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The Canadian Securities Regulators (the CSA) have just agreed on major changes that are set to transform the take-over bid regime that has prevailed in Canada during the last three decades.  CSA Notice 62-306 (the CSA Proposal), issued on September 11, 2014, reconciles the competing proposals for poison pill reform initially introduced in

On November 28, 2013, the Canadian Securities Administrators (CSA) in all jurisdictions except Ontario and British Columbia published for comment a proposed Multilateral Instrument 45-107 Listing Representation and Statutory Rights of Action Disclosure Exemptions (Proposed MI 45-107).

Proposed MI 45-107 is not being proposed in Ontario and British Columbia as existing or proposed local instruments address or are expected to address the issues discussed below.

Background

Proposed MI 45-107 provides exemptions from certain requirements of the securities legislation of the participating jurisdictions that apply in the context of prospectus exempt financings, conducted primarily in a foreign jurisdiction by foreign issuers and by investment dealers or international dealers acting as underwriters, and which are also offered to certain institutional and other sophisticated investors in Canada.

The purpose of Proposed MI 45-107 is as follows:

(1) to provide an exemption from the statutory prohibition against making a representation about the intention to list securities on an exchange or market in the context of international financings; and

(2) to provide an exemption from the requirement that applies in Saskatchewan, Nova Scotia and New Brunswick, that an offering document used in connection with a prospectus exempt distribution include a prescribed statement with respect to certain statutory rights of action.

Proposed MI 45-107 will codify discretionary exemptive relief that the CSA has been granting in the context of U.S. and international offerings of securities to Canadian institutional and other sophisticated investors and consequently will alleviate the need for these discretionary exemption applications.

The Proposed MI 45-107
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Determining whether something is material can be a perplexing and challenging task for clients and lawyers, even at the best of times – all the more so when you consider that whether you get it right or not can have some serious legal consequences. The concept of “materiality” is a cornerstone of securities laws and it is the foundation on which the integrity of the capital markets is based. It is the basis for determining what needs to be disclosed

  • in offering and disclosure documents such as prospectuses and offering memoranda,
  • in information circulars sent to shareholders to enable them to make informed decisions on matters affecting a corporation,
  • to meet a reporting issuer’s continuous disclosure obligations, and
  • for the integrity of the market place not to be compromised, to ensure that no participant in the market place be in possession of a material fact that has not been generally disclosed.

It is a conundrum, therefore, why something as important as “materiality” is in securities law can, most times, be so difficult to determine.  The difficulty stems from the requirement that in order for something to have constituted either a “material change” or a “material fact”, there has to be an assessment by the client of whether the fact or the event would reasonably be expected to have a significant effect on the market price or value of a security of the issuer [1].  Lawyers are not particularly adept in assisting on that, not having been taught the subject in law school, and the law on this matter is unclear and not particularly helpful to lawyers when they are asked to provide advice to clients on the matter, as each situation must be judged on its own merits.
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