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Proposed Marketing  and Pre-marketing Amendments to  the Prospectus Rules
SLIDE    STIKEMAN ELLIOTT LLP AGENDA <ul><ul><ul><ul><li>new “testing the waters” exemption for IPOs </li></ul></ul></ul><...
Background / Overview 1
<ul><li>The “prospectus requirement” applies to any trade that is a distribution </li></ul><ul><li>A “trade” includes acts...
<ul><li>Pre-marketing (prior to filing preliminary prospectus) </li></ul><ul><ul><li>generally prohibited ahead of public ...
SLIDE    STIKEMAN ELLIOTT LLP <ul><li>Marketing (after preliminary prospectus receipt) </li></ul><ul><ul><li>securities le...
<ul><li>Rationale for Amendments (according to CSA) </li></ul><ul><ul><li>increase range of what is expressly permitted be...
Impact on prospectus distributions generally <ul><li>Amendments proposed to: </li></ul><ul><ul><li>National Instrument 41-...
Proposed Amendments  <ul><li>Amendments (among other things): </li></ul><ul><ul><li>Prior to filing preliminary prospectus...
Proposed Amendments  (continued)   SLIDE    STIKEMAN ELLIOTT LLP <ul><li>During and after the waiting period (marketing)  ...
Impact on prospectus distributions generally 2
Proposed Amendments SLIDE    STIKEMAN ELLIOTT LLP PRELIMINARY RECEIPT FINAL RECEIPT CLOSING <ul><li>New exemptions to expr...
<ul><li>Permits solicitation of expressions of interest by non-reporting issuers to ascertain if there would be sufficient...
New “testing the waters” exemption for IPO issuers SLIDE    STIKEMAN ELLIOTT LLP <ul><li>Conditions: </li></ul><ul><ul><li...
New “testing the waters” exemption for IPO issuers SLIDE    STIKEMAN ELLIOTT LLP <ul><li>Conditions:  (continued) </li></u...
<ul><ul><li>investment funds that are  either  managed by an investment fund manager registered, or advised by a adviser a...
<ul><ul><li>foreign entities analogous to the above </li></ul></ul><ul><ul><li>Canadian federal or provincial government a...
New exception to expressly permit use of term sheet during and after the waiting period SLIDE    STIKEMAN ELLIOTT LLP <ul>...
<ul><li>Term Sheet Conditions - Content: </li></ul><ul><ul><li>fair , true and plain (vs.  full , true and plain  for pros...
<ul><li>Term Sheet Conditions - Procedural: </li></ul><ul><ul><li>approved in writing by issuer and underwriters  and file...
<ul><li>Term Sheet Conditions - Procedural: </li></ul><ul><ul><li>if its contents are modified or superseded by a statemen...
Provision of term sheet  (continued) SLIDE    STIKEMAN ELLIOTT LLP <ul><li>Term Sheet Conditions - Procedural: </li></ul><...
<ul><li>investment dealers can provide “traditional” green sheets to their registered representatives  </li></ul><ul><li>g...
<ul><li>proposed to be defined in NI 41-101 as: </li></ul><ul><ul><li>a presentation to potential investors regarding a di...
<ul><li>can be conducted by investment dealers for permitted institutional investors or for retail clients </li></ul><ul><...
<ul><li>Use of comparables </li></ul><ul><ul><li>road shows conducted for retail investors cannot contain comparables (in ...
<ul><li>Conditions: </li></ul><ul><ul><li>all information (including comparables) must be  fair,  true, and plain </li></u...
<ul><li>Use of comparables </li></ul><ul><ul><li>if comparables are used in road show for  permitted institutional investo...
<ul><li>Must be subject to “restricted access” </li></ul><ul><ul><li>Dealer must establish and follow appropriate  procedu...
<ul><li>Cross-border IPOs </li></ul><ul><ul><li>proposed amendments will expressly permit road shows, and  require filing ...
Impact on  bought deals 3
<ul><li>Proposals expand range of pre-marketing activities and ease certain restrictions including: </li></ul><ul><ul><li>...
<ul><li>Investment dealers may provide a term sheet  to  permitted institutional investors  during  pre-marketing period <...
<ul><li>Conditions: </li></ul><ul><ul><li>news release issued immediately after the agreement is amended </li></ul></ul><u...
<ul><li>Conditions:  (continued) </li></ul><ul><ul><li>only one amendment to upsize permitted  </li></ul></ul><ul><ul><li>...
<ul><li>Conditions  (continued) : </li></ul><ul><ul><li>cannot be the culmination of a  formal or informal plan  to offer ...
<ul><li>permitted, provided addition of a particular underwriter was not the culmination of  formal or informal plan  to a...
<ul><li>NI 44-101 to be amended to expressly prohibit “market-out” clause </li></ul><ul><li>proposed to be defined as  a p...
Regulatory Guidance 4
<ul><li>NP 41-201  Income Trusts and other Indirect Offerings  </li></ul><ul><ul><li>amended to clarify that guidance on d...
<ul><li>guidance added on material change disclosure for a potential offering: </li></ul><ul><ul><li>clarifies that while ...
<ul><li>guidance added on material change disclosure for a potential offering:  (continued) </li></ul><ul><ul><li>after fi...
<ul><li>revised guidance  </li></ul><ul><ul><li>expressly states that CSA do not have same concerns with marketing prior t...
<ul><li>revised guidance clarifies that  </li></ul><ul><ul><li>decision to pursue a drawdown may be a material change </li...
<ul><li>marketing and advertising activities are generally prohibited prior to filing a preliminary prospectus  </li></ul>...
<ul><li>current guidance states that distribution  commences when: </li></ul><ul><ul><ul><li>dealer has had discussions wi...
<ul><li>CSA concerned with “aggressive interpretations” of when distribution commences  </li></ul><ul><li>NI 41-101 CP gui...
<ul><li>NI 41-101 CP guidance amended to provide following examples of “sufficient specificity” </li></ul><ul><ul><li>foll...
<ul><li>NI 41-101 CP guidance amended to provide following examples of “sufficient specificity”  (continued) </li></ul><ul...
<ul><li>described by CSA “where issuers and dealers will meet with institutional investors to discuss the business and aff...
<ul><li>Changes proposed to CP guidance to clarify that:  </li></ul><ul><ul><li>dealers involved with a potential prospect...
Next Steps 5
<ul><li>Comment period expires February 23, 2012 </li></ul><ul><li>Important for dealers to respond and comment on what th...
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Proposed Marketing and Pre-marketing Amendments to Prospectus Rules

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Proposed Marketing and Pre-marketing Amendments to Prospectus Rules

  1. 1. Proposed Marketing and Pre-marketing Amendments to the Prospectus Rules
  2. 2. SLIDE STIKEMAN ELLIOTT LLP AGENDA <ul><ul><ul><ul><li>new “testing the waters” exemption for IPOs </li></ul></ul></ul></ul><ul><ul><ul><ul><li>new exemptions for marketing during and after the waiting period (sheets terms and road shows) </li></ul></ul></ul></ul><ul><ul><ul><ul><li>expanded pre-marketing exemption </li></ul></ul></ul></ul><ul><ul><ul><ul><li>upsizing offerings and expanding syndicates </li></ul></ul></ul></ul><ul><ul><ul><ul><li>disclosure matters </li></ul></ul></ul></ul><ul><ul><ul><ul><li>when distribution commences </li></ul></ul></ul></ul><ul><ul><ul><ul><li>non-deal road shows </li></ul></ul></ul></ul><ul><ul><ul><ul><li>research reports </li></ul></ul></ul></ul>Background/Overview PART 1 Impact on Prospectus Distributions Generally PART 2 Impact on Bought Deals PART 3 Regulatory Guidance PART 4 Next Steps PART 5
  3. 3. Background / Overview 1
  4. 4. <ul><li>The “prospectus requirement” applies to any trade that is a distribution </li></ul><ul><li>A “trade” includes acts in furtherance of a trade </li></ul><ul><li>Policy rationale </li></ul><ul><ul><li>equal access to information </li></ul></ul><ul><ul><li>any information provided to public offering investors should be in prospectus </li></ul></ul><ul><ul><li>prospectus should be available to all investors </li></ul></ul><ul><ul><li>deter “conditioning” or “priming” of the market by dealers or issuers </li></ul></ul>SLIDE STIKEMAN ELLIOTT LLP BACKGROUND/OVERVIEW
  5. 5. <ul><li>Pre-marketing (prior to filing preliminary prospectus) </li></ul><ul><ul><li>generally prohibited ahead of public offering until preliminary prospectus is filed and receipted </li></ul></ul><ul><ul><li>limited exception for bought-deals </li></ul></ul>SLIDE STIKEMAN ELLIOTT LLP <ul><li>Policy rationale (continued) </li></ul><ul><ul><li>deter insider trading and tipping (selective disclosure concerns) </li></ul></ul><ul><ul><li>investor protection through adequate disclosure (full, true and plain) and prospectus liability </li></ul></ul>BACKGROUND/OVERVIEW
  6. 6. SLIDE STIKEMAN ELLIOTT LLP <ul><li>Marketing (after preliminary prospectus receipt) </li></ul><ul><ul><li>securities legislation sets out activities that are expressly permitted </li></ul></ul><ul><ul><li>“ grey area” with respect to others (road shows, green sheets, etc.) </li></ul></ul>BACKGROUND/OVERVIEW
  7. 7. <ul><li>Rationale for Amendments (according to CSA) </li></ul><ul><ul><li>increase range of what is expressly permitted before, during and after the waiting period </li></ul></ul><ul><ul><li>ease regulatory burdens and restrictions </li></ul></ul><ul><ul><li>provide clarification </li></ul></ul><ul><li>However: </li></ul><ul><ul><li>regulatory “guidance” and commentary may not reflect certain market practices </li></ul></ul><ul><ul><li>codifying what is permitted may by implication exclude activities/communications not expressly recognized </li></ul></ul>SLIDE STIKEMAN ELLIOTT LLP BACKGROUND/OVERVIEW
  8. 8. Impact on prospectus distributions generally <ul><li>Amendments proposed to: </li></ul><ul><ul><li>National Instrument 41-101 General Prospectus Requirements and Companion Policy </li></ul></ul><ul><ul><li>National Instrument 44-101 Short Form Prospectus Distributions and Companion Policy </li></ul></ul><ul><ul><li>Companion Policy to NI 44-102 Shelf Distributions </li></ul></ul><ul><ul><li>National Policy 41-201 Income Trusts and other Indirect Offerings </li></ul></ul><ul><ul><li>National Policy 47-201 Trading Securities Using the Internet and Other Electronic Means </li></ul></ul>SLIDE STIKEMAN ELLIOTT LLP BACKGROUND/OVERVIEW
  9. 9. Proposed Amendments <ul><li>Amendments (among other things): </li></ul><ul><ul><li>Prior to filing preliminary prospectus (pre-marketing); </li></ul></ul><ul><ul><ul><li>introduce new “testing the waters” pre-marketing exemption for IPOs </li></ul></ul></ul><ul><li>During and after the waiting period (marketing) </li></ul><ul><ul><li>expand the range of activities expressly permitted for all prospectus distributions (long form, short form and shelf prospectuses) </li></ul></ul><ul><ul><li>introduce specific provisions for use of term sheets </li></ul></ul>SLIDE STIKEMAN ELLIOTT LLP BACKGROUND/OVERVIEW
  10. 10. Proposed Amendments (continued) SLIDE STIKEMAN ELLIOTT LLP <ul><li>During and after the waiting period (marketing) (continued) </li></ul><ul><ul><li>introduce specific provisions for conduct of road shows for permitted institutional investors vs. retail investors </li></ul></ul><ul><li>Expand existing pre-marketing exemption for bought deals only </li></ul>BACKGROUND/OVERVIEW
  11. 11. Impact on prospectus distributions generally 2
  12. 12. Proposed Amendments SLIDE STIKEMAN ELLIOTT LLP PRELIMINARY RECEIPT FINAL RECEIPT CLOSING <ul><li>New exemptions to expressly permit use of term sheets and road shows </li></ul><ul><li>Term sheets (and written road show materials) to be filed on SEDAR and included/incorporated in prospectus </li></ul><ul><li>Comparables only permitted for road shows with permitted institutional investors (unless disclosed in prospectus) </li></ul><ul><li>Testing the waters” exemption for IPOs </li></ul><ul><li>Expanded pre-marketing exemption for bought deals to allows term sheets for permitted institutional investors </li></ul><ul><li>New CP guidance on when a distribution commences and on non-deal road shows </li></ul>IMPACT ON PROSPECTUS DISTRIBUTIONS GENERALLY PRE-MARKETING PERIOD WAITING PERIOD AFTER FINAL RECEIPT
  13. 13. <ul><li>Permits solicitation of expressions of interest by non-reporting issuers to ascertain if there would be sufficient interest in an IPO </li></ul><ul><ul><li>through investment dealer </li></ul></ul><ul><ul><li>permits limited confidential communication only with “permitted institutional investors” </li></ul></ul><ul><ul><li>not available to foreign (SEC or other) public issuers </li></ul></ul>New “testing the waters” exemption for IPO issuers SLIDE STIKEMAN ELLIOTT LLP IMPACT ON PROSPECTUS DISTRIBUTIONS GENERALLY PRE-MARKETING PERIOD
  14. 14. New “testing the waters” exemption for IPO issuers SLIDE STIKEMAN ELLIOTT LLP <ul><li>Conditions: </li></ul><ul><ul><li>issuer has reasonable expectation of filing a preliminary long form prospectus </li></ul></ul><ul><ul><li>issuer keeps a record and copy of written authorization given to dealers to make such solicitations on its behalf </li></ul></ul><ul><ul><li>dealer has investor confirm confidentiality in writing before any information is provided </li></ul></ul>IMPACT ON PROSPECTUS DISTRIBUTIONS GENERALLY PRE-MARKETING PERIOD
  15. 15. New “testing the waters” exemption for IPO issuers SLIDE STIKEMAN ELLIOTT LLP <ul><li>Conditions: (continued) </li></ul><ul><ul><li>written material marked confidential with legend disclaiming liability for misrepresentations </li></ul></ul><ul><ul><li>dealer keeps written record of whom it solicits, of confidentiality confirmation and copy of written material </li></ul></ul>IMPACT ON PROSPECTUS DISTRIBUTIONS GENERALLY PRE-MARKETING PERIOD
  16. 16. <ul><ul><li>investment funds that are either managed by an investment fund manager registered, or advised by a adviser authorized, under Canadian securities legislation </li></ul></ul><ul><ul><li>banks, bank subsidiaries and the BDC </li></ul></ul><ul><ul><li>pension funds regulated by OSFI (or a pension commission or similar regulatory authority, domestic or foreign) and their subsidiaries </li></ul></ul>Permitted institutional investors: SLIDE STIKEMAN ELLIOTT LLP IMPACT ON PROSPECTUS DISTRIBUTIONS GENERALLY PRE-MARKETING PERIOD
  17. 17. <ul><ul><li>foreign entities analogous to the above </li></ul></ul><ul><ul><li>Canadian federal or provincial government and its agencies, Crown corporations or other wholly-owned government entities </li></ul></ul><ul><ul><li>foreign national, federal, state, provincial, territorial or municipal governments and their agencies </li></ul></ul><ul><ul><li>Canadian municipalities, public boards or commissions </li></ul></ul>Permitted institutional investors: (continued) SLIDE STIKEMAN ELLIOTT LLP IMPACT ON PROSPECTUS DISTRIBUTIONS GENERALLY PRE-MARKETING PERIOD
  18. 18. New exception to expressly permit use of term sheet during and after the waiting period SLIDE STIKEMAN ELLIOTT LLP <ul><ul><li>term sheet defined as a written communication regarding a distribution of securities under a prospectus that contains information on the issuer or the securities, but does not include, a prospectus, or a notice, circular, advertisement, letter or other communication (referred to in section 13.1 of NI 41-101) that is expressly permitted by securities legislation </li></ul></ul>IMPACT ON PROSPECTUS DISTRIBUTIONS GENERALLY PRE-MARKETING PERIOD
  19. 19. <ul><li>Term Sheet Conditions - Content: </li></ul><ul><ul><li>fair , true and plain (vs. full , true and plain for prospectus) </li></ul></ul><ul><ul><li>information concerning securities is contained in preliminary/final prospectus or prospectus amendment </li></ul></ul><ul><ul><li>dated and contains prescribed legend and same cautionary language as face page and summary of preliminary/final prospectus </li></ul></ul>Provision of term sheet SLIDE STIKEMAN ELLIOTT LLP IMPACT ON PROSPECTUS DISTRIBUTIONS GENERALLY MARKETING DURING AND AFTER THE WAITING PERIOD
  20. 20. <ul><li>Term Sheet Conditions - Procedural: </li></ul><ul><ul><li>approved in writing by issuer and underwriters and filed on SEDAR prior to use </li></ul></ul><ul><ul><li>provided in local jurisdiction only if preliminary/final prospectus is receipted </li></ul></ul><ul><ul><li>distributed with preliminary prospectus (as applicable) and included or incorporated by reference (or deemed to be so) in final prospectus </li></ul></ul>Provision of term sheet (continued) SLIDE STIKEMAN ELLIOTT LLP IMPACT ON PROSPECTUS DISTRIBUTIONS GENERALLY MARKETING DURING AND AFTER THE WAITING PERIOD
  21. 21. <ul><li>Term Sheet Conditions - Procedural: </li></ul><ul><ul><li>if its contents are modified or superseded by a statement in the final prospectus, indicates that such content is not part of final prospectus, and states how the content in the term sheet has been modified or superseded by statement in final prospectus </li></ul></ul>Provision of term sheet (continued) SLIDE STIKEMAN ELLIOTT LLP IMPACT ON PROSPECTUS DISTRIBUTIONS GENERALLY MARKETING DURING AND AFTER THE WAITING PERIOD
  22. 22. Provision of term sheet (continued) SLIDE STIKEMAN ELLIOTT LLP <ul><li>Term Sheet Conditions - Procedural: </li></ul><ul><ul><li>copy of preliminary/final prospectus and any amendment provided with term sheet </li></ul></ul><ul><ul><li>revised and re-distributed if the final prospectus modifies any material fact contained in the term sheet, highlighting modifications </li></ul></ul><ul><ul><li>permitted to summarize information or include graphs and charts based on prospectus </li></ul></ul><ul><ul><li>subject to primary market civil liability (as it is included/incorporated in prospectus) and secondary market civil liability (as it is required to be filed) </li></ul></ul>IMPACT ON PROSPECTUS DISTRIBUTIONS GENERALLY MARKETING DURING AND AFTER THE WAITING PERIOD
  23. 23. <ul><li>investment dealers can provide “traditional” green sheets to their registered representatives </li></ul><ul><li>green sheet distributed to public = term sheet and must comply with term sheet requirements (including being incorporated by reference or included in the prospectus and filed) </li></ul>Green Sheets SLIDE STIKEMAN ELLIOTT LLP IMPACT ON PROSPECTUS DISTRIBUTIONS GENERALLY MARKETING DURING AND AFTER THE WAITING PERIOD
  24. 24. <ul><li>proposed to be defined in NI 41-101 as: </li></ul><ul><ul><li>a presentation to potential investors regarding a distribution of securities under a prospectus conducted by an investment dealer on behalf of an issuer in which one or more executive officers of the issuer participate </li></ul></ul><ul><li>applies to all types of road shows - in-person, telephone conference calls, internet or by other electronic means </li></ul>Road Shows SLIDE STIKEMAN ELLIOTT LLP IMPACT ON PROSPECTUS DISTRIBUTIONS GENERALLY MARKETING DURING AND AFTER THE WAITING PERIOD
  25. 25. <ul><li>can be conducted by investment dealers for permitted institutional investors or for retail clients </li></ul><ul><ul><li>separate sets of rules apply to both categories, but not clear that categorization fits customary market breakdown or captures everyone </li></ul></ul><ul><ul><li>“ permitted institutional investor” category may also be narrower than market view of institutional investors </li></ul></ul>Road Shows (continued) SLIDE STIKEMAN ELLIOTT LLP IMPACT ON PROSPECTUS DISTRIBUTIONS GENERALLY MARKETING DURING AND AFTER THE WAITING PERIOD
  26. 26. <ul><li>Use of comparables </li></ul><ul><ul><li>road shows conducted for retail investors cannot contain comparables (in absence of prospectus liability, i.e. unless contained in the prospectus) </li></ul></ul><ul><ul><li>if included in prospectus, must be accompanied by appropriate risk factor and cautionary language </li></ul></ul><ul><ul><li>CSA concerned that comparables are “cherry picked” by investment dealers and are misunderstood by retail investors (and specifically ask whether they should be permitted for retail investors) </li></ul></ul>Road Shows (continued) SLIDE STIKEMAN ELLIOTT LLP IMPACT ON PROSPECTUS DISTRIBUTIONS GENERALLY MARKETING DURING AND AFTER THE WAITING PERIOD
  27. 27. <ul><li>Conditions: </li></ul><ul><ul><li>all information (including comparables) must be fair, true, and plain </li></ul></ul><ul><ul><li>all information is contained in the preliminary prospectus (other than comparables, if any) </li></ul></ul><ul><ul><li>any written materials distributed to investors comply with the term sheet conditions (other than comparables, if any) </li></ul></ul><ul><ul><li>dealer authorized in writing by issuer to conduct road show </li></ul></ul><ul><ul><li>dealer commences road show with prescribed oral warning </li></ul></ul>Road Shows (continued) SLIDE STIKEMAN ELLIOTT LLP IMPACT ON PROSPECTUS DISTRIBUTIONS GENERALLY MARKETING DURING AND AFTER THE WAITING PERIOD
  28. 28. <ul><li>Use of comparables </li></ul><ul><ul><li>if comparables are used in road show for permitted institutional investors (and not included in the prospectus): </li></ul></ul><ul><ul><ul><li>dealer obtains written confirmation that attendee will keep information regarding comparables confidential prior to commencing road show </li></ul></ul></ul><ul><ul><ul><li>any information regarding comparables contained in any written materials is redacted prior to filing on SEDAR </li></ul></ul></ul><ul><ul><ul><li>version filed on SEDAR describes what was redacted </li></ul></ul></ul><ul><ul><ul><li>version provided during road show contains prescribed cautionary statement </li></ul></ul></ul>Road Shows (continued) SLIDE STIKEMAN ELLIOTT LLP IMPACT ON PROSPECTUS DISTRIBUTIONS GENERALLY MARKETING DURING AND AFTER THE WAITING PERIOD
  29. 29. <ul><li>Must be subject to “restricted access” </li></ul><ul><ul><li>Dealer must establish and follow appropriate procedures to: </li></ul></ul><ul><ul><ul><li>verify identity and keep written record of all attendees, attending by any means (to ensure ability to provide revised materials and for evidentiary purposes) </li></ul></ul></ul><ul><ul><ul><li>ensure each investor receives copy of preliminary/final prospectus </li></ul></ul></ul><ul><ul><ul><li>restrict copying of any written materials </li></ul></ul></ul>Road Shows (continued) SLIDE STIKEMAN ELLIOTT LLP IMPACT ON PROSPECTUS DISTRIBUTIONS GENERALLY MARKETING DURING AND AFTER THE WAITING PERIOD
  30. 30. <ul><li>Cross-border IPOs </li></ul><ul><ul><li>proposed amendments will expressly permit road shows, and require filing of road show materials on SEDAR (in accordance with “term sheet requirements”) </li></ul></ul><ul><ul><li>exemptive relief for filing materials on EDGAR will therefore no longer be required </li></ul></ul>Road Shows (continued) SLIDE STIKEMAN ELLIOTT LLP IMPACT ON PROSPECTUS DISTRIBUTIONS GENERALLY MARKETING DURING AND AFTER THE WAITING PERIOD
  31. 31. Impact on bought deals 3
  32. 32. <ul><li>Proposals expand range of pre-marketing activities and ease certain restrictions including: </li></ul><ul><ul><li>allowing for use of term sheets prior to filing preliminary prospectus </li></ul></ul><ul><ul><li>expressly accommodating upsizing of offerings and enlarging of syndicate </li></ul></ul><ul><li>CSA intention is to provide clear rules and a level playing field for market participants, however, new provisions and regulatory guidance may not accurately reflect certain market practices </li></ul>SLIDE STIKEMAN ELLIOTT LLP IMPACT ON BOUGHT DEALS
  33. 33. <ul><li>Investment dealers may provide a term sheet to permitted institutional investors during pre-marketing period </li></ul><ul><ul><li>Conditions: </li></ul></ul><ul><ul><ul><li>term sheet provisions (same as above) </li></ul></ul></ul><ul><ul><ul><li>all information concerning securities contained in the term sheet must be included in the bought deal news release or the issuer's continuous disclosure record </li></ul></ul></ul><ul><ul><ul><li>filed on SEDAR before use (will not be made public on SEDAR until the preliminary prospectus is filed and receipted) </li></ul></ul></ul><ul><ul><ul><li>any permitted institutional investor who receives a term sheet must receive the subsequent preliminary prospectus </li></ul></ul></ul>Use of term sheets SLIDE STIKEMAN ELLIOTT LLP IMPACT ON BOUGHT DEALS
  34. 34. <ul><li>Conditions: </li></ul><ul><ul><li>news release issued immediately after the agreement is amended </li></ul></ul><ul><ul><li>preliminary prospectus filed and receipted within four business days of the original agreement </li></ul></ul><ul><ul><li>amended agreement is otherwise on same terms as original, including price, with same underwriters (unless syndicate is expanded in accordance with new rules allowing for expansion of syndicate) </li></ul></ul>Upsizing bought deals SLIDE STIKEMAN ELLIOTT LLP IMPACT ON BOUGHT DEALS
  35. 35. <ul><li>Conditions: (continued) </li></ul><ul><ul><li>only one amendment to upsize permitted </li></ul></ul><ul><ul><li>representations, warranties, indemnities and conditions cannot be amended unless agreement is otherwise the same as the original and other conditions to reliance on the pre-marketing exemption are complied with </li></ul></ul><ul><ul><li>bought deal agreement must not be terminated unless parties decide not to proceed with offering </li></ul></ul>Upsizing bought deals (continued) SLIDE STIKEMAN ELLIOTT LLP IMPACT ON BOUGHT DEALS
  36. 36. <ul><li>Conditions (continued) : </li></ul><ul><ul><li>cannot be the culmination of a formal or informal plan to offer a larger amount devised before the execution of the original agreement </li></ul></ul><ul><ul><li>permitted increase in offering size capped at specified percentage (cap to be fixed) </li></ul></ul><ul><li>CSA have asked for specific comments on size of the appropriate cap ranging from 15% to 50% of the original size of the offering </li></ul>Upsizing bought deals (continued) SLIDE STIKEMAN ELLIOTT LLP IMPACT ON BOUGHT DEALS
  37. 37. <ul><li>permitted, provided addition of a particular underwriter was not the culmination of formal or informal plan to add that underwriter devised before the execution of the original agreement </li></ul>Expanding syndicate SLIDE STIKEMAN ELLIOTT LLP IMPACT ON BOUGHT DEALS
  38. 38. <ul><li>NI 44-101 to be amended to expressly prohibit “market-out” clause </li></ul><ul><li>proposed to be defined as a provision in an agreement which permits an underwriter to terminate its commitment, to purchase securities in the event that the securities cannot be marketed profitably due to market conditions </li></ul>Definition of “bought deal agreement” SLIDE STIKEMAN ELLIOTT LLP IMPACT ON BOUGHT DEALS
  39. 39. Regulatory Guidance 4
  40. 40. <ul><li>NP 41-201 Income Trusts and other Indirect Offerings </li></ul><ul><ul><li>amended to clarify that guidance on disclosure of distributable cash (which currently applies to MD&A and other disclosure) will also apply to distributable cash disclosure contained in term sheets and road show materials prepared under NI 41-101 </li></ul></ul>Disclosure matters SLIDE STIKEMAN ELLIOTT LLP REGULATORY GUIDANCE
  41. 41. <ul><li>guidance added on material change disclosure for a potential offering: </li></ul><ul><ul><li>clarifies that while CSA acknowledge the decision to pursue a potential offering may be a material change, any material change press release and report filed before filing a preliminary prospectus or announcing a bought deal </li></ul></ul><ul><ul><ul><li>should be carefully drafted to avoid promoting the distribution or conditioning the market, and </li></ul></ul></ul><ul><ul><ul><li>should be limited to identifying the securities proposed to be issued without a summary of the commercial feature of the distribution </li></ul></ul></ul>NI 41-101 CP SLIDE STIKEMAN ELLIOTT LLP REGULATORY GUIDANCE
  42. 42. <ul><li>guidance added on material change disclosure for a potential offering: (continued) </li></ul><ul><ul><li>after filing material change new release, issuer should not grant media interviews on proposed offering and investment dealer would not be able to solicit expressions of interest until a receipt is issued for a preliminary prospectus or a bought deal is announced </li></ul></ul>NI 41-101 CP (continued) SLIDE STIKEMAN ELLIOTT LLP REGULATORY GUIDANCE
  43. 43. <ul><li>revised guidance </li></ul><ul><ul><li>expressly states that CSA do not have same concerns with marketing prior to filing shelf prospectus supplement (as they do with pre-marketing prior to filing a short or long form prospectus) </li></ul></ul><ul><ul><li>confirms use of “preliminary” form of shelf prospectus supplement to “drawdown” a tranche of securities </li></ul></ul>NI 41-101 CP (continued) SLIDE STIKEMAN ELLIOTT LLP REGULATORY GUIDANCE
  44. 44. <ul><li>revised guidance clarifies that </li></ul><ul><ul><li>decision to pursue a drawdown may be a material change </li></ul></ul><ul><ul><li>issuers may need to file preliminary form of shelf prospectus supplement on SEDAR (asking principal regulator to make it public) to address selective disclosure issues (although preliminary supplement will generally not be “pre-cleared”) </li></ul></ul><ul><ul><li>if drawdown is not disclosed via news release, investment dealers may need to consider measures to address selective disclosure and insider trading and tipping concerns </li></ul></ul>NI 41-101 CP SLIDE STIKEMAN ELLIOTT LLP REGULATORY GUIDANCE
  45. 45. <ul><li>marketing and advertising activities are generally prohibited prior to filing a preliminary prospectus </li></ul><ul><li>prohibition applies to all activities undertaken “in connection with” a prospectus offering (i.e. as of “commencement of distribution”) </li></ul>When does a distribution commence? SLIDE STIKEMAN ELLIOTT LLP REGULATORY GUIDANCE
  46. 46. <ul><li>current guidance states that distribution commences when: </li></ul><ul><ul><ul><li>dealer has had discussions with an issuer or selling securityholder (or another dealer that has had those discussions) about the distribution, and </li></ul></ul></ul><ul><ul><ul><li>the discussions are of “sufficient specificity” that it is reasonable to expect that the dealer (alone with others) will propose an underwriting of securities </li></ul></ul></ul>When does a distribution commence? (continued) SLIDE STIKEMAN ELLIOTT LLP REGULATORY GUIDANCE
  47. 47. <ul><li>CSA concerned with “aggressive interpretations” of when distribution commences </li></ul><ul><li>NI 41-101 CP guidance amended to clarify that CSA do not agree that: </li></ul><ul><ul><li>distribution commences at a later time (i.e. when proposed engagement letter or proposal for underwriting with indicative terms is provided), or </li></ul></ul><ul><ul><li>if issuer rejects proposed engagement letter the distribution ends and dealer is permitted to immediately resume discussions with potential investors (according to CSA, dealer should wait until after “cooling off” period to resume discussions) </li></ul></ul>Commencement of a distribution – “sufficient specificity” SLIDE STIKEMAN ELLIOTT LLP REGULATORY GUIDANCE
  48. 48. <ul><li>NI 41-101 CP guidance amended to provide following examples of “sufficient specificity” </li></ul><ul><ul><li>following discussions with issuer, (i) dealer provides issuer with document outlining possible prospectus financing scenarios with share price ranges, (ii) management recommends financing at contemplated range to board, (iii) board gives management broad authority to execute on financing opportunity within contemplated range, and (iv) dealer is advised of this approval </li></ul></ul>Commencement of a distribution – “sufficient specificity” (continued) SLIDE STIKEMAN ELLIOTT LLP REGULATORY GUIDANCE
  49. 49. <ul><li>NI 41-101 CP guidance amended to provide following examples of “sufficient specificity” (continued) </li></ul><ul><ul><li>following discussions with issuer, dealer advises issuer that market is “looking good” for a possible prospectus offering and that dealer would likely provide indicative terms for an offering later that day </li></ul></ul>Commencement of a distribution – “sufficient specificity” (continued) SLIDE STIKEMAN ELLIOTT LLP REGULATORY GUIDANCE
  50. 50. <ul><li>described by CSA “where issuers and dealers will meet with institutional investors to discuss the business and affairs of the issuer” </li></ul><ul><li>according to proposed CP guidance, these are prohibited by the prospectus requirement if undertaken in anticipation of a prospectus offering and CSA would have selective disclosure concerns if institutional investors are given material information that has not been publicly disclosed </li></ul>Non-deal road shows SLIDE STIKEMAN ELLIOTT LLP REGULATORY GUIDANCE
  51. 51. <ul><li>Changes proposed to CP guidance to clarify that: </li></ul><ul><ul><li>dealers involved with a potential prospectus offering should not issue a research report on the issuer or provide media commentary on the issuer prior to the filing of a preliminary prospectus, the announcement of a bought deal or the filing of a shelf prospectus supplement, unless appropriate &quot;ethical wall&quot; policies and procedures are in place between the business unit issuing the research report and the unit proposing to act as underwriter, and </li></ul></ul><ul><ul><li>research reports would have to comply with section 7.7 of the UMIR (trading during securities transactions) </li></ul></ul>Research reports SLIDE STIKEMAN ELLIOTT LLP REGULATORY GUIDANCE
  52. 52. Next Steps 5
  53. 53. <ul><li>Comment period expires February 23, 2012 </li></ul><ul><li>Important for dealers to respond and comment on what they want to do </li></ul><ul><li>CSA have specifically asked for comments on (among others) </li></ul><ul><ul><li>usefulness of “testing the waters” exemption for IPOs </li></ul></ul><ul><ul><li>appropriate size of cap for upsizing bought deals </li></ul></ul><ul><ul><li>provision of bought deal term sheet to retail investors (prior to preliminary prospectus receipt) </li></ul></ul><ul><ul><li>use and disclosure of “comparables” </li></ul></ul>SLIDE STIKEMAN ELLIOTT LLP NEXT STEPS

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