CANADA: CSA provides update on amendments to Canada takeovers reporting

Monday October 13 2014

The Canadian Securities Administrators have published CSA Notice 62-307 Update on Proposed Amendments to Multilateral Instrument 62-104 Take-Over Bids and Issuer Bids, National Instrument 62-103 Early Warning System and Related Take-Over Bid and Insider Reporting Issues and National Policy 62-203 Take-Over Bids and Issuer Bids (“CSA Notice 62-307”), which provides an update to market participants on the status of proposed amendments to the Canada takeovers reporting regime.

Following the publication of the Draft Amendments on March 13, 2013, the CSA received over 70 comment letters from various market participants. While the commenters generally agreed with the enhanced transparency objective of the CSA proposals, a majority of commenters raised various concerns about certain of the Draft Amendments.

The Draft Amendments had proposed a lower early warning reporting threshold of 5%, requiring disclosure of decreases in ownership of 2% or more of securities and enhancing the content of the disclosure in the early warning news releases and reports. The CSA also proposed changes so that certain hidden ownership and empty voting arrangements would be disclosed.

Following feedback, the CSA have concluded that it is not appropriate at this time to proceed with:

• the proposal to reduce the reporting threshold from 10% to 5%; and
• the proposal to include “equity equivalent derivatives” for the purposes of determining the threshold for early warning reporting disclosure.

However, the CSA are proceeding with the following Final Amendments:

• requiring disclosure of 2 % decreases in ownership;
• requiring disclosure when a shareholder’s ownership interest falls below the reporting threshold;
• making the alternative monthly reporting system unavailable to eligible institutional investors as described in the Draft Amendments, with additional clarification on the circumstances when they would be precluded;
• exempting lenders from disclosure requirements if they lend shares pursuant to a specified securities lending arrangement;
• exempting borrowers, in certain circumstances, from disclosure requirements if they borrow shares under a securities lending arrangement;
• providing guidance clarifying the current application of early warning reporting requirements to certain derivatives and requiring disclosure of derivatives in the early warning report;
• enhancing and improving the disclosure requirements in the early warning report; and
• clarifying the timeframe to file the early warning report and news release.

Subject to receipt of necessary approvals, the CSA intend to publish the final amendments in the second quarter of 2015.

Click on the above link for more details.