The Canadian Securities Administrators (CSA) have provided an
update on the status of proposed changes to the regime governing
early warning reporting of significant holdings of issuers'
securities. Most notably, the CSA has determined not to reduce the
reporting ownership threshold from 10 per cent to five per cent and
not to include "equity equivalent derivatives" for the
purposes of calculating an investor's ownership level. However,
the CSA has stated that, in order to enhance transparency of
investor interests, it intends to proceed with other proposed
Previously, the CSA published for comment draft amendments to
the framework for early warning reporting. See our March 2013 Blakes Bulletin: CSA Move to Enhance Transparency of
Significant Voting Positions and Economic Interests for
more information. Despite broad support for the CSA's enhanced
transparency objective, a majority of commenters—particularly
institutional investors—expressed concern regarding potential
unintended consequences of certain proposed changes. Specifically,
they cited the fairly large number of relatively illiquid small
issuers in the Canadian market, the complexity and uncertainty of
determining if "equity equivalent derivatives" trigger
early warning disclosure, and the anticipated additional
administrative and compliance burden on investors.
Reducing the early warning reporting threshold to five per cent
would have provided issuers with more information concerning their
shareholder base, potentially facilitating greater shareholder
engagement by issuers, and provided more time for issuers to
contend with potential hostile offerors or activist shareholders
through earlier identification.
After considering the comments received, the CSA determined not
to align Canada's threshold for early warning disclosure with
the five-per-cent threshold applicable in the U.S. and several
other major foreign jurisdictions, and not to require investors to
include economic interests held through "equity equivalent
derivatives" in determining whether the reporting threshold
has been met. However, the CSA stated that it remains committed to
enhancing transparency and that it intends to publish final
amendments in the second quarter of 2015.
The CSA indicated that, under the revised regime, early warning
reports will need to include more detailed disclosure of
investors' future intentions and provide a more complete
picture of investors' ownership interests through reporting of
derivatives holdings and certain securities lending arrangements in
effect at the time of a reportable transaction. The CSA also noted
that it intends to clarify the timeframe to file early warning
reports and related news releases, add reporting triggers for
two-per-cent decreases in security holdings of those who have filed
early warning reports, as well as when ownership interests fall
below the 10-per-cent reporting threshold, and make the alternative
monthly reporting system unavailable to investors who solicit, or
intend to solicit, proxies from securityholders of an issuer.
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