Canadian Securities Administrators

Abstract

Proposed National Instrument 62-102, "Disclosure of Outstanding Share Data", ensures the reliable public dissemination by reporting issuers of the designation and number or principal amount of outstanding securities of the reporting issuer. Reliable disclosure is essential for the purposes of the early warning requirements and the alternative monthly reporting system contained in proposed National Instrument 62-103.

Proposed National Instrument 62-103, "The Early Warning System and Related Take-Over Bid and Insider Reporting Issues", provides exemptions from the early warning requirements, the insider reporting requirement, and related provisions to certain institutional investors that have a "passive intent" with respect to their ownership or control of securities of reporting issuers. The proposed National Instrument also permits those persons to disaggregate securities that they own or control for purposes of those requirements in certain circumstances. This relief makes compliance easier for financial institutions, pension funds, certain mutual funds, portfolio managers, portfolio clients, underwriters in the course of a distribution, and pledgees.

National Instrument 14-101, "Definitions", which was adopted by the CSA on April 1, 1997, was intended to provide a national approach to the interpretation of national instruments and to increase the level of consistency in both their interpretation and application. The National Instrument provided a framework of terms, the definitions of which the CSA have agreed upon for use in future national instruments. It also set out commonly used terms, definitions of terms necessary to provide local application of a national instrument, and definitions of terms used in more than one national instrument.

Three Proposed National Instruments Based on Ontario Draft Rule

On October 20, 1995, the Ontario Securities Commission published a proposed Rule, "The Early Warning System and Related Take-Over Bid, Insider Trading and Control Block Distribution Issues". The Canadian Securities Administrators (CSA) have agreed to use this draft Rule as the basis for three national instruments that will regulate substantially the same matters.

Proposed National Instrument 62-101, "Control Block Distribution Issues", sets out a limited exemption for eligible institutional investors from the prospectus requirements applicable to control block distributions. The exemption allows these investors to dispose of their securities without having to comply with certain provisions of securities legislation that would require a statement that the investor has no knowledge of undisclosed material information concerning the issuer. The proposed National Instrument also modifies the application of hold periods as they may apply to pledgees disposing of securities that form part of a control block.

Proposed National Instrument 62-102, "Disclosure of Outstanding Share Data", ensures the reliable public dissemination by reporting issuers of the designation and number or principal amount of outstanding securities of the reporting issuer. Reliable disclosure is essential for the purposes of the early warning requirements and the alternative monthly reporting system contained in proposed National Instrument 62-103.

Proposed National Instrument 62-103, "The Early Warning System and Related Take-Over Bid and Insider Reporting Issues", provides exemptions from the early warning requirements, the insider reporting requirement, and related provisions to certain institutional investors that have a "passive intent" with respect to their ownership or control of securities of reporting issuers. The proposed National Instrument also permits those persons to disaggregate securities that they own or control for purposes of those requirements in certain circumstances. This relief makes compliance easier for financial institutions, pension funds, certain mutual funds, portfolio managers, portfolio clients, underwriters in the course of a distribution, and pledgees.

For further information on these proposed National Instruments, please refer to the September 4, 1998 OSC Bulletin.

Are These National Policies Out of Date?

The Canadian securities regulatory authorities are proposing to rescind the following National Instruments:

- National Policy 4, "Conditions for Dealer Sub-Underwriting": Policy 4 deals with situations in which the plan of distribution contained in a prospectus discloses that an underwriter may sell securities to a dealer as principal. The Canadian securities regulatory authorities believe that the policy is no longer necessary, given the manner in which distributions now take place.

- National Policy 16, "Maintenance of Provincial Trading Records": The purpose of Policy 16 is to ensure that complete details concerning trades in a specific province are readily available to the Canadian securities regulatory authority in that province and its staff. Since provincial securities legislation now contains the same books and records requirements carried by Policy 16, the Canadian securities regulatory authorities have decided that it is no longer necessary.

- National Policy 20, "Trading in Unqualified Securities -- Securities in Primary Distribution in Other Jurisdictions": Policy 20 warns registrants of their obligation to ensure that when executing orders on behalf of residents of the jurisdiction in which they are registered, the securities being purchased are qualified for sale in that jurisdiction. The Canadian securities regulatory authorities want to rescind Policy 20 because they believe that market participants are now aware of the obligation not to trade in securities that are the subject of a distribution if those securities have not been qualified in the jurisdiction. Also, a number of the statements in the policy are either out of date or incorrect.

Comments are sought on the proposed rescissions by December 11, 1998. For further information, please refer to the September 11, 1998 OSC Bulletin.

New Definitions Proposed for National Instrument 14-101

National Instrument 14-101, "Definitions", which was adopted by the CSA on April 1, 1997, was intended to provide a national approach to the interpretation of national instruments and to increase the level of consistency in both their interpretation and application. The National Instrument provided a framework of terms, the definitions of which the CSA have agreed upon for use in future national instruments. It also set out commonly used terms, definitions of terms necessary to provide local application of a national instrument, and definitions of terms used in more than one national instrument.

The CSA have now published proposed amendments to the National Instrument that would add a number of definitions of new terms. Most of the terms to be added are generic terms that describe specific provisions of Canadian securities legislation in a manner that avoids using specific section numbers of any particular statute and that can, therefore, be used in any jurisdiction. The proposed amendments also add a reference to "multilateral instruments" to section 1.1 and amend subsection 1.1(2) to refer to one or more jurisdictions rather than a single jurisdiction.

Comments are sought on the proposed amendments by December 11, 1998. For further information, please refer to the September 11, 1998 OSC Bulletin.