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Canadian Securities Regulatory Monitor

News and Insight

The OSC LaunchPad – Unveiled

Posted in Fintech, Industry News, OSC
Ana BadourDan DolinerShauvik ShahRene Sorell

As previously announced, the OSC has opened the OSC LaunchPad which consists of a dedicated team within the securities regulator to support Fintech businesses wishing to navigate securities law requirements.

The OSC LaunchPad will offer tailored support which can include time-limited exemptive relief to allow testing of innovative products and services.

In order to be eligible to receive support from the OSC LaunchPad, a business must meet certain criteria, including:

  • Being a new or early-stage Fintech business that has not yet started operations or is applying to the OSC for exemptive relief.
  • Having a new, innovative or significantly different product from those currently on the market.
  • Developing innovative products and/or services that will provide identifiable benefits to investors.
  • Addressing consumer or investor risks presented by its innovation.
  • Requiring additional support because the business model raises new or complex regulatory questions.

Fintech businesses can contact the OSC LaunchPad team at www.osclaunchpad.ca.

The OSC LaunchPad does not guarantee to provide support to all applicants who meet its criteria.

The OSC will use its OSC LaunchPad experience to modernize regulation for similar businesses and will also establish a Fintech advisory committee.

For more information about our firm’s Fintech expertise, please see our Fintech group’s page.


IIROC issues cybersecurity report cards to dealer firms

Posted in Broker-Dealers, CSA, IIROC
Cristian BlidariuMichael NicholasSean SadlerRene Sorell

IIROC is providing all dealer member firms it regulates (Firms) with a confidential cybersecurity “report card” that will include:

  • an individual assessment of the Firm’s cybersecurity preparedness program
  • a comparison of the Firm’s cybersecurity practices against the industry and other Firms of similar size and business model
  • a list of cybersecurity areas to which the Firm should be giving priority attention.

The report cards were generated based on the results of an extensive assessment survey that Firms completed in June 2016. The survey responses were benchmarked against a National Institute of Standards and Technology cybersecurity framework that considers governance, threat prevention, threat detection and threat response and recovery criteria.

IIROC is also using the June survey results to assess the adequacy of each Firm’s cybersecurity policies and procedures. Firms that are assessed as lagging their peers may face further regulatory scrutiny.

Cybersecurity is a key regulatory priority for IIROC and the CSA

All registered securities firms can expect continued and heightened scrutiny of their cybersecurity policies and procedures. As we discussed in our earlier blogs (IIROC 2016 Compliance Priorities and CSA Sets Out Priorities for 2016-2019), cybersecurity preparedness is a key regulatory priority for IIROC and the Canadian Securities Administrators (CSA).

Recently, the CSA issued CSA Staff Notice 11-332 – Cyber Security which further highlights the importance of cybersecurity and communicates expectations that the CSA has of market participants in this area, including the following:

Registered securities firms are expected to:

  • remain vigilant in developing, implementing and updating their approach to cybersecurity management
  • review and follow regulatory guidance (e.g. IIROC and MFDA guidance).

Regulated entities (e.g. marketplaces, clearing agencies, information processors) are expected to:

  • examine and review compliance with ongoing requirements outlined in securities legislation, terms and conditions of recognition, registration or exemption orders
  • have internal controls over their systems and to report security breaches
  • adopt a cybersecurity framework provided by a regulatory authority or standard-setting body that is appropriate to their size and scale.

Public companies who have determined that cybersecurity is a material risk are expected to:

  • provide detailed and entity-specific cyber risk disclosure
  • address in any cyber-attack remediation plan:
    • how materiality of an attack would be assessed, including the attack’s impact on the company’s operations and reputation, its customers, employees and investors
    • whether and what, as well as when and how, to disclose a cyber-attack.

In previous guidance (CSA Staff Notice 11-326 – Cyber Security), the CSA also indicated that it expects registrants to implement strong and tailored cybersecurity measures in accordance with prudent business practice and to improve information security, including by:

  • educating staff
  • conducting third party testing and assessment
  • regularly reviewing and updating cybersecurity measures
  • following industry guidelines and best practices.

Improving your firm’s cybersecurity regulatory compliance

Enhanced data protection measures and a robust breach response protocol are key to discharging a registrant’s regulatory compliance obligations, but can also be a potential competitive advantage that differentiates market-leading firms from the competition.

All securities firms, and especially Firms that received a lagging IIROC “report card”, should carefully review their cybersecurity policies and procedures. For more information on how our cross-functional securities regulatory and cyber law expertise may assist in this regard, please contact a member of our Securities Regulation & Investment Products Group. For additional insights on CSA Staff Notice 11-332, please see our colleagues’ recent post on the CyberLex blog.

TSX Releases Guidance with Respect to Pricing a Prospectus Offering or Private Placement where there is Undisclosed Material Information

Posted in Capital Markets, Corporate Finance
Heidi GordonMatthew CummingWendi LockeNicole Rumble

On October 11, 2016, TSX released guidance with respect to pricing a prospectus offering or private placement where there is undisclosed material information. This guidance will be of particular interest to TSX-listed companies contemplating a prospectus offering or private placement of securities, where the proceeds of such financing are to be used to fund an acquisition.

On October 11, 2016, Toronto Stock Exchange (TSX) issued Staff Notice 2016-0006 (the Notice), providing guidance with respect to pricing a prospectus offering or private placement where there is undisclosed material information. This guidance will be of particular interest to TSX-listed companies contemplating a prospectus offering or private placement of securities, where the proceeds of such financing are to be used to fund an acquisition.

The Notice provides the following general guidance with respect to the relationship between the dissemination of information about the company and the pricing of a prospectus offering or a private placement:

  • Companies proposing a prospectus offering or a private placement should price their offerings in the context of the market with reference to the “market price” (as determined in accordance with the TSX Company Manual);
  • Generally, when pricing a financing, the market price should reflect all material events, changes or announcements (collectively, Material Information); and
  • Where there is undisclosed Material Information, it is not appropriate to price a financing prior to dissemination of Material Information, as the market price of the securities may not accurately reflect the business and affairs of the company. This means that in the case of a prospectus offering or private placement of securities, where the proceeds of such financing are to be used to fund a material acquisition, TSX will typically require that the material acquisition be announced prior to the pricing of the financing.

Despite this general guidance, TSX has historically allowed an exception to pricing a financing where there is undisclosed Material Information if the event would not otherwise occur without a financing arrangement (the Pricing Exception).

The Pricing Exception is most often relevant where there is a prospectus offering or private placement of securities and the proceeds of such financing are used to fund an acquisition. For these transactions, the principal terms of the financing (including the price) are typically announced concurrently with the acquisition; therefore, financing is priced prior to the acquisition being disclosed to the public.

The Notice confirms that TSX will generally: (i) accept pricing of such financings in this manner, provided that TSX is satisfied that the acquisition would not otherwise have been approved by the board of directors of the company, but for the financing arrangement, and (ii) require an officer’s certificate confirming that the board of directors of the company would not have entered into the acquisition agreement without also having entered into the financing arrangement.

Importantly, the Notice flags two scenarios where TSX may have concerns about allowing the Pricing Exception for financings:

  1. Where the net proceeds of the financing significantly exceed the cash consideration of the acquisition, in which case TSX may require the company: (i) to reduce the gross proceeds of the offering (so that the acquisition and financing are more clearly aligned); (ii) set the price of the financing after the acquisition has been disclosed; or (iii) obtain security holder approval as a condition of the financing. Note that TSX will generally consider a financing to significantly exceed the cash consideration where the financing raises 30% or more in excess of the cash consideration.
  2. Where the financing provides for significant insider participation. Significant insider participation by officers, directors and major shareholders may provide or appear to provide insiders with an economic advantage not generally available to the investing public.

Although the Notice provides some helpful guidance, pricing and disclosure issues often require careful consideration, and in some cases, may necessitate prior consultation with the company’s legal advisors and/or TSX. If you have questions about the Notice feel free to reach out to us.



Preparing for the Implementation of T+2 Settlement

Posted in Amendments, CSA, Proposals
Matthew ApplebyMichael EldridgeZachary Masoud

In August 2016, the Canadian Securities Administrators (“CSA”) published for comment Proposed Amendments to National Instrument 24-101 (“NI 24-101”) – Institutional Trade Matching and Settlement, Proposed Changes to Companion Policy 24-101 (“CP 24-101”) – Institutional Trade Matching and Settlement and CSA Consultation Paper 24-402 – Policy Considerations for Enhancing Settlement Discipline in a T+2 Settlement Cycle Environment (the “Consultation Paper”).

The proposed amendments to NI 24-101 and CP 24-101 (the “Proposed Amendments”) are intended to assist in a successful migration to T+2 settlement from the current T+3 regime. The Proposed Amendments also update NI 24-101 to reflect certain developments since it came into force in 2007, as well as clarify certain existing provisions. For example, the Proposed Amendments include making trades in exchange-traded mutual fund (ETF) securities, a significant area of growth since 2007, subject to NI 24-101. Other proposed revisions to modernize or clarify NI 24-101 and CP 24-101 include broadening the definition of “clearing agency” to include clearing agencies other than CDS and enhancing the provisions on matching services utilities systems and business continuity planning.

The Consultation Paper provides an overview of existing settlement discipline measures in the Canadian equity and debt markets and raises policy considerations for addressing the risk that the transition to a standard T+2 settlement cycle might increase settlement failures. The CSA is using the Consultation Paper to seek comments on whether (i) additional settlement discipline measures might be required, including additional amendments to NI 24-101 and CP 24-101, and (ii) other settlement discipline mechanisms – similar to those already in place or proposed in certain foreign jurisdictions, such as a settlement-fail penalty mechanism or a close-out (or forced buy-in) requirement – for the Canadian equity and debt markets would deter settlement failures.

The comment period on the Proposed Amendments and the Consultation Paper expires on November 16, 2016.

Canadian Deposit Insurance – Framework Under Review

Posted in Industry News
Daniel BénayMason Gordon


On September 16, 2016, Canada’s federal Department of Finance launched a consultation process on the deposit insurance framework. The consultation paper can be found here. The consultation process is to help determine whether the scope of targeted Canadian financial products requires adjustments to ensure the deposit insurance framework continues to serve Canadians effectively.

The review comes as a response to changes to the global banking landscape since 2008 financial crisis and, more specifically, changes to deposit products offered by financial institutions. The policy objectives relating to the review include protecting depositors, supporting financial stability and promoting efficient and competitive financial services.

Current Canadian Deposit Insurance Framework

Canada’s deposit insurance framework is administered by the Canada Deposit Insurance Corporation (CDIC). CDIC has 80 members and is comprised of banks, federally incorporated trust and loan companies, federal credit unions, provincially incorporated trust and loan companies, and cooperative retail associations.

Canada’s deposit insurance coverage framework consists of:

  • seven coverage categories
  • scope of eligible deposits
  • coverage limit

The seven categories of deposits to which coverage extends are:

  • deposits held in one name (individual)
  • deposits held in more than one name (joint deposits)
  • deposits held in trust for another person
  • deposits in Registered Retirement Savings Plans
  • deposits in Registered Retirement Income Funds
  • deposits in Tax Free Savings Accounts
  • deposits held in mortgage tax accounts

Coverage extends to:

  • savings and chequing accounts
  • Guaranteed Investment Certificates (GICs) and other term deposits of five years or less
  • money orders, travellers’ cheques and bank drafts issued by CDIC members and cheques certified by CDIC members
  • debentures issued by loan companies that are CDIC members

The coverage limit has been $100,000 since 1983 (when it was raised from $60,000) and applies to deposits of up to $100,000 in each of the above seven categories. Therefore, by holding deposits in multiple categories, and with multiple CDIC member institutions, depositors can access coverage above $100,000.

Policy Framework Considerations

The Department of Finance Canada is seeking views on possible enhancements to the deposit insurance framework in three broad categories: streamlining deposit categories; updating the scope of eligible deposits; and addressing the complexity of trust deposits. The specific issues for consideration regarding each area are noted below. For each issue, the Government has proposed questions to solicit comments in the consultation paper.

Streamlining Deposit Categories

Mortgage Tax Accounts: Given the declining use of mortgage tax accounts, mortgage tax deposits may no longer warrant their own separate category of deposit insurance. To keep the deposit insurance framework current, the Government is considering removing mortgage tax accounts as a separate insured category of deposit.

Registered Products: Registered Retirement Savings Plans (RRSPs) and Registered Disability Savings Plans (RDSPs) do not receive the same coverage as other registered products. The Government is considering the addition of two new deposit categories for RESPs and RDSPs. This approach would ensure that every registered product would be equally covered up to the same $100,000 limit. Alternatively, all registered products could be amalgamated into one deposit category with a higher insurance limit.

Updating the Scope of Eligible Deposits

Travellers’ Cheques: Given that CDIC member institutions no longer issue travellers’ cheques, the Government is considering modernizing the deposit insurance framework by removing travellers’ cheques as an eligible deposit.

Foreign Currency Deposits: Given that foreign currency deposits are widely held in Canada, the Government is considering the addition of foreign currency as an eligible deposit. To reduce complexity, any funds paid out to depositors holding eligible foreign currency accounts could be paid in Canadian dollars.

Temporary High Balances: Temporary high balances include large lump-sum payments such as payment received from an inheritance, an insurance payout, a divorce settlement or the sale of property. The creation of temporary high balance coverage in Canada would add complexity to the deposit insurance framework and increase CDIC exposure. Funds necessary to cover temporary high balances under deposit insurance could likely only be collected subsequent to a bank failure.

Addressing the Complexity of Trusts

Disclosure of Beneficiary Information: For CDIC to be able to quickly and accurately pay out deposit insurance, they need to have ready access to beneficiary information. Insufficient or incorrect beneficiary information may result in a reduction in coverage available to beneficiaries.

Brokered Deposits: Brokers can deposit funds either as an agent or in their own name in a trust for their client. Brokered deposits receive coverage differently depending on the approach the broker chooses. If the deposit broker acts as agent, the amount is considered part of the client’s $100,000 limit in the individual category of deposit insurance. In the trust form, the client is a beneficiary, and coverage is dependent on the provision of accurate beneficiary information by the trustee to the member institution before the institution fails. In the latter case, brokers may be reluctant to provide client information to CDIC member institutions who are potential competitors. Therefore the Government is seeking views on how to ensure beneficiaries of brokered trustee deposits retain their coverage.


Written comments can be sent by November 30, 2016 to DepositInsuranceReview-ExamenDuCadreDAssuranceDepots@canada.ca or to:

Financial Systems Division
Financial Sector Policy Branch
Department of Finance Canada
90 Elgin Street
Ottawa, Canada
K1A 0G5

The Canadian Securities Administrators are closely monitoring compliance with gender diversity disclosure rules

Posted in Continuous and Timely Disclosure, CSA
Heidi GordonWendi LockeSabrina Lyon

The Canadian Securities Administrators recently released the results of its second review of compliance with the new gender diversity disclosure rules.

Last year new rules came into effect requiring Canadian public companies to disclose, on an annual basis (either in their annual proxy circular or annual information form), certain information regarding women on boards and in executive positions (the Gender Disclosure Rules).

The Gender Disclosure Rules represent some of the most significant changes to the annual disclosure requirements of Canadian public companies that have come into effect in the last few years, and the Canadian Securities Administrators (CSA) are paying careful attention to compliance.

On September 28, 2015, the CSA published a summary of the findings of their review of compliance with the Gender Disclosure Rules by companies that had released their annual proxy circulars or annual information forms by July 31, 2015 (Year 1), and on September 28, 2016, the CSA published an updated set of findings, this time focusing on compliance by companies that had released their annual disclosure by July 31, 2016 (Year 2). The Year 2 findings are based on a sample size of 677 companies.

The Gender Disclosure Rules came into effect for financial years ending December 31, 2014, apply to TSX-listed (and other non-venture) companies and require them to disclose:

  1. The number and percentage of women on the company’s board of directors and in executive officer positions.
  2. Whether the company has (i) a policy relating to the identification and nomination of women directors, (ii) director term limits or other mechanisms of board renewal, and (iii) targets for women on its board and in its executive officer positions. If a company has not adopted such a policy, mechanisms or targets, an explanation as to why it has not done so is required.
  3. Whether the company considers the representation of women in its director identification and selection process and in its executive officer appointments.

Results of the CSA Review

The Year 2 findings reveal the following (with meaningful differences between Year 1 and Year 2 noted):


  • Number of Women. 94% disclosed the number or percentage of women on their boards, with 55% having at least one female director (up 6% over Year 1) and 10% having three or more female directors (up 2% over Year 1).
  • Term Limits. 20% adopted director term limits, with 48% of these companies setting age limits, 23% setting tenure limits and 29% setting both. Less than 3% failed to provide a reason for not adopting board renewal mechanisms.
  • Targets Regarding the Representation of Women. 9% (up 2% over Year 1) set formal targets for the representation of women on their boards. The larger a company, the more likely it was to implement a target for board representation, with 31% of companies with market caps over $10 billion adopting a target, compared to just 5% of companies with market caps under $1 billion.
  • Consideration of the Representation of Women in the Director Identification and Selection Process. 66% (up 6% over Year 1) disclosed that they consider the representation of women on their boards as part of their director identification and nominating process. 70% (up 28% over Year 1) made disclosure of how they consider the representation of female directors on their boards and in their identification and nomination process.
  • Policies Regarding Representation of Women. 21% (up 6% over Year 1) clearly disclosed the adoption of a policy relating to the identification and nomination of women directors, and 59% (down 6% over Year 1) disclosed that they did not adopt a policy. Only 2% (down 6% over Year 1) failed to provide disclosure related to policy adoption.


  • Number of Women. 90% disclosed the number or percentage of women in their executive officer positions, with 59% (up 6% over Year 1) having at least one female executive officer.
  • Targets Regarding the Representation of Women. 2% set formal targets for the representation of women in executive officer positions.
  • Consideration of the Representation of Women. 58% (up 5% over Year 1) disclosed that they consider the representation of women when making executive officer appointments. 38% (up 30% over Year 1) made disclosure of how they consider the level of representation of women in executive officer positions when making executive officer appointments.

The Year 2 findings indicate an overall increase in compliance with the Gender Disclosure Rules. The findings also show that the representation of women on boards is increasing, and that companies that have policies or targets in place have a higher percentage of women on their boards. The CSA intends to publish a comparison of the complete two-year results once all required companies have made the requisite disclosure for two consecutive years.

Want to learn more about the Gender Disclosure Rules? Check out the following additional resources:







Canada’s First Regulatory Sandbox for Fintech? OSC Announces Plans for “OSC LaunchPad” Innovation Hub

Posted in Fintech, Industry News, OSC
Ana BadourGenevieve Pinto

OSC chair Maureen Jensen has announced that the OSC plans to launch an innovation hub for fintech entities. “OSC Launchpad” will be the first fintech hub for a Canadian securities regulator.

Securities regulation in Canada impacts a number of fintech business models (including companies offering online advising, peer-to-peer lending, crowdfunding platforms and angel investor organizations). The OSC had also previously issued a notice on peer-to-peer lending, inviting those operating in this sector to discuss with OSC Staff and reminding prospective marketplace lenders that certain prospectus and registration requirements may be applicable to them, depending on their business model.

OSC Launchpad will be staffed by a dedicated team who will work directly with fintech companies to help them navigate Ontario’s securities laws.  The OSC says it will work to tailor regulation and oversight for fintech companies to foster innovation, and to reduce regulatory burden, while ensuring investors remain protected.

OSC Launchpad arrives as many jurisdictions (including the UK, Singapore and Australia) launch their own “regulatory sandboxes” seeking to create a regulatory “safe space” in which businesses can test innovative products and services without immediately incurring all the normal regulatory consequences of engaging in such activity. In Canada, the Competition Bureau is also in the process of completing a market study focused on how innovation in the fintech sector is impacting consumers and businesses, with the results intended to be published in the spring of 2017, seeking to determine whether there is a need for “regulatory reform to promote greater competition while maintaining consumer confidence in the sector.”

For more information on regulatory sandboxes in other jurisdictions, please see the report “FinTech in Canada: British Columbia Edition” co-authored by the Digital Finance Institute and McCarthy Tétrault. For more information about our firm’s fintech expertise, please see our Fintech group’s page.

TSX’s New DRIP Rules Now in Effect

Posted in Corporate Finance, Industry News
Heidi GordonAndrew Parker

Effective September 1, 2016, the Toronto Stock Exchange adopted new rules governing dividend / distribution reinvestment plans, which apply to new plans, and amendments to existing plans.

Effective September 1, 2016, the Toronto Stock Exchange (“TSX”) adopted new rules governing dividend / distribution reinvestment plans (“DRIPs”). The new rules are reflected in amendments to Section 6.17.1(c) of the TSX Company Manual.

Prior to the amendments coming into effect, there were no specific requirements applicable to DRIPs in the TSX Company Manual; instead companies and their legal counsel would reach out to the TSX on an ad hoc basis for guidance on implementing a DRIP. The new rules formalize the process.

Application of the New Rules

The new rules apply to all new DRIPs that allow existing securityholders to either: (1) reinvest their cash dividends or distributions by purchasing additional TSX-listed securities, or (2) elect to receive additional TSX-listed securities in lieu of cash dividends or distributions. The new rules do not apply to DRIPs that provide for the payment of dividends or distributions solely with securities purchased on the secondary market.

The new rules only apply to existing DRIPs that were implemented prior to September 1, 2016 if and when such DRIPs are amended. The mere listing of additional securities under an existing DRIP, without an amendment to the DRIP, does not constitute an amendment.

New and existing DRIPs continue to be governed by Canadian securities laws.

Key Features of the New Rules

Under the new rules:

  • securities cannot be issued under a DRIP for a price lower than the market price (i.e. the volume weighted average trading price for a period of between 5 and 20 trading days), less a 5% discount;
  • fractional securities that may result from a DRIP must be addressed;
  • all of a company’s Canadian securityholders must be permitted to participate in the DRIP;
  • new DRIPs, and amendments to existing DRIPs, must be submitted to the TSX (along with certain ancillary documentation, including an opinion of legal counsel) for approval by the TSX at least 5 business days prior to when the DRIP or the amendments are intended to be effective;
  • a company must apply to list a sufficient number of securities to cover securities to be issued under the DRIP, and pay the listing fees in connection therewith; and
  • the TSX must be notified, and a press release must be issued, each time a company proposes to suspend, terminate, resume or reinstate its DRIP.

More Information

Implementing a DRIP can be beneficial to both a company and its securityholders. It can allow a company to preserve cash and encourage long-term investment in the company’s securities. However, prior to implementing a DRIP, TSX-listed companies should understand their obligations under the new rules, as well as under Canadian securities law requirements.

CSA Sets Out Priorities for 2016-2019

Posted in Advisors, Broker-Dealers, Compliance and Supervision, Continuous and Timely Disclosure, CSA, Enforcement, Exempt Market Dealers, Investment Funds, Mutual Funds, Registrants
Omar SolimanRene SorellCristian Blidariu

The Canadian Securities Administrators (CSA) published on July 7, 2016 their priorities for the three-year period 2016 to 2019 under four categories: “Enhanced Investor Protection”, “Fair and Efficient Markets and Reduction of Risks to Market Integrity”, “Enhancement of Enforcement Effectiveness” and “Enhancement of Information Technology”.

The CSA states its strategic objectives without once mentioning the possible impact on it of the proposed national Cooperative Capital Markets Regulatory Authority (CCMRA) some of its members support. On July 22, it was announced that the CCMRA is expected to be operational in 2018.

Enhanced Investor Protection

The CSA proposes to enhance investor protection through further study of embedded compensation arrangements for investment funds, such as mutual funds, targeted regulatory reforms in the advisor-client relationship, and improving the Canadian proxy voting infrastructure through a clarification of the roles and responsibilities of key entities to support accurate, reliable and accountable meeting vote reconciliation.

Fair and Efficient Markets and Reduction of Risks to Market Integrity

Key initiatives under this heading include the close monitoring of trends and levels of compliance by issuers and registrants alike in the prospectus exempt markets, improving access, transparency and fairness in the fixed income market, finalizing and implementing an OTC Derivatives regulatory framework, improving collaboration and communication with market participants on cybersecurity issues and monitoring and assessing the implications of fintech innovations. A targeted review of some corporate governance topics such as director independence is also planned.

Enhancement of Enforcement Effectiveness

The CSA’s priorities relating to the enforcement of Canada’s securities laws include developing and implementing new marketplace surveillance and analytical systems and strengthening enforcement technology capabilities and strategies.

Enhancement of Information Technology

The final grouping of priorities focuses on a far-reaching project by CSA members to replace various service providers (including SEDAR, SEDI, National CTO Database, NRD and others) with a single, secure filing system for regulators and market participants.

The First FinTech Stock Index is Announced

Posted in Fintech
Ana BadourGenevieve PintoHeidi GordonJake Irwin

The first major index devoted solely to U.S. publicly traded financial technology companies is here. According to recent articles by BusinessWire and the Wall Street Journal, investment bank Keefe, Bruyette & Woods (KBW), together with Nasdaq Inc. are now offering the “KBW Nasdaq Financial Technology Index”.

According to the WSJ article, KBW and Nasdaq Inc. define “fintech” using 3 criteria:

  1. the companies primarily sell financial services;
  2. the companies are not predominantly brick-and-mortar oriented; and
  3. the key income generator for these companies is fees, not interest on loans or deposits.

The 49 companies currently in the KBW index include a significant number of more established financial technology businesses, including major credit card companies, ratings agencies and credit bureaus, data services and other financial technology heavyweights. The criteria applied by KBW may exclude some technology service providers and certain online lenders that are thought of as “fintech”, while capturing more financial technology incumbents that are sometimes overlooked in current discussions of “fintech” as a new phenomenon.

Publicly traded fintech companies are more common in the US than Canada. We expect to see an increase in the number of fintech IPOs on both sides of the border in the next several years, given the rapid growth of many earlier stage fintech companies.

If you’re thinking of buying or selling a fintech target, check out our recent blog post on due diligence issues unique to fintech M&A.

For more information about our firm’s Fintech expertise, please contact our Fintech Group.