Canada: New Canadian Marketing Rules For Prospectus Offerings

Last Updated: June 20 2013
Article by Yaniv Saragosti, David Surat, Paul Mingay, Graeme Martindale and Pascal de Guise

Most Read Contributor in Canada, September 2016

On May 30, 2013, the Canadian Securities Administrators (CSA) published the final version of the amendments to the rules related to "pre-marketing" and "marketing" activities in connection with prospectus offerings (the "Final Amendments"). The amendments to the rules were originally published for comment by the CSA on November 25, 2011 (the "Original Amendments").

The CSA indicate that the amendments are intended to ease certain regulatory burdens that issuers and investment dealers are facing in trying to successfully complete a prospectus offering, while at the same time providing protection to investors, and to provide clear rules and a level playing field for market participants involved in a prospectus offering.

The Final Amendments include significant new rules relating to the:

  • use of standard term sheets and marketing materials in connection with prospectus offerings;
  • conduct of road shows;
  • conduct of bought deals; and
  • process for non-reporting issuers to gauge interest in a potential initial public offering.

The Final Amendments are the long awaited response to changing conditions in the marketplace, such as the introduction of "free-writing prospectuses" in the United States, the increased demand by retail investors for access to similar opportunities as institutional investors, and the proliferation of information available on the internet to investors of all types. The Final Amendments are expected to come into force on August 13, 2013.


In addition to the notice related to the availability of a prospectus regarding an offering contemplated under the current rules, the Final Amendments provide for "standard term sheets" and "marketing materials", which are defined as follows:

  • A "standard term sheet" is a written communication intended for potential investors regarding a distribution of securities under a prospectus that contains solely limited prescribed information relating to an issuer, securities or an offering. A standard term sheet does not include a preliminary prospectus notice or a final prospectus notice.
  • "Marketing materials" are defined as written communications intended for potential investors regarding a distribution of securities under a prospectus that contains material facts relating to an issuer, securities or an offering, but does not include a prospectus or amendment thereto, a standard term sheet, a preliminary prospectus notice or a final prospectus notice.

The rules governing marketing materials are intended to apply to situations where issuers and investment dealers would like to provide investors with information that is more detailed than the limited information that can be contained in a standard term sheet.

The use of the standard term sheet will be subject to the following conditions:

  • the standard term sheet must contain the prescribed information;
  • other than contact information, all information in the standard term sheet must be disclosed in, or derived from, the relevant prospectus;
  • a receipt for the relevant prospectus must have been issued in the local jurisdiction; and
  • it must contain the prescribed legend.

The provision of marketing materials to potential investors will be subject to the following conditions:

  • other than contact information and any comparables, all information in the marketing materials must be disclosed in, or derived from, the relevant prospectus;
  • the material must contain a prescribed legend as well as the same cautionary language in bold type as contained on the cover page, and in the summary, of the relevant prospectus;
  • a template version of the marketing materials must be approved in writing by the issuer and the lead underwriter before the marketing materials are provided;
  • a template version of the marketing materials must be filed on or before the day that the marketing materials are first provided;
  • a receipt for the relevant prospectus must have been issued in the local jurisdiction;
  • the investment dealer must provide a copy of the relevant prospectus and any amendment with the marketing materials; and
  • the template version of the marketing materials must be included in the prospectus or incorporated by reference into the prospectus.

Requiring the inclusion or incorporation of the marketing materials in the prospectus is intended to provide investors with remedies under the civil liability provisions of securities legislation if the marketing materials contain a misrepresentation. Standard term sheets will not have to be filed on SEDAR or included or incorporated by reference in the relevant prospectus, thus they will not be subject to civil liability, but they will be subject to the existing statutory prohibitions on misleading or untrue statements.

Comparable information

While the Original Amendments permitted the disclosure of information comparing the issuer to other issuers, such disclosure could only be provided to permitted institutional investors. The Final Amendments permit the disclosure of comparable information to any investor in marketing materials subject to certain conditions. If comparables are used, certain additional disclosures are also required, including the source and basis for inclusion.


The Original Amendments contained separate requirements for road shows aimed at institutional investors and road shows aimed at retail investors. This distinction has been eliminated in the Final Amendments. However, if an investor, other than an accredited investor, attends a road show, the investment dealer must make a prescribed cautionary statement to the effect that the presentation does not provide full disclosure of all material facts. Investment dealers conducting a road show must establish and follow reasonable procedures to:

  • ask any investor attending the road show in person, by telephone conference call, on the internet or by other electronic means to provide their name and contact information;
  • keep a record of any information provided by the investor; and
  • provide the investor with a copy of the relevant prospectus.

Guidance for road shows for cross border IPO offerings

The Final Amendments include guidance that the CSA will no longer provide relief in connection with road shows for cross-border offerings to allow for compliance with U.S. requirements. Since the proposed rules require that marketing materials be filed on SEDAR, issuers will be able to file the same materials on EDGAR without needing exemptive relief. However, the CSA have added an exception to the requirement to file and incorporate marketing materials in the prospectus for certain cross-border offerings to prevent U.S. underwriters from avoiding Canadian tranches due to concerns regarding class action lawsuits. The exception will apply for where:

  • the U.S. cross-border prospectus offering is primarily intended to be sold in the U.S.;
  • the issuer and underwriters provide a contractual right of action to any investor who views the marketing materials; and
  • a copy of the marketing materials is confidentially delivered to the applicable securities regulators on SEDAR.

It would appear that these provisions could well lead to conflict between the Canadian rules and U.S. rules for road shows, where the offering is not primarily made in the U.S.


Bought deal agreements

In order to take advantage of the bought deal procedures, an issuer and underwriter must enter into an enforceable agreement for the purchase of the offered securities. These rules will be clarified to require that the agreement must not be subject to a "market-out" clause. Although this has always been the general practice and is consistent with the market's general understanding of what is meant by a "bought deal", we understand that there have been instances where issuers and dealers have purported to rely on the bought deal exemption for transactions that are subject to a market-out clause. This will now be prohibited.

Enlarging bought deals

The Final Amendments allow bought deals to be enlarged up to 100% of the size of the original offering. In addition, the Final Amendments permit the increase of a bought deal if:

  • the type of securities to be purchased, and the price per security, is the same as under the original agreement;
  • the preliminary prospectus is filed within four business days of the original agreement;
  • a news release is issued immediately after a bought deal agreement is amended; and
  • no previous amendment has been made to the original agreement to increase the number of securities to be purchased.

In addition, the Final Amendments provide that a bought deal agreement may not contain an upsizing option (other than an over-allotment option).

Increasing the size of a bought deal would most efficiently be done prior to the filing of the preliminary prospectus; however, it may be done after this point though doing so is likely to require an amendment to the preliminary prospectus and to the bought deal agreement.

These conditions are intended to ensure that the original bought deal agreement is a firm commitment for a substantial number of securities and to prevent underwriters from entering into the original agreement for a small number of securities in order to solicit investors without a preliminary prospectus and then, after having obtained expressions of interest, entering into an amended agreement for a much larger amount.

Bought deal syndicates

The Final Amendments specify that a bought deal agreement may not be conditional on syndication, provided that the parties may add or remove an underwriter or adjust the number of securities to be purchased by each underwriter on a proportionate basis under certain conditions.

Furthermore, confirmation clauses, where an underwriter proposes a bought deal subject to confirmation of the participation of one or more additional underwriters, are only permissible where (i) the lead underwriter provides a signed bought deal agreement to the issuer and the issuer signs it on the same day, and (ii) on the following day, the lead underwriter provides a notice to the issuer either confirming the bought deal or terminating it.

Additional guidance regarding the commencement of distribution discussions and non-deal road shows

Marketing activities in connection with a prospectus distribution are generally prohibited until the receipt for the preliminary prospectus is issued or a bought deal agreement is executed.

The Final Amendments include guidance as to when discussions with an issuer are of sufficient specificity that a distribution would be regarded as having commenced. The proposed guidance includes the following examples:

  • the dealer provides the issuer with financing scenarios at specified price ranges, the directors authorize management to pursue a prospectus financing within any such range, and the dealer is advised of this approval; or
  • the dealer indicates that market conditions are favourable and that the dealer will likely provide indicative terms of a financing later that day.

Accordingly, in these circumstances, any communication by the dealer with its clients would be considered to be in furtherance of the distribution and must not take place until the bought deal agreement has been entered into and announced.

The Final Amendments also provide guidance as to when non-deal road shows should be considered to be prohibited, particularly when undertaken in anticipation of a prospectus offering.

Marketing materials for bought deals

The conditions applicable to marketing materials in the context of a bought deal are similar to the conditions mentioned above, except that all the information in such marketing materials must be disclosed in, or derived from, the bought deal news release, the issuer's continuous disclosure record or the subsequent preliminary prospectus.


A limited exemption is proposed to permit non-reporting issuers to determine interest in a potential IPO. The exemption is subject to the following:

  • the communications are made through an investment dealer and only to accredited investors (which is an expansion of the name of investors compared to the Original Amendments);
  • any materials used by the investment dealer to solicit an expression of interest from an investor must be approved in writing by the issuer;
  • the investment dealer must obtain confirmation in writing from the accredited investor that the investor will keep the information about the proposed offering confidential and will not use the information for any other purpose other than assessing the investor's interest in the offering;
  • the issuer must keep a written record of any investment dealer that it authorized to act on its behalf in making solicitations in reliance on the exemption and a copy of any written authorization; and
  • an investment dealer must keep a written record of any accredited investor that it solicited.

The Final Amendments prohibit solicitation under the testing of the waters exemption for a period of 15 days prior to the filing of the preliminary prospectus for the initial public offering.

The exemption will not be available to issuers if (i) any of the issuer's securities are held by a control person that is a public company, and (ii) the initial public offering would be a material fact or material change with respect to the control person.


The new rules do not apply to mutual funds that file prospectuses under National Instrument 81-101 Mutual Fund Prospectus Disclosure and investment funds that file prospectuses under Form 41-101F2 Information Required in an Investment Fund Prospectus or Form 41-101F3 Information required in a Scholarship Plan Prospectus.

About BLG

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.