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Filing Process for an Acquisition of an OTC Call Option

When an insider acquires an OTC call option (an option to purchase securities of the reporting issuer) from a person other than the reporting issuer, this OTC call option is a separate class of security and must be reported separately from other classes of securities in the insider’s holdings, including issuer options. The closing balance of securities/contracts held calculated by SEDI is also separated from other classes of securities held. Securities holdings and transactions involving OTC call options (or third party call options) are reported in a manner similar to other options:

• Designation of class of security: select the appropriate security designation, OTC call option (with the underlying security designation), from the insider-defined securities list (the insider will need to create an insider-defined security designation if this is the first time filing the OTC call option, see note below.)
• Nature of transaction: Code 70 - Acquisition or disposition (writing) of third party derivative
• Indicate the number of contracts (for securities) acquired in the Number or value of securities or contracts acquired field (most exchange-traded contracts represent a certain number of underlying securities called the "trading unit" or "contract multiplier" which can be found in the contract specifications. One option contract often represents 10 or 100 shares.)
• Indicate the equivalent number of underlying securities that may be acquired in the Equivalent number or value of underlying securities acquired field

Example: The insider holds 5 exchange-traded options and the multiplier is 100, report 500 as the equivalent number of underlying securities. For an OTC option, report one contract with a multiplier of one and 500 as the equivalent number of underlying securities.

Note that until the options are exercised, the equivalent number of underlying securities is not added to the actual holdings of the insider in the underlying securities as it does not mean and should not be taken to indicate that the underlying securities have, in fact, been acquired by the insider

• Unit price or exercise price: consideration for the option (e.g. premium), if applicable
• Conversion or exercise price: option exercise price
• Date of expiry or maturity: indicate the expiry date of the call option.

Note: Insiders are required to add an insider-defined security designation when filing the acquisition of a third party derivative such as an OTC Call Option.

An initial report recording the opening balance of securities held for the insider-defined security and ownership type is required to be completed prior to posting any related transactions on SEDI. The steps are similar to Filing an Opening Balance on Initial Report with the exception that an insider-defined security is added when filing the report instead of selecting a security from the issuer’s outstanding securities list.

Once a transaction has been posted as an insider-defined security designation, all other transactions for those securities must be filed under that security designation to ensure proper balances of securities. SEDI calculates separate balances for insider-defined securities and issuer-defined securities.

Related Documents

See:

Insider Report to Add an Insider-Defined Security Designation (e.g. Third Party Derivatives)

Insider Report for Stock Options
Preliminary Information for Stock Option Filings