results can amount to a material change, depending on the circumstances” (p. 600). In addition, the Court ruled that the issuer’s failure to make timely disclosure of a multimillion-dollar contractual dispute, another internal development, also involved a failure to disclose a material change (p. 606).
[54] An example of an external development that caused a material change in an issuer’s affairs arose in Coventree Inc. (2011), 34 OSCB 10209, aff’d Cornish v. Ontario Securities Commission, 2013 ONSC 1310, 306 O.A.C. 107 (Div. Ct.). The Ontario Securities Commission ruled that Coventree Inc., an investment bank specializing in structured finance, failed to comply with its obligation to file a material change report after a credit rating agency issued a press release advising that it would no longer provide credit ratings for certain credit arbitrage transactions. Such transactions formed a significant part of Coventree’s business. The Commission ruled that the company had an obligation to disclose the credit rating agency’s press release and subsequent liquidity events it experienced as material changes because investors likely would not have been able to fully assess the effect on Coventree’s affairs as these events were unfolding.
[55] Although a material change is necessarily internal to the issuer, a material fact may be internal or external. In Kerr, for example, the unseasonably warm weather that led to the decline in Danier Leather’s intra-quarterly financial performance was a material fact external to the issuer (para. 48). By contrast, examples of material facts internal to an issuer could include an issuer’s board of directors engaging financial advisers for the recapitalization of a company (Crawford Report, p. 143, fn. 290) or negotiating a material acquisition (Dey Remarks, at p. 2366; Fraiberg and Yalden, at pp. 109-10).
[56] The distinction between a material fact and a material change, and particularly the requirement that a material change be internal to the issuer, is “deliberate and policy-based” (Kerr, at para. 38). There are two main policy reasons for the distinction.
[57] First, the distinction balances the burdens that disclosure places on issuers with the need for investors to be informed on a timely basis of material developments in an issuer’s affairs. The distinction “relieve[s] reporting issuers of the obligation to continually interpret external political, economic and social developments as they affect the affairs of the issuer, unless the external change will result in a change in the business, operations or capital of the issuer, in which case, timely disclosure of the change must be made” (Kerr, at para. 38 (emphasis deleted), quoting Dey Remarks, at p. 2368; see also Crawford Report, at p. 143; Fraiberg and Yalden, at p. 110; R. Provencher et al., “Information continue”, in Jurisclasseur Québec — Collection Droit des affaires — Valeurs mobilières (loose-leaf), fasc. 4, at No. 67).
[58] Second, the distinction between a material fact and a material change promotes the purpose of securities law to remedy informational asymmetry between issuers and investors. As Professor Sarro explains, there is generally no informational asymmetry between issuers and investors regarding external political, social, and economic developments (p. 22). External developments are usually in the public domain, and apart from situations such as in Coventree where investors have very limited knowledge about an opaque market (para. 641), the impact of external developments on an issuer’s financial performance is “typically ascertainable by reviewing [an issuer’s] existing disclosure record” (Sarro, at p. 3; see also Fraiberg and Yalden, at p. 110). On the other hand, there is often an informational asymmetry regarding internal developments in an issuer’s business, operations, and capital. Internal developments are usually not in the public domain, and thus investors “cannot reasonably be expected to discover [them] on their own” (Sarro, at p. 3). Requiring timely disclosure of a material change thus helps level the informational playing field between issuers and investors.
(d) A Material Change Generally Requires More Than Mere Negotiations or Internal Deliberations
[59] Negotiations and internal deliberations, without more, will not usually amount to a change in the business, operations or capital of the issuer, even if they are material.
[60] For example, in AiT Advanced Information Technologies Corporation (2008), 31 OSCB 712, the Ontario Securities Commission ruled that a proposed merger transaction was not a material change unless there was a “substantial likelihood that the transaction would be completed” (para. 6; see also para. 224). The Commission stated that “where the proposed transaction is speculative, contingent and surrounded by uncertainties, a commitment from one party to proceed will not be sufficient to constitute a material change” (para. 223). Instead, there must be “sufficient commitment from both parties of the transaction to determine whether a ‘decision to implement’ the transaction has taken place” (para. 223). As Professor Sarro explains, this is justifiable from a policy perspective “because managers do not yet have reliable information about the likely outcomes of these processes that could be shared with investors” (p. 3). This again promotes the goal of effectively remedying informational asymmetry: any information held by management regarding negotiations or internal deliberations becomes much more useful to investors once “the information available to management provides a meaningful signal about outcomes” (p. 23).
[61] As a further example, in Theratechnologies, this Court ruled that routine correspondence with a regulator did not amount to a change in the issuer’s affairs. The Court held that a drug company did not breach its obligation of timely disclosure by not immediately disclosing questions from the United States Food and Drug Administration (“FDA”) during the drug approval process about a drug’s potential side effects. The company had previously publicly disclosed the potential side effects and explained why they were not clinically significant. The FDA’s questions, the Court stated, did “not constitute a departure from the normal FDA process” and were a “routine step”, and thus could not involve any change in the company’s business, operations or capital (para. 51).
[62] Similarly, in Peters v. SNC-Lavalin Group Inc., 2023 ONCA 360, 166 O.R. (3d) 756, released with the decision under appeal, the Court of Appeal for Ontario ruled that a company did not have to make timely disclosure of a telephone call from federal prosecutors advising the company that it would not be invited to negotiate a remediation agreement to resolve a pending criminal prosecution. The company faced the prospect of prosecution before the call, and continued to face that prospect after the call. The company had publicly disclosed the risk of prosecution on many occasions and, even after the call, prosecutors agreed to receive further submissions on the company’s request for a remediation agreement. As a result, the court held, the telephone call could not have resulted in a material change.
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(4) Summary
[96] Material changes are dynamic, related to changes in the issuer’s business, operations or capital, internal rather than external to the issuer, and usually involve more than mere negotiations or internal deliberations. They are distinct from the broader category of material facts. Like material facts, however, material changes must be reasonably expected to have a significant effect on the market price or value of securities.
[97] Whether there has been a material change in a given case is a highly contextual question of mixed fact and law (see Cornish, at paras. 51 and 53; AiT, at paras. 214-15). There is no bright line test and this determination is not a science, but rather a matter of judgment and common sense applied to the unique circumstances of each case (YBM Magnex, at paras. 90 and 518; Coventree, at paras. 159-60; Cornish, at paras. 48 and 53; AiT, at paras. 215 and 228). At the same time, disclosure decisions are a matter of legal obligation, and thus are “not to be subordinated to the exercise of business judgment. . . . It is for the legislature and the courts, not business management, to set the legal disclosure requirements” (Kerr (SCC), at para. 55; see also Coventree, at paras. 162-63; Cornish, at para. 55; AiT, at para. 228; Rex Diamond (Ont. Sec. Comm.), at para. 238).
[98] The contextual exercise of identifying a material change is guided by the purpose of disclosure obligations to level informational asymmetry between issuers and investors, which serves to maintain the integrity of the securities system and protect the public interest (see Theratechnologies, at para. 25; Branch, at para. 77). . Kraft v. Ontario (Securities Commission) [NCOB]
In Kraft v. Ontario (Securities Commission) (Ont Divisional Ct, 2025) the Divisional Court dismissed an appeal, here from "two decisions of the Capital Markets Tribunal (the “Tribunal”) in regulatory proceedings brought under the Securities Act, R.S.O. 1990, c. S.5 (the “Securities Act” or the “Act”) by the respondents the Ontario Securities Commission (the “OSC”) and the Chief Executive Officer of the OSC".
The court considers what constitutes a "material fact", here in a Securities Act context:[71] Section 1(1) of the Securities Act defines “material fact”, when used in relation to securities, to mean “a fact that would reasonably be expected to have a significant effect on the market price or value of the securities”. Whether a fact is a material fact is a question of mixed fact and law, since it requires the application of a legal standard to the facts: see Donald (Re), 2012 ONSEC 26, 35 O.S.C.B. 7383, at paras. 28-29; Canada (Director of Investigation and Research) v. Southam Inc., 1997 CanLII 385 (SCC), [1997] 1 S.C.R. 748, at para. 35. The standard of review is palpable and overriding error unless the error relates to an extricable legal principle, which is reviewable on a correctness standard: Housen, at paras. 26-37.
[72] At previously noted, the Tribunal found that the planned expansion transaction (including the terms of the draft Transaction Documents) constituted a material fact that Mr. Kraft selectively disclosed to Mr. Stein. The Tribunal also found that “the fact of and terms of the Draft Lease, considered alone, constituted a material fact that … had not been generally disclosed”: Merits Decision, at para. 196.
[73] In its analysis of whether the information was a material fact, the Tribunal, at paras. 106-7 of the Merits Decision, stated:In determining whether the information would reasonably be expected to have a significant effect on the market price or value of a security, the Tribunal applies an objective “market impact test” and views materiality from the perspective of the trading markets, that is, the buying, selling, or holding of securities.
Materiality is assessed objectively from the perspective of a reasonable investor and prospectively through the lens of expected market impact. [Citations omitted.] ....
[80] We see no palpable and overriding error in the Tribunal’s conclusion that the information Mr. Kraft conveyed to Mr. Stein constituted a material fact, a finding of mixed fact and law that is entitled to deference. We also find no extricable error of law in the Tribunal’s analysis. . Peters v. SNC-Lavalin Group Inc.
In Peters v. SNC-Lavalin Group Inc. (Ont CA, 2023) the Court of Appeal considered (and held) that a change in 'risk' could constitute a "material change" for Securities Act disclosure duties under s.75(1):[91] As a starting point, it is important to note that SNC does not dispute that a change in risk in its business, operations or capital could constitute a material change for the purpose of the Securities Act. In effect, this position is consistent with the decision in Rex Diamond Mining Corporation et al., 2008 ONSEC 18, aff’d 2010 ONSC 3926 (Div. Ct.), cited by the motion judge and cited in other Superior Court decisions to explain the scope and meaning of “material change”: see e.g., Cornish, at para. 56; Mask, at para. 57; Coffin v Atlantic Power Corp., 2015 ONSC 3686, 127 O.R. (3d) 199, at para. 105; Paniccia v. MDC Partners Inc., 2018 ONSC 3470, 142 O.R. (3d) 421, at para. 77. In Rex Diamond, the defendant (“Rex”) was a diamond mining company. Rex had received several warning letters indicating that its leases for diamond mines in Sierra Leone were going to be cancelled if it failed to comply with certain terms. The notices gave rise to “a very possible risk” (emphasis added) that the leases would be cancelled: Rex Diamond, at para. 211. However, these notices were not disclosed to securities holders.
[92] The Ontario Securities Commission (the “OSC”), as affirmed by the Divisional Court, found that the final notice constituted a material change and triggered statutory obligations to disclose forthwith pursuant to s. 75 of the Securities Act. The OSC explained that the letters demonstrated a significant possibility that the operations on the property would be halted. This significant possibility was reinforced by the notice of tender and the commencement of the tender evaluation process. Since “the loss of the Sierra Leone Leases eliminated any potential for Rex to generate future revenue from these operations”, the OSC concluded that the final notice constituted a change in operations: Rex Diamond, at para. 218. . Markowich v. Lundin Mining Corporation
In Markowich v. Lundin Mining Corporation (Ont CA, 2023) the Court of Appeal canvasses some Securities Act duties, here with respect to disclosure of "material changes" in the affairs of the listed company [s.75(1)]:(2) Disclosure obligations under the Securities Act and right of action
[41] Section 75(1) of the Securities Act requires a reporting issuer to “forthwith issue and file a news release” in circumstances “where a material change occurs in the affairs of [the] reporting issuer” (emphasis added). In addition, s. 75(2) requires the reporting issuer to “file a report of such material change in accordance with the regulations as soon as practicable and in any event within ten days of the date on which the change occurs”.
[42] Section 1(1) of the Securities Act defines “material change” in relation to a reporting issuer as:(i) a change in the business, operations or capital of the issuer that would reasonably be expected to have a significant effect on the market price or value of any of the securities of the issuer [Emphasis added.] [43] Section 1(1) of the Securities Act also defines “material fact”. In contrast with “material change”, a “material fact” is “a fact that would reasonably be expected to have a significant effect on the market price or value of the securities”.
[44] The disclosure requirements in the Securities Act for material facts and material changes are different. The Act imposes various disclosure obligations on issuers with respect to material facts, but, unlike material changes, does not require that issuers disclose material facts “forthwith”.
[45] In Kerr v. Danier Leather, 2007 SCC 44, [2007] 3 S.C.R. 331, at para. 32, the Supreme Court emphasized that the Securities Act is “remedial legislation” that is to be given a broad interpretation. The Act protects investors by imposing disclosure obligations. At the same time, it limits the burden placed on issuers by requiring disclosure “forthwith” of material changes but not of material facts. In Kerr, at para. 38, the Supreme Court also stated that the distinction between a material change and a material fact is “deliberate and policy-based”.
[46] The issue of whether there has been a material change requires a two-step analysis. First, the court must determine whether there has been a change in the business, operations or capital of the issuer. Second, the court must determine whether the change was material, in the sense that it would be expected to have a significant impact on the value of the issuer’s shares: Theratechnologies Inc. v. 121851 Canada Inc., 2015 SCC 18, [2015] 2 S.C.R. 106, at para. 40; Cornish v. OSC, 2013 ONSC 1310 (Div. Ct.), para. 46. This case focuses on the first step of the analysis. I address the specific meaning of “a change in the business, operations or capital” and the relevant case law further below. At paras 51-89 the court extensively considers the interpretation of "change in the business, operations or capital" and related case law.
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