Insider Trading Policy
A fundamental principle of securities legislation is that everyone investing in securities should have equal access to information that may affect their decision as to whether to buy, sell or hold securities. Directors, officers and employees of a corporation and consultants sometimes acquire knowledge of Material Information (as defined below) concerning the business and affairs of the corporation (or a related corporation) which has not yet been disclosed to the public. If that is the case, they have an unfair advantage in buying or selling securities because the seller or buyer on the other side of the transaction may have made a different investment decision had they been aware of that information.
“Material Information” is any information relating to the business and affairs of a corporation and its subsidiaries that results in, or would reasonably be expected to result in, a significant change in the market price or value of any of the corporation’s securities or would reasonably be expected to affect the investment decisions of a reasonable investor. Examples of Material Information include, but are not limited to, release of quarterly financial results, acquisitions, dispositions, mergers, developments in operations, changes in capital structure, dividend announcements and significant changes in earnings or cash flow prospects.
Similarly, if such a person informs another person of undisclosed Material Information, and such person buys or sells securities on the basis of that information, the seller or buyer on the other side of the transaction is, once again, at a disadvantage.
Insider reporting requirements help prevent improper activities involving stock options and similar equity based instruments including stock option backdating, option re-pricing and the opportunistic timing of option grants since timely disclosures and public scrutiny will limit the ability of issuers to engage in such practices
Certain securities laws in Canada have been enacted so as to prevent and deter such inequitable trading in securities and to increase market efficiency by providing investors with information concerning the trading activities of certain insiders of an issuer by providing that:
1. persons receiving undisclosed Material Information are prohibited from buying or selling securities of a corporation while in possession of such Material Information and prior to dissemination of such information to the public;
2. directors, officers and employees are prohibited from disclosing undisclosed Material Information relating to the corporation to third parties, other than when it is necessary to do so in the course of business of the corporation; and
3. significant shareholders, directors, senior officers and other reporting insiders must report their changes in ownership, control or direction over securities of the corporation.
Edgewater Wireless Systems Inc. (the “Company”) has formulated this policy to assist directors, officers, employees and consultants of the Company and its affiliates in complying with these laws. (For the purposes of this policy, “affiliate” has the meaning as prescribed in subsection 1(2) of the Securities Act (Ontario)). The purpose of this policy is to confirm in writing the existing policies and procedures and guidelines relating to trading by directors, officers, employees and consultants in securities of the Company. This policy, however, in no way reduces the obligations imposed by law on those directors, officers, employees and consultants. Compliance with insider trading and disclosure requirements remains the personal responsibility of such persons.
1. Application of the Policy
This policy applies to all directors, officers, employees and consultants of the Company and its affiliates, as well as to securities over which such director, officer, employee or consultant exercises control or direction (such as in relation to a trust or in relation to minor children or spouse) and securities which are indirectly owned (such as in RRSPs or through a wholly-owned corporation). Directors, officers, employees and consultants are responsible for ensuring compliance by their families and other members of their households with the terms of this policy.
This policy applies to any transactions in all the Company’s securities, including, but not limited to common shares, stock options, warrants and debentures.
In addition, this policy applies to Material Information relating to another company that directors, officers, employees or consultants of the Company or its affiliates may learn in the course of a proposed or pending transaction.
2. Trading Restrictions and Blackout Periods
Directors, officers, employees and consultants may trade in the Company’s securities, either directly or indirectly, or may exercise direction or control over the trading of its securities, except as follows:
a) Trading by directors, officers, employees and consultants is prohibited when they are in possession of Material Information which is being kept confidential and which has not been made public. Except in the necessary course of business, it is also illegal for anyone to inform any other person of material non-public information (referred to as “tipping”). Directors, officers, employees and consultants of the Company and its affiliates with knowledge of confidential or Material Information about the Company or its affiliates are prohibited from tipping or trading until the information has been fully disclosed. Employees who are not sure whether they should be trading in securities at any particular time should contact the President and Chief Executive Officer (“CEO”) or the Chief Financial Officer (“CFO”) (collectively, the “Designated Officers”).
To protect the reputation of the Company and avoid the appearance of impropriety, directors, officers and other reporting insiders are required to inquire prior to making proposed trades in the Company’s securities with one of the Designated Officers to determine if there is undisclosed Material Information about the Company or its affiliates that is to be announced.
b) Under this policy, trading by directors, officers and other reporting insiders should not take place until after the first full business day following a broadly disseminated news release of any Material Information.
c) No trading should take place by directors, officers, employees or consultants of the Company who have access to undisclosed financial information during periods when financial statements are being prepared but results have not yet been publicly disclosed. With respect to proposed public announcements for quarterly and annual financial results, the blackout period commences ten calendar days following the end of the fiscal quarter or year, and ends after the first full business day following the issuance of a news release disclosing the financial results. Directors, officers, employees and consultants should confirm the timing for issuance of financial results prior to engaging in a transaction involving securities of the Company.
d) Blackout periods may be prescribed from time to time as a result of special circumstances relating to the Company pursuant to which directors, officers, employees and/or consultants of the Company and its affiliates may be precluded from trading in securities of the Company and/or other issuers.
e) Ontario Securities Commission Rule 48-501 Trading during Distributions, Formal Bids and Share Exchange Transactions (“OSC Rule 48-501”) imposes restrictions on the ability of insiders of the Company and its affiliates to purchase or sell securities of the Company during certain restricted periods including those during which the Company is involved in an offering of its securities by way of a prospectus or a private placement. The OSC Rule 48- 501 provides for a number of exemptions from the trading restrictions. The Company will institute a blackout for such periods during which the Company is in the course of distributing its securities. To the extent that you wish to rely on an exemption available to you pursuant to OSC Rule 48-501 you must first seek the prior approval of any one of the Designated Officers on your intended reliance on such exemption.
f) If you are uncertain as to your status as a “Reporting Insider” of the Company as defined below, you should enquire of one of the Designated Officers as to the existence of any trading restrictions or reporting requirements before entering into a transaction.
3. Exception for Blind Trusts or Other Arrangements
Section 2 does not apply to a reporting insider that is not a natural person and whose securities of the Company are held in a blind trust or are subject to another arrangement, under the terms of which no persons involved in trading decisions relating to securities of the Company can be in receipt of any undisclosed material information regarding the Company at the time of any trade.
A Designated Officer must be given a copy of the blind trust or other arrangement.
4. Prohibition on Short Selling, Certain Options Transactions
Subject to certain limited exceptions, the Canada Business Corporations Act (“CBCA”) prohibits a director, officer, or person employed or retained by the Company, from knowingly entering into a sale of the Company’s securities, directly or indirectly, where such person does not own or has not fully paid for the securities being sold or from knowingly selling a call or buying a put in respect of securities of the Company unless the insider owns another security issued by the Company that is convertible into the security sold or an option or right to acquire the security sold and, no later than ten days after the sale, the insider:
- exercises the conversion privilege, option or right and delivers the security so acquired to the third-party purchaser, or
- transfers the convertible security, option or right to the third-party purchaser.
5. Insider Reporting Requirements
Canadian insider reporting requirements are set out in National Instrument 55-104 Insider Reporting Requirements and Exemptions and its related companion policy. The following is a brief overview of insider reporting obligations:
Who is a Reporting Insider?
You are deemed to be a “Reporting Insider” of the Company if (a) you are a director or the CEO, CFO or COO of the Company or one of the Company’s major subsidiaries (defined as entities that represent 30% or more of the consolidated assets or revenue of the Company based on a look back at the most recent annual or interim financial statements), or (b) you are a person responsible for a principal business unit, division or function of the Company, or (c) you are a shareholder that controls 10% or more of the securities of the Company (calculated on a post-conversion beneficial ownership basis), or (d) regardless of your title and position with the Company, you (i) in the ordinary course of business receive or have access to information as to material facts or material changes concerning the Company before the material facts or material changes are generally disclosed; and (ii) directly or indirectly exercise, or have the ability to exercise, significant power or influence over the business, operations, capital or development of the Company.
The definition of the term “Reporting Insider” in securities legislation is very technical and you are encouraged to contact any one of the Designated Officers if you are unsure whether you are deemed to be a Reporting Insider of the Company.
Filing of Insider Reports
A Reporting Insider of the Company is required to file an initial insider report within ten days of becoming a Reporting Insider (unless the Reporting Insider does not have any beneficial ownership of, control or direction over, whether direct or indirect, in securities of the Company) and subsequent insider reports within five days following any trade in securities of the Company.
Preparation and Filing of Insider Reports
Insider trading reports are required to be filed electronically on the “System for Electronic Disclosure by Insiders” or “SEDI”. SEDI is an Internet-based system for reporting insider trading information and can be located at www.sedi.ca. Insider reports (excluding certain personal information) that are filed on SEDI are accessible to the public via the Internet.
6. Insider Liability
The British Columbia, Alberta and Ontario Securities Commissions levy fees for late filing of insider reports. In British Columbia, the late payment fee is currently $50 per late report and in Ontario, the late payment fee is $50 per day, subject to a maximum of $1,000 per insider, per issuer, per financial year. It is the insider’s obligation to pay any late payment fees.
Violations of insider trading and tipping prohibitions can result in severe consequences under securities and corporate laws, which in Canada can include fines (to a maximum fine equal to the greater of three times the profit made or loss avoided and $5,000,000), injunctions against future violations, civil liability and a jail term of up to five years, in addition to general embarrassment and damage to his or her reputation. Further, the reputation of the Company may be damaged, and it may be exposed to liability. A breach of this policy is considered a breach of the employment contract with the Company and as such, violators may be immediately dismissed for cause.
7. Further Information
Any questions concerning insider trading matters should be directed to any one of the Designated Officers.
This policy was approved by the Board of Directors on October 22nd, 2016.