CSA Notice and Request for Comment
Proposed Amendments to National Instrument 44-102 Shelf
Distributions and Change to Companion Policy 44-102CP Shelf
Distributions relating to At-the-Market Distributions
May 9, 2019
Introduction
The Canadian Securities Administrators (CSA or we) are publishing, for a 90-day comment period,
proposed amendments to National Instrument 44-102 Shelf Distributions (NI 44-102) and a
proposed change to Companion Policy 44-102CP Shelf Distributions (44-102CP). We are
proposing amendments to Part 9 of NI 44-102 (the Proposed Amendments) to replace relief that
has historically been required by issuers conducting at-the-market (ATM) distributions of equity
securities.
This notice contains the following annexes:
Annex A – Proposed Amendments to NI 44-102
Annex B – Proposed Change to Companion Policy 44-102CP
Annex C – Local Matters
This notice will also be available on the following website of CSA jurisdictions:
www.bcsc.bc.ca
www.albertasecurities.com
www.fcaa.gov.sk.ca
www.mbsecurities.ca
www.osc.gov.on.ca
www.lautorite.qc.ca
www.fcnb.ca
nssc.novascotia.ca
Substance and Purpose
Part 9 of NI 44-102 contemplates the distribution of equity securities by way of an ATM
distribution using the shelf procedures. Part 9 of NI 44-102 does not currently provide an
exemption for the prospectus delivery requirement. Because of the nature of ATM distributions,
issuers are required to request exemptive relief (ATM Orders) from certain prospectus-related
requirements if they wish to conduct ATM distributions in Canada. The Proposed Amendments
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are aimed at reducing the regulatory burden for issuers who wish to conduct ATM distributions,
without compromising investor protection. The Proposed Amendments adopt the terms found in
ATM Orders, so that issuers would not have to apply for exemptive relief to conduct ATM
distributions.
Background
The Proposed Amendments are informed by comment letters received respecting ATM
distributions in response to CSA Consultation Paper 51-404 Considerations for Reducing
Regulatory Burden for Non-Investment Fund Reporting Issuers as summarized in CSA Staff
Notice 51-353 Update on CSA Consultation Paper 51-404 Considerations for Reducing
Regulatory Burden for Non-Investment Fund Reporting Issuers.
NI 44-102 was adopted in 2000. The requirements of Part 9, together with the conditions that
appear in ATM Orders (collectively, the ATM Requirements) form the regulatory framework for
ATM distributions in Canada. The ATM Requirements were derived in part from rules previously
adopted by the U.S. Securities and Exchange Commission (SEC), where ATM distributions have
been conducted since the early 1980s.
ATM distributions in Canada are not as common as they are in the U.S. market. Industry
participants have observed that the lack of ATM distributions in Canada may be due to restrictions
and obligations imposed by the ATM Requirements. In particular, we understand that certain
requirements originally applicable to U.S. ATM distributions, and upon which some of the ATM
Requirements were based, have since been relaxed or abandoned by the SEC.
Summary of the Proposed Amendments
The Proposed Amendments include:
An exemption for the underwriter from the requirement to deliver a prospectus to
purchasers in a distribution of securities;
An exemption for the issuer and underwriter from certain of the prospectus form
requirements, including a relaxation of the form of statement of rights.
The Proposed Amendments contain several requirements for issuers and underwriters conducting
ATM distributions taken from the ATM Orders. Additionally, the Proposed Amendments contain
a requirement that an issuer must disclose on the cover page of its base shelf prospectus that it may
qualify an ATM distribution.
The Proposed Amendments contemplate two different approaches (labelled as Option 1 and
Option 2 in Annex A) to conducting ATM distributions. Once the CSA has reviewed the comments
received with respect to Options 1 and 2, the CSA will select one of these two options to include
in the amendments to Part 9 of NI 44-102.
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Option 1: Limit ATMs to circumstances in which liquidity would be expected
The first approach allows an issuer to distribute securities under an ATM prospectus, as that term
is defined in the Proposed Amendments, only if (i) the aggregate number of securities of the class
distributed on one or more ATM exchanges under the ATM prospectus on any trading day does
not exceed 25% of the trading volume of that class on all marketplaces on that day (the 25% Daily
Cap) or (ii) the securities are “highly liquid securities”, as defined in the Proposed Amendments.
The 25% Daily Cap is a requirement that has been typically imposed in the ATM Orders. Its
purpose was to reduce the risk that an ATM distribution would have a material impact on the price
of the securities being distributed. This risk is also reduced where an ATM distribution only
involves the issuance of “highly liquid securities.”
As with certain of the ATM Orders under the Proposed Amendments, issuers distributing highly
liquid securities would not be required to file a monthly report disclosing certain information about
the ATM distribution, provided that the same disclosure is made on a quarterly basis.
Under Option 1, issuers that do not have highly liquid securities will be subject to the 25% Daily
Cap. The benefits of the exemptions in the Proposed Amendments to such issuers may be limited
if the daily trading volume of their securities is low. We acknowledge that such issuers are more
likely to be small to mid-size issuers.
Option 2: No liquidity requirements
The second approach is to impose neither the 25% Daily Cap nor the “highly liquid securities”
requirement. Arguably, issuers are already incentivized not to conduct ATM distributions that will
have a material impact on the market price of their securities. Additionally, an investment dealer
must be involved to facilitate the ATM distribution onto the marketplace. The investment dealer,
who is expected to have the experience and expertise in managing orders to limit negative impact
on market integrity, is also prohibited from engaging in conduct that may disrupt a fair and orderly
market.
Removal of 10% Aggregate Cap
Currently, section 9.1 of NI 44-102 provides that the market value of equity securities distributed
under a single ATM distribution prospectus supplement may not exceed 10% of the aggregate
market value of the issuer’s outstanding equity securities of the same class (the 10% Aggregate
Cap). We understand that the 10% Aggregate Cap has been an impediment to the establishment
of ATM distributions in Canada and, accordingly, the Proposed Amendments remove it. Its
removal does not adversely affect investor protection because the dilution concerns underlying the
10% Aggregate Cap are addressed by other factors, including existing prospectus and continuous
disclosure requirements and the requirement to engage an underwriter in the ATM distribution.
Removal of Instalment Receipts
Part 9 of NI 44-102 currently permits issuers to use ATM Distributions to issue instalment receipts
convertible into equity securities. However, there does not appear to be a market demand for ATM
distributions of instalment receipts in Canada. As a result, the Proposed Amendments do not
contemplate instalment receipts.
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The proposed changes to 44-102CP correspond to the Proposed Amendments.
Request for Comments
We welcome comments on the Proposed Amendments. In particular, we would like to receive
feedback on the following questions:
General Questions
1.
Is a “highly liquid securities” test or the 25% Daily Cap necessary to reduce the impact on
the market price of an issuer’s securities? Please explain.
2.
The Proposed Amendments only permit distributions of equity securities. Should the
issuance of debt securities under an ATM distribution be permitted? If yes, please explain
the market need and suggest appropriate exemptions and conditions.
Non-redeemable investment funds (NRIFs) and exchange-traded mutual funds (ETFs)
The Proposed Amendments would permit ATM distributions by NRIFs or by ETFs that are not in
continuous distribution (ETFNCDs). The Proposed Amendments do not remove the ETF Facts
delivery requirement that applies to dealers transacting in securities of ETFs in continuous
distribution. We have not otherwise added any conditions particular to NRIFs or ETFNCDs.
NRIFs and ETFNCDs are already or will be subject to some operational requirements under
National Instrument 81-102 Investment Funds that they must comply with on an on-going basis
such as the requirements to not issue new securities at a price less than the fund’s net asset value
per security or to not invest in illiquid assets making more than 20% of their net asset value.
3.
Do you think that permitting NRIFs and ETFNCDs to conduct ATM distributions is
warranted, based on differences in their distribution model and investor base compared to
ETFs in continuous distribution?
4.
If the CSA permits NRIFs and ETFNCDs to use ATM distributions, what additional
conditions, if any, should apply?
5.
Net asset value (NAV) is calculated daily, if using specified derivatives or selling short, or,
otherwise, weekly. How frequently should the NAV be calculated with respect to ATM
distributions?
6.
Under new restrictions that came into force on January 3, 2019, NRIFs are generally
limited to having 25% of assets in illiquid assets. However, illiquid assets are difficult to
value. We have concerns that the NAV in some cases may be “stale” and may not reflect
the economic value of the underlying assets. Should we restrict NRIFs with significant
illiquid assets from conducting ATM distributions? What should the threshold be?
Please submit your comments in writing on or before August 7, 2019.
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Address your submission to all of the CSA as follows:
British Columbia Securities Commission
Alberta Securities Commission
Financial and Consumer Affairs Authority of Saskatchewan
Manitoba Securities Commission
Ontario Securities Commission
Autorité des marchés financiers
Financial and Consumer Services Commission (New Brunswick)
Department of Justice and Public Safety, Prince Edward Island
Nova Scotia Securities Commission
Superintendent of Securities, Newfoundland and Labrador
Superintendent of Securities, Northwest Territories
Superintendent of Securities, Yukon
Superintendent of Securities, Nunavut
Deliver your comments only to the addresses listed below. Your comments will be distributed to
the other participating CSA jurisdictions.
The Secretary
Ontario Securities Commission
20 Queen Street West
22nd Floor
Toronto, Ontario
M5H 3S8
Fax: 416-593-2318
comments@osc.gov.on.ca
Me Anne-Marie Beaudoin
Corporate Secretary
Autorité des marchés financiers
800, rue du Square-Victoria, 4e étage
C.P. 246, Place Victoria
Montréal (Québec) H4Z 1G3
Fax : 514-864-6381
consultation-en-cours@lautorite.qc.ca
Comments Received will be Publicly Available
We cannot keep submissions confidential because securities legislation in certain provinces
requires publication of a summary of the written comments received during the comment period.
Please note that comments received will be made publicly available and posted on websites of the
Alberta Securities Commission at www.albertasecurities.com, the Ontario Securities Commission
at www.osc.gov.on.ca and the Autorité des marchés financiers at www.lautorite.qc.ca, and may be
posted on the websites of certain other securities regulatory authorities. You should not include
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personal information directly in the comments to be published. It is important that you state on
whose behalf you are making the submission.
Questions
Please refer your questions to any of the following:
Elliott Mak
Senior Legal Counsel, Corporate Finance
British Columbia Securities Commission
604-899-6501
emak@bcsc.bc.ca
Gillian Findlay
Senior Legal Counsel, Corporate Finance
Alberta Securities Commission
403-297-3302
gillian.findlay@asc.ca
Patrick Weeks
Corporate Finance Analyst
Manitoba Securities Commission
204-945-3326
patrick.weeks@gov.mb.ca
Michael Tang
Senior Legal Counsel, Corporate Finance Branch
Ontario Securities Commission
416-593-2330
mtang@osc.gov.on.ca
Carolyne Lassonde
Senior Legal Counsel, Legal Affairs
Autorité des marchés financiers
514-395-0337 ext. 2545
carolyne.lassonde@lautorite.qc.ca
Abel Lazarus
Director, Corporate Finance
Nova Scotia Securities Commission
902-424-6859
Abel.lazarus@novascotia.ca
Jan Bagh
Senior Legal Counsel, Corporate Finance
Alberta Securities Commission
403-355-2804
jan.bagh@asc.ca
Heather Kuchuran
Acting Deputy Director, Corporate Finance
Financial and Consumer Affairs Authority
of Saskatchewan
306-787-1009
heather.kuchuran@gov.sk.ca
Michael Balter
Manager, Corporate Finance Branch
Ontario Securities Commission
416-593-3739
mbalter@osc.gov.on.ca
Roxane Gunning
Legal Counsel, Corporate Finance Branch
Ontario Securities Commission
416-593-8269
rgunning@osc.gov.on.ca
Wendy Morgan
Deputy Director, Policy
Financial and Consumer Services
Commission (New Brunswick)
506-643-7202
wendy.morgan@fcnb.ca
PROPOSED AMENDMENTS TO NATIONAL INSTRUMENT 44-102 SHELF DISTRIBUTIONS
1.
National Instrument 44-102 Shelf Distributions is amended by this Instrument.
2.
Part 9 is replaced with the following:
PART 9 – AT-THE-MARKET DISTRIBUTIONS OF EQUITY SECURITIES UNDER SHELF
9.1
Definitions
In this Part
“ATM exchange” means
(a)
a short form eligible exchange, or
(b)
a marketplace outside of Canada;
“ATM prospectus” means
(a)
a short form prospectus that is a base shelf prospectus for an at-the-market
distribution,
(b)
a shelf prospectus supplement to a base shelf prospectus referred to in
paragraph (a), and
(c)
a shelf prospectus supplement establishing an at-the-market distribution;
“highly-liquid security” means, in relation to an at-the-market distribution, a listed security or
quoted security that:
(a)
has traded, in total, on one or more marketplaces, as reported on a
consolidated market display during a 60-day period ending not earlier than 10
days prior to the distribution:
(i)
an average of at least 100 times per trading day, and
(ii)
with an average trading value of at least $1,000,000 per trading day; or
(b)
at the time of the distribution is subject to Regulation M under the 1934 Act and
is considered to be an "actively-traded security" under that regulation.
“investment dealer” has the meaning ascribed to it in National Instrument 31-103 Registration
Requirements, Exemptions and Ongoing Registrant Obligations;
“marketplace” has the meaning ascribed to it in National Instrument 21-101 Marketplace
Operation.
9.2
Provisions not applicable to at-the-market distributions
(1)
The following provisions do not apply to an issuer distributing a security under an ATM
prospectus:
(a)
section 7.2 of NI 41-101;
(b)
Item 20 of Form 44-101F1;
(c)
item 8 of section 5.5 of this Instrument.
(2)
The following provisions do not apply to an investment dealer acting as an underwriter
in connection with the distribution of a security under an ATM prospectus:
(a)
section 6.7 or a similar provision under securities legislation;
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(b)
item 8 of section 5.5 of this Instrument.
9.3
Requirements for issuers and underwriters conducting at-the-market distributions
(1)
An issuer may distribute a security under an ATM prospectus as part of an at-the-market
distribution if all of the following apply:
[OPTION 1 – LIQUIDITY TEST:
(a)
either:
(i)
the security being distributed is a highly-liquid security, or
(ii)
the aggregate number of securities of the class distributed on all ATM
exchanges under the ATM prospectus on the day of the distribution
does not exceed 25% of the trading volume of that class on all
marketplaces on that day;]
[OPTION 2 – NO LIQUIDITY TEST: paragraph (a) will not be adopted]
(b)
the security being distributed is an equity security;
(c)
the security is distributed through an investment dealer acting as an
underwriter in connection with the distribution;
(d)
with respect to any agreement with an investment dealer referred to in
paragraph (c) to distribute the security, the issuer
(i)
has issued and filed a news release
(A)
announcing that the issuer has entered into the agreement,
(B)
indicating that an ATM prospectus has been filed, or will be
filed, on SEDAR, and
(C)
specifying where and how a purchaser of a security under the
at-the-market distribution may obtain a copy of the agreement
and the ATM prospectus; and
(ii)
has filed a copy of the agreement on SEDAR;
(e)
the ATM prospectus discloses the material terms of any agreement referred to
in paragraph (d);
(f)
the issuer distributes the security through an ATM exchange;
(g)
the issuer has disclosed the distribution if it constitutes a material fact or
material change;
(h)
the cover page of the base shelf prospectus states that it may qualify an at-the-
market distribution;
(i)
the ATM prospectus states in substantially the following words:
“Securities legislation in some provinces [and territories] of Canada
provides purchasers of securities with the right to withdraw from an
agreement to purchase securities and with remedies for rescission or, in
some jurisdictions, revisions of the price, or damages if the prospectus,
prospectus supplements relating to securities purchased by a purchaser
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and any amendment are not delivered to the purchaser, provided that
the remedies are exercised by the purchaser within the time limit
prescribed by securities legislation. However, purchasers of [describe
securities] distributed under an at-the-market distribution by [name of
issuer] do not have the right to withdraw from an agreement to
purchase the [describe securities] and do not have remedies of rescission
or, in some jurisdictions, revisions of the price, or damages for non-
delivery of the prospectus supplement, the accompanying prospectus
and any amendment thereto relating to [describe securities] purchased
by such purchaser because the prospectus supplement, the
accompanying prospectus and any amendment thereto relating to the
[describe securities] purchased by such purchaser will not be delivered,
as permitted under Part 9 of National Instrument 44-102 Shelf
Distributions.
Securities legislation in some provinces [and territories] of Canada
further provides purchasers with remedies for rescission or, in some
jurisdictions, revisions of the price or damages if the prospectus,
prospectus supplements relating to securities purchased by a purchaser
and any amendment contains a misrepresentation. Those remedies must
be exercised by the purchaser within the time limit prescribed by
securities legislation. Any remedies under securities legislation that a
purchaser of [describe securities] distributed under an at-the-market
distribution by [name of issuer] may have against [name of issuer] or its
agents for rescission or, in some jurisdictions, revisions of the price, or
damages if the prospectus supplement, the accompanying prospectus
and any amendment thereto relating to securities purchased by a
purchaser and any amendment contain a misrepresentation will remain
unaffected by the non-delivery of the prospectus referred to above.
A purchaser should refer to any applicable securities legislation for the
particulars of these rights and should consult a legal adviser.”;
(j)
if there has been any previous statement of a purchaser's rights contained in a
previous version of the ATM prospectus, the issuer discloses in the ATM
prospectus that, solely with regards to the at-the-market distribution, the
statement of rights required to be included in the ATM prospectus under
paragraph (i) supersedes and replaces the previous statement;
(k)
the ATM prospectus states:
“No underwriter of the at-the-market distribution, nor any person or
company acting jointly or in concert with an underwriter, may enter into
any transaction that is intended to stabilize or maintain the market price
of the securities or securities of the same class as the securities
distributed under the ATM prospectus, including selling an aggregate
number or principal amount of securities that would result in the
underwriter creating an over-allocation position in the securities.”;
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(l)
the ATM prospectus includes the certificates required under Part 5 of NI 41-101
or other securities legislation in the form required under section 9.5 or 9.6 of
this Instrument, as applicable.
(2)
An underwriter of an at-the-market distribution, or a person or company acting jointly
or in concert with the underwriter, must not enter into any transaction that is intended
to stabilize or maintain the market price of the same class of securities distributed under
the at-the-market distribution, including for greater certainty, trading a security that
would result in the underwriter creating an over-allocation position in that class of
securities.
9.4
Reporting
(1)
Subject to subsection (2), for each month during which the issuer distributes securities
under an ATM prospectus, the issuer, within 7 days after the end of the month, files a
report on SEDAR, disclosing
(a) the number and average price of the securities distributed under the ATM
prospectus, and
(b) the aggregate gross and net proceeds raised, and the aggregate commissions
paid or payable, under the ATM prospectus to date.
(2) If each security distributed under an ATM prospectus is a highly-liquid security at the
time of the at-the-market distribution, subsection (1) does not apply to the distribution
if, in its annual financial statements, interim financial reports, and management
discussion and analysis filed on SEDAR, for the year and period immediately following
the distribution, the issuer discloses
(a) the number and average price of the securities distributed under the ATM
prospectus, and
(b) the aggregate gross and net proceeds raised, and the aggregate commissions
paid or payable, under the ATM prospectus to date.
9.5
Form of certificates – base shelf prospectus establishing an at-the-market distribution
(1)
If a base shelf prospectus establishes an at-the-market distribution, the issuer
certificate form required under paragraph 9.3(1)(l) must state the following:
“This short form prospectus, together with the documents incorporated
in this prospectus by reference, will, as of the date of a particular
distribution of securities under the prospectus, constitute full, true and
plain disclosure of all material facts relating to the securities offered by
this prospectus and the supplement(s) as required by the securities
legislation of [insert name of each jurisdiction in which qualified]. “
(2)
If a base shelf prospectus establishes an at-the-market distribution, the
underwriter certificate form required under paragraph 9.3 (1) (l) must state the
following:
4
“To the best of our knowledge, information and belief, this short form
prospectus, together with the documents incorporated in this
prospectus by reference, will, as of the date of a particular distribution
of securities under the prospectus, constitute full, true and plain
disclosure of all material facts relating to the securities offered by this
prospectus and the supplement(s) as required by the securities
legislation of [insert name of each jurisdiction in which qualified].”
(3)
For an amendment to a base shelf prospectus that includes the form of
certificates required under subsections (1) and (2), if the amendment does not
restate the base shelf prospectus,
a) the issuer certificate form must state the following:
“The short form prospectus dated [insert date] as amended by this
amendment, together with the documents incorporated in this
prospectus by reference, will, as of the date of a particular distribution
of securities under the prospectus, constitute full, true and plain
disclosure of all material facts relating to the securities offered by this
prospectus and the supplement(s) as required by the securities
legislation of [insert name of each jurisdiction in which qualified]. “
b) the underwriter certificate form must state the following:
“To the best of our knowledge, information and belief, the short form
prospectus dated [insert date] as amended by this amendment,
together with the documents incorporated in this prospectus by
reference, will, as of the date of a particular distribution of securities
under the prospectus, constitute full, true and plain disclosure of all
material facts relating to the securities offered by this prospectus and
the supplement(s) as required by the securities legislation of [insert
name of each jurisdiction in which qualified].”
(4)
For an amended and restated base shelf prospectus in respect of a base shelf
prospectus that includes the certificates required under subsections (1) and (2),
a) the issuer certificate form must state the following:
“This amended and restated short form prospectus, together with the
documents incorporated in this prospectus by reference, will, as of the
date of a particular distribution of securities under the prospectus,
constitute full, true and plain disclosure of all material facts relating to
the securities offered by this prospectus and the supplement(s) as
required by the securities legislation of [insert name of each jurisdiction
in which qualified]. “
5
b) the underwriter certificate form must state the following:
“To the best of our knowledge, information and belief, this amended
and restated short form prospectus, together with the documents
incorporated in this prospectus by reference, will, as of the date of a
particular distribution of securities under the prospectus, constitute full,
true and plain disclosure of all material facts relating to the securities
offered by this prospectus and the supplement(s) as required by the
securities legislation of [insert name of each jurisdiction in which
qualified].”
9.6
Form of certificates – shelf prospectus supplement establishing an at-the-market
distribution
(1)
If the form of certificate required under subsection 9.5(1) was not included in
the corresponding base shelf prospectus, the issuer certificate form required
under paragraph 9.3(1)(l) must, in a shelf prospectus supplement that
establishes an at-the-market distribution, state the following:
“The short form prospectus, together with the documents incorporated
in the prospectus by reference, as supplemented by the foregoing, will,
as of the date of a particular distribution of securities under the
prospectus, constitute full, true and plain disclosure of all material facts
relating to the securities offered by the prospectus and the
supplement(s) as required by the securities legislation of [insert name of
jurisdiction in which qualified].”
(2)
If the form of certificate required under subsection 9.5(2) was not included in
the corresponding base shelf prospectus, the underwriter certificate form
required under paragraph 9.3(1)(l) must, in a shelf prospectus supplement that
establishes an at-the-market distribution, state the following:
“To the best of our knowledge, information and belief, the short form
prospectus, together with the documents incorporated in the
prospectus by reference, as supplemented by the foregoing, will, as of
the date of a particular distribution of securities under the prospectus,
constitute full, true and plain disclosure of all material facts relating to
the securities offered by the prospectus and the supplement(s) as
required by the securities legislation of [insert name of jurisdiction in
which qualified].”
(3)
For an amendment to a shelf prospectus supplement in respect of a shelf
prospectus supplement that includes the certificates required under subsections
(1) and (2), if the amendment does not restate the shelf prospectus supplement,
a) the issuer certificate form must state the following:
“The short form prospectus, together with the documents incorporated
in the prospectus by reference, as supplemented by the foregoing as it
amends the shelf prospectus supplement dated [insert date], will, as of
the date of a particular distribution of securities under the prospectus,
6
constitute full, true and plain disclosure of all material facts relating to
the securities offered by the prospectus and the supplement(s) as
required by the securities legislation of [insert name of jurisdiction in
which qualified].”
b) the underwriter certificate form must state the following:
“To the best of our knowledge, information and belief, the short form
prospectus, together with the documents incorporated in the
prospectus by reference, as supplemented by the foregoing as it
amends the shelf prospectus supplement dated [insert date], will, as of
the date of a particular distribution of securities under the prospectus,
constitute full, true and plain disclosure of all material facts relating to
the securities offered by the prospectus and the supplement(s) as
required by the securities legislation of [insert name of jurisdiction in
which qualified].”
(4)
For an amended and restated shelf prospectus supplement in respect of a shelf
prospectus supplement that includes the certificates required under subsections
(1) and (2),
a) the issuer certificate form must state the following:
“The short form prospectus, together with the documents incorporated
in the prospectus by reference, as supplemented by the foregoing, will,
as of the date of a particular distribution of securities under the
prospectus, constitute full, true and plain disclosure of all material facts
relating to the securities offered by the prospectus and the
supplement(s) as required by the securities legislation of [insert name of
jurisdiction in which qualified].”
b) the underwriter certificate form must state the following:
“To the best of our knowledge, information and belief, the short form
prospectus, together with the documents incorporated in the
prospectus by reference, as supplemented by the foregoing, will, as of
the date of a particular distribution of securities under the prospectus,
constitute full, true and plain disclosure of all material facts relating to
the securities offered by the prospectus and the supplement(s) as
required by the securities legislation of [insert name of jurisdiction in
which qualified].”
3.
These amendments come into force on ●.
7
PROPOSED CHANGES TO COMPANION POLICY 44-102CP TO NATIONAL INSTRUMENT 44-102
SHELF DISTRIBUTIONS
1.
Companion Policy 44-102CP to National Instrument 44-102 Shelf Distributions is changed by this
Document.
2.
The following Part is added:
PART 5 – AT-THE-MARKET DISTRIBUTIONS OF EQUITY SECURITIES UNDER SHELF
5.1 Purpose
The purpose of Part 9 of NI 44-102 is to provide exemptions from certain regulatory
requirements, subject to conditions, so that issuers and underwriters may distribute securities
under an ATM prospectus.
5.2 Definition of highly-liquid security
It is the issuer’s responsibility to determine if a security is a highly-liquid security. The
definition of “highly-liquid security” is intended to be identical in substance to the one found in
IIROC’s Universal Market Integrity Rules (UMIR) except that, in relation to an at-the-market
distribution, the determination is made at the time of each at-the-market distribution. The
definition includes the expression “consolidated market display”, which is also defined in UMIR.
To assist an issuer in making such a determination, IIROC maintains a list of highly-liquid securities.
The definition of “consolidated market display” and the list of highly-liquid securities prepared by
IIROC are available on IIROC’s website at www.iiroc.ca.
5.3 Disclosure of Intention to Qualify At-the-Market Distribution
(1) Paragraph 9.3(1)(h) of Part 9 of NI 44-102 requires that an issuer disclose on the cover page of
its base shelf prospectus that the prospectus may qualify an at-the-market distribution. An at-
the-market distribution cannot be established by shelf prospectus supplement unless the base
shelf prospectus has met this requirement. The securities regulatory authorities are of the view
that a base shelf prospectus that is intended to qualify an at-the-market distribution may result
in additional review respecting sufficiency of proceeds, an issuer’s business or a recent reverse
take-over of former shell companies. In connection with this review, the securities regulatory
authorities may consider a number of factors, including
(a) the number of securities that may be qualified by the base shelf prospectus;
(b) the total number of issued and outstanding securities of the same class; and
(c) the trading volume of the securities of the same class.
(2) An issuer should qualify the statements required by paragraphs 2 and 3 of section 5.5 of NI 44-
102 in its base shelf prospectus to indicate that delivery is not required where an exemption from
the delivery requirements referred to in these provisions is available.
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5.4 Material Fact or Material Change
(1) In determining whether a proposed distribution of securities under an ATM prospectus would
constitute a material fact or material change under paragraph 9.3(1)(g) of NI 44-102, the issuer
should take into account a number of factors including
(a) the parameters of the proposed distribution, including the number of securities
proposed to be distributed and any price or timing restrictions that the issuer may
impose with respect to the proposed distribution;
(b) the percentage of the outstanding securities of the same class that the number of
securities proposed to be distributed represents;
(c) previous, and cumulative, distributions of securities under the ATM prospectus;
(d) whether the investment dealer has advised the issuer that the proposed distribution
may have a significant impact on the market price of securities of the same class;
(e) trading volume and volatility of securities of the same class;
(f)
recent developments in the business, operations or capital of the issuer; and
(g) prevailing market conditions generally.
(2) The issuer will have an interest in minimizing the market impact of an at-the-market
distribution. If a proposed distribution of securities under an ATM prospectus could have a
significant impact on the market price of securities of the same class as the securities proposed
to be distributed, the proposed distribution may disrupt a fair and orderly market. The
investment dealer selected by the issuer will have experience and expertise in managing orders
to limit any negative effect on market integrity. An investment dealer is prohibited from engaging
in conduct that may disrupt a fair and orderly market under IIROC rules and standards of conduct.
5.5 Selling Agent
It is best practice to include language in an ATM prospectus that a purchaser's rights and
remedies under applicable securities legislation against the dealer underwriting or acting as an
agent for the issuer in an at-the-market distribution will not be affected by that dealer’s decision
to effect the distribution directly or through a selling agent.
5.6 Designated News Releases
To ensure an ATM prospectus includes full, true and plain disclosure of all material facts
related to the securities distributed under the ATM prospectus, the issuer may file a designated
news release rather than filing a prospectus supplement or an amended prospectus. If an issuer
disseminates a news release disclosing information that, in the issuer's determination, constitutes
a "material fact", the issuer should identify the news release as a "designated news release" for
the purposes of the ATM prospectus. This designation should be made on the face page of the
version of the news release filed on SEDAR. An ATM prospectus should provide that any such
designated news release will be deemed to be incorporated by reference into the ATM
prospectus.
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5.7 Prospectus Certificates
The certificates required to be filed under paragraph 9.3(1)(l) of NI 44-102 in the form
required under sections 9.5 and 9.6 of NI 44-102, as applicable, are forward looking certificates
confirming that the ATM prospectus provides full, true and plain disclosure of all material facts
relating to the securities distributed under the ATM prospectus as of the date of each distribution
under an ATM prospectus. For promoters of an at-the-market distribution, the certificate of
promoter required under Part 5 of NI 41-101 should be in the form required by section 9.5 or 9.6
of NI 44-102, as applicable.
5.8 Filing Jurisdictions
Issuers are required to file a prospectus in every jurisdiction where a distribution will
occur. However, because purchases in an at-the-market distribution are made directly on a
securities exchange, it is difficult to determine where a distribution will occur because issuers and
dealers are unable to determine where a purchaser is located at the time of the trade. As a result,
it is possible that purchasers under an at-the-market distribution can be located in any jurisdiction
of Canada.
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These changes become effective on ●.
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You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.