What is a cease trade order?
Cease trade order (CTO) is a decision issued by a provincial or territorial securities regulatory authority or similar regulatory body against a company or an individual. Orders are issued for reasons such as failing to meet disclosure requirements or as a result of an enforcement action that involves an investigation of potential wrongdoing.
The purpose of the CTO Database is twofold: provide stakeholders with a publicly searchable database containing all Orders issued by participating CSA members, regardless of whether their effect is temporary or indefinite, and disseminate such Orders to its subscribers.
There are two categories of Orders:
- Orders that ban trading in securities of a reporting issuer or a non-reporting issuer, regardless of whether the Order resulted from a continuous disclosure default, an enforcement action or other, and;
- Orders that ban trading by certain individuals and/or companies, regardless of whether the Order resulted from a continuous disclosure default of the issuer (such as a management cease trade order), an enforcement action or other.
Some Orders may fall under both categories, in which circumstance, they will appear in both categories.
This categorization is intended as a tool to simplify the classification of Orders and enhance search results. However, it remains the obligation of users to conduct the necessary due diligence before trading to determine whether or not a specific trade can be executed. As such, we cannot overstate the importance of reading all decisions to fully understand their scope.
Who issues cease trade orders and why?
Securities regulatory authorities have sole authority to issue CTOs. The securities regulatory authorities and tribunals oversee securities regulation in their respective provinces or territories and require publicly traded companies to disclose material information to the public as soon as possible. For example, publicly traded companies must file copies of quarterly and annual financial statements and management’s discussion and analysis (MD&A) with provincial and territorial securities regulatory authorities, and must also send this information to shareholders, on request. Companies must also disclose material events or developments – such as takeover bids and merger and acquisitions, which may affect the value of the company’s shares. When a company fails to do so, a CTO banning trading in the securities of the company or banning certain individuals and/or companies from trading in securities of the company may be issued.
Securities regulatory authorities are also tasked with enforcing the securities legislation in their province or territory. For instance, during the course of an investigation into potential wrongdoing, the securities regulators may issue or ask a tribunal to issue a temporary order banning trading by individuals or companies, or banning the trading in the securities of a company.
Securities regulators can also impose or ask a tribunal to impose sanctions following the conclusion of a proceeding against respondents, which includes orders that ban trading by individuals or companies, or orders that ban trading in the securities of a company, either permanently or for a defined period of time.
Presently, all equity and fixed income marketplaces in Canada have retained the Investment Industry Regulatory Organization of Canada (IIROC) as their regulation services provider. Under the rules adopted by IIROC, if a securities regulator issues a CTO with respect to an issuer whose securities are traded on a marketplace, IIROC imposes a regulatory halt on trading of those securities on all marketplaces for which IIROC acts as a the regulatory services provider. Such action is taken whether or not the CSA regulator that issued the CTO is the principal regulator of the issuer. Once the halt is imposed by IIROC, no person subject to these rules may trade those securities on any marketplace in Canada, over-the counter or on a foreign organized regulated market. The Montreal Exchange regulates and oversees the options market. When a CTO is issued, the Montreal Exchange and IIROC coordinate their decisions to halt trading of securities and options on these marketplaces simultaneously.
How do I find cease trade orders?
You can find information about cease trade orders by searching the Cease Trade Order database. By default all searches will show all cease trade orders issued that remain outstanding (active). To view cease trade orders that have been revoked or have expired (inactive), use Advanced Search and check the inactive box. You can also browse by company name.
Helpful hint for searching the CTO database:
- To get the best results when searching for a specific name, only input the company name (don’t include “Inc.”, “Co.”, etc.) or only input the last name of the individual.
How long does a CTO last? How will I know the status of a CTO?
A CTO may remain in effect until a certain date, or for an indefinite period of time. A CTO’s status will be listed as either ‘Issued’, ‘Amended’, ‘Expired’ or ‘Revoked’:
- Issued: means that a decision to ban trading has been rendered.
- Amended: means that the original order has been modified.
- Expired: means that the order has lapsed.
- Revoked: means that the order has been lifted.
It remains the obligation of users to conduct the necessary due diligence before trading to determine whether or not a specific trade can be executed. As such, we cannot overstate the importance of reading all decisions to fully understand their scope.
AS PUBLISHED BY CANADIAN SECURITIES ADMINISTRATORS (SCA)
ACCESS CSA CEASE TRADE ORDERS DATABASE
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