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.

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.