Canada: CSA Provides Flexibility For Prospectus Marketing Rules


On May 30, 2013, the Canadian Securities Administrators published final amendments to the applicable securities rules that significantly expand the range of permissible “pre-marketing” and “marketing” activities undertaken by issuers and investment dealers in connection with prospectus offerings. The amendments will come into force on August 13, 2013.

The amendments, primarily to National Instrument 41-101 General Prospectus Requirements and National Instrument 44-101 Short Form Prospectus Distributions, allow, among other things: (a) non-reporting issuers, through their investment dealers, to communicate with “accredited investors” prior to filing a preliminary prospectus for an initial public offering; (b) the expanded use of “marketing materials” for prospectus offerings; and (c) bought deals to be up-sized and bought deal syndicates to be enlarged. The amendments also clarify and provide guidance on certain prospectus offering practices including procedures for road shows and issuing “material change” news releases announcing a prospectus offering prior to the filing of a preliminary prospectus.

“Testing the Waters” Exemption for an IPO

The amendments contain a new limited exemption from the general prohibition on pre-marketing activities allowing non-reporting issuers, through their investment dealers, to communicate on a confidential basis with “accredited investors” for a period lasting up until 15 days before the filing of a preliminary prospectus, in order to determine interest in a potential initial public offering.

This exemption is subject to specific requirements, such as keeping records of the accredited investors that were solicited and obtaining written board approval of, and retaining a copy of, materials that were provided to such investors. The exemption is not available if either: (a) the issuer is already a public company in a foreign jurisdiction; or (b) any of the issuer’s securities are held by a control person that is a public issuer and the initial public offering would be a material fact or material change with respect to the control person.

Marketing Prospectus Offerings

Marketing After Announcing an Offering - The new rules significantly expand marketing activities as they allow an investment dealer to provide marketing materials and a standard term sheet after announcing a bought deal short form prospectus offering and prior to obtaining a receipt for the preliminary prospectus. Subject to certain conditions, an investment dealer is also expressly permitted to conduct road shows after the announcement of a bought deal short form prospectus offering and prior to obtaining a receipt for the preliminary prospectus.

Marketing During the Waiting Period - After the issuance of a receipt for a preliminary prospectus and before the issuance of a receipt for a final prospectus, an investment dealer may conduct marketing activities via standard term sheets, marketing materials and/or road shows. Previously, only a preliminary prospectus or a brief notice was permitted to be used for marketing purposes during this time period. Subject to certain conditions, an investment dealer is also expressly permitted to conduct road shows during the waiting period.

Marketing After Receipt for a Final Prospectus - All changes to the conditions for marketing materials and road shows during the waiting period are also applicable to marketing materials and road shows after the receipt of a final prospectus, with certain accommodations for a draw-down under a final base shelf prospectus and a final base PREP prospectus.

Standard Term Sheets & Marketing Materials - The amendments differentiate between standard term sheets and marketing materials. Standard term sheets may only contain limited prescribed information about the issuer, securities or the offering, however, marketing materials may also contain more detailed information, including comparables (comparisons to other issuers) and material facts relating to the issuer, securities or the offering.

Standard term sheets are subject to the following conditions:

  • other than the contact information for the investment dealer or underwriters, any information in a standard term sheet concerning an issuer, securities or an offering must be disclosed in or derived from the preliminary prospectus (except for a bought deal standard term sheet, in which case the information must be disclosed in or derived from the bought deal news release, the issuer’s continuous disclosure record on SEDAR or the subsequent preliminary prospectus); and
  • the term sheet must be dated and contain prescribed cautionary language referring investors to the preliminary prospectus and stating that the term sheet does not contain full disclosure of all material facts relating to the securities offered.

Marketing materials are subject to the two conditions described above plus the following additional requirements:

  • a template version of the marketing materials must be approved in writing by the issuer and the lead underwriter and filed on SEDAR before being provided to potential investors (marketing materials for bought deals will only be made public after the preliminary prospectus is filed and receipted); and
  • upon issuance of a receipt for the preliminary prospectus, a copy must be delivered to each person who received the marketing materials (for bought deals, this condition only applies if the investor expressed an interest in acquiring the securities).

As the amendments do not require standard term sheets to be filed on SEDAR or included or incorporated by reference in the relevant prospectus, they are not subject to civil liability (although they are subject to the existing prohibition on misleading or untrue statements). In contrast, the filed version of the marketing materials must be included or incorporated by reference in the relevant prospectus and, as a consequence, are part of the prospectus, are subject to the full, true and plain disclosure standard and could subject issuers to statutory liability for misrepresentations.

Road Shows - The new rules clarify the procedures for road shows conducted in conjunction with prospectus offerings. These procedures include investment dealers asking investors their name and contact information, keeping a record of the information provided by investors, providing investors with a copy of the relevant prospectus, and, in certain instances, reading a cautionary statement at the road show. Written marketing materials provided during the road show are subject to the same conditions as other marketing materials.

Bought Deal Agreements

Enlarging the Offering - The amendments have clarified that in addition to relying on the over-allotment option mechanism to increase the size of the offering, a bought deal agreement may be amended in order to increase the size, provided that:

  • the offering size is increased by no more than 100% of the original deal;
  • the type of securities to be purchased and the price per security are the same as under the original agreement;
  • the issuer files a preliminary prospectus within four days of the original bought deal agreement;
  • the issuer issues a news release confirming the amendment; and
  • no previous amendment has been made to the original agreement to increase the offering size.

Enlarging Bought Deal Syndicates - The amendments permit additional underwriters to join the bought deal syndicate, but the bought deal agreement must not be conditional on syndication. Further, “confirmation clauses” (which allow the lead underwriter to contact potential syndicate members before confirming the bought deal) are only acceptable in limited circumstances and require confirmation of the terms of the bought deal agreement within one business day.

No “Market-Out” Clauses or “Upsizing Options” - Under the amendments, it has now been codified that a bought deal agreement may not contain a “market-out clause” (which permits the underwriter not to purchase the securities if they cannot be profitably marketed due to market conditions) or an “upsizing option” (which allows the underwriter to increase the number of securities to be purchased without amending the bought deal agreement as discussed above), other than an over-allotment option.

Clarification of Issuing “Material Change” News Releases Announcing Prospectus Offerings

In the companion policy to NI 41-101, the amendments also clarify that issuers need to consider whether the decision to pursue a potential prospectus offering is a material change under applicable securities legislation (most likely in the case of a “non-bought deal” offering), and if so, that the news release and material change report requirements in Part 7 of National Instrument 51-102 Continuous Disclosure Obligations and other securities legislation apply. The amendments further clarify that, in order to avoid contravening the pre-marketing restrictions under applicable securities legislation, any news release and material change report filed before the filing of a preliminary prospectus should be limited to identifying the securities proposed to be issued without a summary of the commercial features of the prospectus offering (those details should instead be dealt with in the preliminary prospectus).

For further reference, a copy of the CSA Notice of Amendments is available here.

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.

Similar Articles
Relevancy Powered by MondaqAI
Borden Ladner Gervais LLP
Osler, Hoskin & Harcourt LLP
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Borden Ladner Gervais LLP
Osler, Hoskin & Harcourt LLP
Related Articles
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
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

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 or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq 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 of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions