On March 13, 2013, the Canadian Securities Administrators (the
"CSA") published a number of proposed
amendments to Canada's early warning reporting system (the
"Proposed Amendments"), such as
including, but not limited to, reporting thresholds, triggers and
disclosure requirements. The Proposed Amendments were intended, in
part, to address concerns about the level of transparency of
shareholders with sizable holdings of issuers' securities under
the early warning reporting system.
The CSA received over 70 comment letters on the Proposed
Amendments. After a considered review of these letters, the CSA
announced on October 10, 2014, that it would not proceed with
certain of the Proposed Amendments:
reducing the early warning reporting threshold from 10% to 5%;
requiring shareholders to include "equity equivalent
derivatives" for the purposes of determining the threshold for
early warning reporting disclosure.1
The CSA noted that among other things, some of the comments it
considered in dispensing with certain of the Proposed Amendments
The unique features of the Canadian market in comparison to the
United States and other jurisdictions, including the large number
of smaller issuers with limited liquidity;
A reduction of the early warning reporting threshold to 5% could
potentially hinder investors' ability to rapidly accumulate or
reduce a large position and signal shareholders' investment
strategies to the market; and
The additional reporting requirements would considerably
increase companies' administrative and compliance
The CSA will publish the "Final
Amendments" which will address certain key issues
identified in the Proposed Amendments. The Final Amendments will,
among other things, clarify the filing timeframes for early warning
reports and news releases, and will require that shareholders:
Disclose any decrease of any ownership interest that is 2% or
Disclose when their ownership interest falls below the reporting
Provide additional enhanced disclosure in early warning
The CSA also announced the Final Amendments would include
amendments to disclosure requirements for certain derivatives and
exempting disclosure requirements for securities lending
agreements. The Final Amendments are expected to exempt lenders,
and in certain circumstances borrowers, from disclosure
requirements if shares are lent under a specified securities
The Canadian markets are generally viewed as bidder friendly,
partly due to the early warning reporting regime, which allows
investors to acquire a sizable position in an issuer prior to
making an announcement. As a result of the CSA's determination
to maintain a 10% insider reporting threshold rather than reducing
it to 5%, Canada is likely to maintain this reputation.
It is anticipated that the Final Amendments will increase the
number of filings and provide greater transparency to the reduction
in shareholder ownership interests and the rationale behind such
The Final Amendments are expected to be published by the CSA in
the second quarter of 2015. Stay tuned for further updates in
future editions of Miller Thomson LLP's Securities Practice
1 Equity equivalent derivatives are positions which is
referenced to or derived from a voting or equity security, which
provides the holder with an economic interest that is substantially
equivalent to the economic interest associated with the beneficial
ownership of the voting or equity security.
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