Canada: Publication Of Research Reports During Distributions

Last Updated: September 1 2015
Article by Tal Cyngiser

Most Read Contributor in Canada, October 2018

On August 25, 2015, the participating provinces and territory in the Cooperative Capital Markets Regulatory System achieved an important milestone towards implementation of the system by publishing a revised consultation draft of the uniform provincial and territorial capital markets act (now known as the Capital Markets Act), along with the drafts of the initial regulations proposed for adoption by the participating provinces and territory under the draft uniform act. These materials have been published for a 120-day public comment period.

This article is part of Gowlings'  Guide to the Proposed Initial Regulations and related materials. In this segment of our guide, we discuss the proposed initial regulations relating to the publication of research reports during distributions of an issuer's securities. To view other sections of the guide,  click here.

Overview

The participating provinces and territories are proposing to provide exemptions from the prospectus requirement under the draft uniform act to permit certain dealer communications relating to an issuer during a distribution of an issuer's securities. These are set out in section 6 of CMRA Regulation 41-501 Prospectus Requirement and Exemptions and are based on Part 4 of OSC Rule 48-501 Trading During Distributions, Formal Bids and Share Exchange Transactions. The adoption of the exemptions will represent a change in British Columbia.

Details

Under section 6 of CMRA Regulation 41-501:

Compilations and Industry Research ― A person falling within the category of "dealer-restricted person" may, despite the prospectus requirement, publish or disseminate any information, opinion or recommendation relating to the issuer of a "restricted security", provided that it is: 

(a)
contained in a publication that (i) is disseminated with reasonable regularity in the normal course of business of the dealer-restricted person, and (ii) includes similar information with respect to a substantial number of companies in the issuer's industry or a comprehensive list of securities recommended by the dealer-restricted person; and
(b)
given no materially greater space or prominence in the publication than that given to other securities or issuers.

Issuers of highly-liquid securities ― A dealer-restricted person may, despite the prospectus requirement, publish or disseminate any information, opinion or recommendation relating to the issuer of a restricted security that is a "highly-liquid security", provided it is contained in a publication that is disseminated with reasonable regularity in the normal course of business of the dealer-restricted person.

For the definitions of "dealer-restricted person", "restricted security" and "highly-liquid security", see note (1) below.

Rationale behind Part 4 of OSC Rule 48-501

The prospectus exemptions under Part 4 of OSC Rule 48-501 are needed as advertising or marketing activities directly or indirectly in furtherance of a distribution of securities, including research reports, are subject to the prospectus requirement. Although the exemptions will be new for British Columbia, section 6 of CMRA Regulation 41-501 will minimize disruption for dealers in Ontario that have been relying on the exemptions when they distribute research reports about an issuer during a distribution of that issuer's securities.

How does section 6 of CMRA Regulation 41-501 differ from OSC Rule 48-501?

Section 6 of CMRA Regulation 41-501 adopts Part 4 of OSC Rule 48-501, largely, in its current form as of March 2, 2015. There are no noteworthy changes that have been proposed.

Much of the balance of OSC Rule 48-501 (including, for example, trading restrictions imposed on dealers in the distribution of restricted securities) is now reflected in the Universal Market Integrity Rules of IIROC and is therefore not proposed to be carried forward.

What are the implications for British Columbia?

Liberalizing the research rules across the participating provinces and territories to allow research reports to be published during a distribution of restricted securities could serve useful to increase the information that is available to clients. However, the exemption will only permit research (other than relating to a highly-liquid security) in the form of compilation reports providing similar coverage in respect of a significant number of other issuers. As some commentators noted when OSC Rule 48-501 was published for comment, this could limit the content of the report to investors, making it difficult for dealers to respond to client inquiries and hindering the ability of the client to make an informed decision.

Footnotes

(1) "dealer-restricted person" includes:

(a)  a dealer that:

(i)   is an underwriter in a prospectus offering or a restricted private placement;

(ii)   is participating in a restricted private placement as agent and has been allotted to sell more than 25% of the securities to be issued under the restricted private placement;

(iii) is the dealer-manager, manager, soliciting dealer or adviser appointed by an offeror in respect of a securities exchange take-over bid or issuer bid, or

(iv)  is appointed by the an issuer to be the soliciting dealer or adviser in connection with amalgamations, arrangements, capital reorganizations or similar transactions;

(b)  related entities of any person or company referred to above, unless there are written policies and procedures in place designed to prevent information flow between related entities and the operations of such policies and procedures is assessed annually, the dealer has no officers or employees that solicit orders or recommend transactions in securities in common with the related entity and the related entity does not act as a market maker for the restricted security, solicit orders from clients or enter principal orders or otherwise engage in proprietary trading;

(c)  partners, directors, officers or employees of dealers or related entities; or

(d)  any person or company acting jointly or in concert with a person referred to above for a particular transaction.

"restricted security" includes, generally, any security being offered by way of a prospectus or restricted private placement, or by an offeror in a take-over bid, or issuable to security holders pursuant to an amalgamation, arrangement, capital reorganization or similar transaction. A restricted security also includes a security into which any of the foregoing securities is convertible or that may be convertible into a restricted security.

"highly-liquid security" means a listed security that trades during a 60-day period an average of at least 100 times per trading day with an average trading value of $1 million per trading day, or a listed security that is subject to Regulation M under the Securities Exchange Act of 1934 as an "actively-traded security".

"restricted private placement" means a distribution of offered securities made pursuant to sections 2.3 or 2.30 of National Instrument 45-106 Prospectus Exemptions.

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 Mondaq.com.

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

Authors
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
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
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
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

Mondaq.com (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 www.mondaq.com

To Use Mondaq.com 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.

Disclaimer

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.

General

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