If a bank has an automatic exercise of options program, they may be able to evade the insider reporting requirements (section 91 of the Securities Act) in respect to the sale of common shares of the Bank to employees.

In Royal Bank of Canada (Re), 2008 BCSECCOM 297 (CanLII), the Royal Bank of Canada filed an application in every jurisdiction for exemptive relief from insider reporting requirements in respect of the sale of common shares of the Royal Bank of Canada by certain insiders. This included officers of the Bank who hold or are, in the future, granted options under the Employee Stock Option Plan. The dispositions of the underlying shares were automatic and occurred at pre-determined regular intervals. The case was held for the Royal Bank of Canada. The insider reporting requirements would not apply to eligible employees so long as (1) the person receiving the options filed a report disclosing all transactions in the form prescribed by the Insider Reporting Requirements; and (2) the person receiving the options does not hold more than 10% of the voting rights attached to the Royal Bank of Canada.


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