The Canadian Securities Administrators (CSA) have issued
proposed changes to the rules on the marketing of prospectus
offerings. These changes include new rules on "upsizing"
bought deals and new rules on the conduct of road shows. These
changes are not in force, and the CSA has asked for feedback on a
number of specific elements of the proposals.
While some of the changes may be consistent with existing Street
practice, some of the new proposals, if adopted, would impact
marketing activities in a number of ways. For instance:
the CSA has finally proposed rules on "upsizing" a
bought deal, and is requesting comments on whether upsizing should
be capped at 15%, 25%, 50% or some other limit of the original
the CSA is proposing to regulate the use of term sheets on
prospectus offerings, including bought deals. In addition to
requiring prescribed new legends on term sheets, they are proposing
that a term sheet be approved in writing by the issuer and all of
the underwriters and filed on SEDAR prior to providing it to any
potential investors. Term sheets would also need to be included in
the prospectus, meaning issuers and underwriters would have
liability on them. As a practical matter, we believe there is
typically little, if any, information in a term sheet that would
not be in the prospectus, but this would be a significant change
from the current law;
the CSA is proposing brand new rules on road shows. Not
surprisingly, the new rules explicitly state that all information
in a road show needs to be in the prospectus. The CSA is asking for
comments on the use of "comparables" (i.e., data and
information on comparable companies relevant for pricing and other
purposes) in road show materials. The CSA is proposing to
distinguish between institutional investors and retail investors in
terms of providing comparables. Comparables could be disclosed to
institutional investors in a road show without that information
being in the prospectus if written confidentiality commitments are
obtained from those investors. However, comparables could only be
disclosed to retail investors in a road show if that information is
in the prospectus and the issuer and underwriters take liability
for it. In practice, this may not be a significant issue given that
road shows for retail investors are relatively uncommon in
the CSA is also asking for comments on whether there should be
additional rules on the use of comparables, such as prescribed
templates for metrics, or rules on how to pick a representative
sample of comparable issuers;
one other notable aspect of the new rules is that written
materials distributed to investors during road shows (other than
the prospectus) are proposed to be treated in the same way as term
sheets, suggesting that if any investor presentation (i.e., a slide
deck) is given to investors in physical form, that would need to be
included in the prospectus and filed on SEDAR. This would result in
issuers and underwriters having liability on an investor
the CSA is also proposing a new "testing the waters"
exemption that would allow limited marketing to institutional
investors prior to an IPO of a private company. This ability to
test the waters could be of interest to issuers and dealers looking
for early stage views on whether there is demand for the securities
of a particular issuer and potential pricing. The proposed
exemption would not apply if the issuer is listed in any
We will be providing further commentary on these proposals in a
The proposals were issued on November 25, 2011 and the deadline
for comments is February 23, 2012.
Desmond Lee practises corporate and securities
law with an emphasis on securities offerings, investment dealer
regulation and public company issues. Jeremy
Fraiberg is Co-Chair of Osler's Mining Group.
François' Paradis practice covers many
areas of corporate and securities law with an emphasis on corporate
finance and mergers and acquistions.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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The Canadian Office of the Superintendent of Financial Institutions ("OSFI") recently ruled that a bank cannot promote comprehensive credit insurance ("CCI") within its Canadian branches under the Insurance Business (Banks and Bank Holdings Companies) Regulations (the "Regulations").
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