Susan Maples - PWYP Montreal Conference 2009


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Finding Contracts on Securities Disclosure Databases

Susan Maples, Legal Fellow, Revenue Watch Institute & Columbia Law School

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  • The report is available here:
  • There is no securities reporters out there to walk into a company’s filing room (or computer database, more accurately) and pick out, independently, what needs be reported. Generally, a company’s general counsel or outside lawyer interprets the rules and decides what to disclose.
  • Your least favorite colleague? The annoying summer intern? This is a task uniquely made for them.
  • We should note that when we’re referring to ‘contracts’ we are specifically referring to the contracts between host states and companies for exploration and extraction. And, these can take many forms (licenses, PSCs, Mining Conventions or Concessions, etc.) Other contracts would certainly have information that would qualify as ‘commercially sensitive’—employment contracts, merger and acquisition agreements, etc.
  • NB: a promoter is someone who sells the company’s stock, i.e. a broker or other banker 1 is concerned with conflict of interest 2 is concerned with supply chain issues 3 is about the protection of intellectual property 4 to let investors know about the prospect for dividends – if there are other creditors with higher priority, there are fewer prospects of dividends 5 – this is the important one for us
  • For one, ask: why is this important? Which companies will this affect? Very small companies with very few assets.
  • Susan Maples - PWYP Montreal Conference 2009

    1. 1. Finding Contracts on Securities Disclosures Databases<br />PWYP International Montreal<br />November 18, 2009<br />Revenue Watch Institute & <br />Columbia Law School <br />
    2. 2. Contracts Confidential and the Public Availability of Contracts<br /><ul><li>Report finds several major myths or fallacies when it comes to contract transparency
    3. 3. 1) Confidentiality clauses are not a barrier to contract transparency. In a survey of over 150 oil and mining contracts from around the world, we found that confidentiality clauses do allow contract transparency.
    4. 4. 2) Contracts are available , but generally for a high price. Thus, industry will have access but citizens likely will not. There are several pay-for-access databases and contracts are available on securities disclosure databases.
    5. 5. 3) There israrely commercially sensitive information in contracts. We reviewed multiple contracts and laws on trade secrets and intellectual property and interviewed dozens of lawyers, engineers, and others in the industry to come to this conclusion.</li></li></ul><li>Securities Disclosure Basics<br /><ul><li>What is a security?
    6. 6. It is a transferable certificate of ownership of investment products. Stocks are the most common example, but there are also bonds, options, and other more exotic products.
    7. 7. Why securities disclosure databases?
    8. 8. Primarily disclosures for investors not the general public. Information that they need to make investing decisions.</li></li></ul><li>Securities Databases: <br />Created by lawyers, for lawyers<br />
    9. 9. Securities Disclosure Basics<br />“Mandatory Disclosures” …but that does not mean it’s uniform<br />2 Main Reasons:<br />Disclosures are “self-reporting” disclosures<br />“Materiality”  Different from company to company and transaction to transaction<br />
    10. 10. Contract Disclosure: The “Bad News”<br />Contract disclosure is highlyirregular and not common on the Canadian and American stock exchanges<br />Disclosed contracts are very hard to find. Expect to spend hours going through opaque legal documents presented in a non-user friendly manner.<br />
    11. 11.
    12. 12. The bad news seems pretty bad…<br /><ul><li>But it may not be. Why? Why is it important that companies do not make redactions when they can?
    13. 13. Companies argue that there is ‘commercially sensitive information’ in contracts. However, when companies have to disclose contracts pursuant to securities regulations and they can redact this kind of information on their own, they do not redact anything.
    14. 14. This confirms that there is not, in fact, commercially sensitive information in contracts.</li></li></ul><li>TSX: When Will Contracts Be Disclosed?<br />Actual contracts will be disclosed if they are “material documents” according to the definition of the TSX. The main definition of “material” in this context means a contract that is made outside the course of ordinary business.<br />Material changes to contracts must also be reported. <br />There are other situations which are considered material, too.<br />
    15. 15. TSX: When Will Contracts Be Disclosed? <br />They will also be disclosed in these situations:<br />1) If a director, officer or promoter is a party to the contract or an ‘insider contract’<br />2) Any continuing contract to sell the majority of the company’s products or services or to purchase the majority of the company’s requirements for goods or services <br />3) Any franchise, license or other agreement to use a patent, formula, trade secret, process or trade name<br />4) Any financing or credit agreement, with terms that have a direct correlation with anticipated cash distribution<br />5) Any contract upon which the company’s business is substantiallydependent<br />
    16. 16. TSX: Which Contract Disclosure Rules Could Be Most Helpful?<br />Generally, the most helpful rules for finding contracts will be the last category, contracts that a company is substantially dependent upon. <br />A caveat:<br />“substantially dependent” is generally understood to mean a contract that 50% or more of the company’s business is dependent upon, though more conservative companies are interpreting it as 25% <br />
    17. 17. SEC: When are contracts disclosed?<br />Again, not very often<br />The TSX rules and SEC rules are very similar when it comes to contract disclosure:<br />Must be disclosed if it is a transaction that is outside the ordinary course of business<br />Or, if it is a contract on which the business is substantially dependent<br />
    18. 18. Exploring the TSX and SEC<br />1) Go to the company website<br />2) Look for the stock exchanges that the company is listed on<br />3) Go to the relevant disclosure database<br />TSX =<br />SEC =<br />4) Start the great hunt for the needle in the haystack<br />
    19. 19. Conclusions<br /><ul><li>Despite the difficulty of finding full contracts on securities disclosure databases, they remain an important source of information. Reserves, royalties and taxes, and economic and social information are disclosed much more regularly.
    20. 20. The fact of full contract disclosure on securities databases is very important for contract transparency. Companies can and do disclose contracts and they do not redact anything from them.
    21. 21. The best sources of information on these websites will be Annual Reports and Technical Reports. Contracts will often be an exhibit to an Annual Report. </li></li></ul><li>Thank you!<br />To Join the Contract Transparency Working Group, email:<br /><br />