On March 14, 2013, the Canadian Securities Administration (CSA) issued for comment new proposed rules enhancing the reporting requirements relating to the early warning reporting system. The proposal would amend the early warning reporting requirements of Multilateral Instrument 62-104 Take-Over Bids and Issuer Bids, National Policy 62-203 Take Over Bids and Issuer Bids and National Instrument 62-103 Early Warning System and Related Take-Over Bid and Insider Reporting Issues. These amendments, together with expected changes to the Ontario Securities Act and OSC Rule 62-504 Take-Over Bids and Issuer Bids, will apply in all Canadian jurisdictions.
The following is a summary of the CSA’s proposed amendments to these rules:
- The early warning reporting threshold is decreased from 10% to 5%. The news release must be issued and filed promptly but no later than the opening of trading on the next business day.
- Equity derivative positions and positions under securities lending arrangements would now be aggregated in the threshold calculation so as to require the disclosure of certain “hidden ownership” and “empty voting” practices.
- Further disclosure is required if there is a 2% increase or decrease in ownership or if there is a change in a material fact contained in an earlier report. A news release must be issued and filed and a report must be filed if the ownership percentage decreases to less than 5%.
- Currently, the early warning requirements are accelerated during a take-over bid by requiring disclosure of acquisitions by a party other than the offeror at the 5% level. The CSA proposes not to maintain these particular provisions for reporting during a take-over bid.
- The CSA proposes to enhance disclosure requirements in the news release and related report, and the report would have to be certified and signed.
- A person would be excluded from the alternative monthly reporting system if such person solicits, or intends to solicit, proxies from the security holders of a reporting issuer on matters relating to the election of directors of the issuer or to a reorganization, amalgamation, merger, arrangement or similar corporate action involving the securities of the issuer.
Market participants are invited to provide their comments on the proposal by June 12, 2013. Our M&A team discusses the implications of this enhanced early warning system.