A "road show" is proposed to be defined as a
presentation to potential investors regarding a distribution of
securities under a prospectus that is conducted by an investment
dealer on behalf of an issuer in which one or more executive
officers of the issuer participate. These rules apply in respect of
road shows conducting during or after the waiting period, with
applicable modifications in the case of base shelf prospectus
Like term sheets, all disclosure made in a road show must be
"fair, true and plan" and all information concerning the
offered securities must be disclosed in the prospectus (see our
related summary on the use of term sheets for details on the
meaning of this standard). Investment dealers would also be
required to read a prescribed oral warning statement at the
beginning of the road show. Any written materials provided during a
road show would be considered a "term sheet" and subject
to the requirements applicable to term sheets under the proposed
In order to rely on this exemption, a dealer must be authorized
in writing by the issuer to conduct a road show and the road show
may be conducted in the local jurisdiction only if a receipt for
the prospectus was issued in that jurisdiction. Dealers would also
be required to establish and follow reasonable procedures to verify
the identity and keep a record of all attendees, ensure that each
attendee receives a copy of the prospectus and restrict copying of
any written materials. The proposed Companion Policy to NI 41-101
states that for a road show held in person, these procedures may
include putting a legend on the first page of the written materials
indicating that the materials are only intended for the relevant
group of investors and are not to be copied or provided to others.
According to the CSA, it is important to know who attended a road
show in order to provide any revised materials and for evidentiary
reasons in connection with complaints, compliance reviews,
litigation or enforcement proceedings.
Use of Comparables for Permitted Institutional
Citing concerns about comparables being "cherry
picked" by investment dealers and misunderstood by retail
investors, the proposed amendments distinguish between road shows
conducted for permitted institutional investors vs. retail investor
in that information relating to comparables is only be permitted
for road shows conducted for the former group. In this respect,
where comparables are included in a road show presentation,
information relating to comparables does not need to be derived
from the prospectus. If the information is included in a term sheet
that is provided to permitted institutional investors it must be
redacted prior the term sheet being filed on SEDAR and the version
filed on SEDAR must state what has been redacted. Any written
materials must also include a statement immediately after the
information relating to comparables stating that such information
is not disclosed in the prospectus and will not be subject to
prospectus liability. Prior to commencing the road show, the dealer
must also obtain written confirmation from each attending permitted
institutional investor confirming that the investor will keep
information regarding the comparables confidential. In order to
include comparables in a road show for retail investors the
information would have to be included in the prospectus and
therefore subject to prospectus liability.
Concurrent U.S. and Canadian Offerings
Since the proposed rules expressly permit road shows to be
conducted and will require written materials to be filed on SEDAR
(in accordance with conditions that apply to "term
sheets"), issuers conducting a concurrent IPO in the United
States would no longer need exemptive relief under Canadian
securities laws in order to file or provide access to internet road
show materials (as required under U.S. securities laws).
The CSA have specifically asked for feedback on the
circumstances in which comparables should be permitted to be given
to retail investors. In addition, if comparables are included in a
prospectus or road show, they have also asked whether the
prospectus rules should prescribe a method for choosing them or
contain measures to foster the preparation of comparables in a fair
and balanced manner.
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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