The TSX published on April 27, 2007 a notice of amendments effective June 1, 2007 to its policy on normal course issuer bids ("NCIBs") and debt substantial issuer bids (the "Amendments").
Highlights of the Amendments are, for NCIBs:
- the replacement of the monthly 2% repurchase restriction with a daily repurchase restriction of up to 25% of average daily trading volume; and
- a block purchase exception to the new daily repurchase restriction.
The notice follows a request by the TSX for comments on amendments to NCIBs and DSIBs published in October 2005.
The TSX has decided to postpone to an undisclosed date the implementation of the other major change to NCIBs - the use of derivatives and accelerated buy-backs in conjunction with NCIBs - proposed in October 2005.
Daily Repurchase Restriction
Under the new daily repurchase restriction, issuers (other than investment funds) may purchase up to the greater of (i) 25% of the average daily trading volume ("ADTV") of the securities of a class and (ii) 1,000 securities on any trading day. The ADTV will be calculated based on trading on the TSX over the six months prior to the TSX acceptance of a notice of intention of the NCIB. NCIB purchases made through a stock exchange other than the TSX or otherwise will not be included when determining ADTV over the prior six months nor will they be included in determining whether an issuer has reached its daily ADTV repurchase limit.
Investment funds will continue to be subject to the old monthly repurchase limit which restricted issuers from making purchases under an NCIB to 2% of a class of securities in any 30-day period. The annual repurchase restriction remains the same for all issuers, including investment funds: up to 10% of the public float (excluding securities, which are pooled, escrowed or non-transferable and securities held by the issuer itself, senior officers or directors or principal securityholders of the issuer) calculated on the date of acceptance of a notice of intention of the NCIB by the TSX or 5% of issued and outstanding securities (calculated on the same date).
Block Purchase Exemption
An issuer (other than an investment fund) will be entitled to make one block purchase every week exceeding the daily repurchase restriction. A "block" is defined as a quantity of securities that (i) has a purchase price of at least $200,000; (ii) is at least 5,000 securities having a price of at least $50,000; or (iii) is at least 20 board lots of the security and total 150% or more of the ADTV for that security and is not owned by an insider of the issuer. Ordinary NCIB purchases may be made on the same trading day as a block purchase. However, once the block purchase exception has been used on any day, an issuer may not make any other purchases under its NCIB that day.
Purchases by issuers under NCIBs must be made at a price which is not higher than the last independent trade of a board lot of the class of securities subject to the NCIB. The Amendments deem four types of trades to be not "independent trades:"
- trades directly or indirectly for the account of (or an account under the direction of) an insider;
- trades for the account of (or an account under the direction of) the broker making purchases for the bid;
- trades solicited by the broker making purchases for the bid; and
- trades directly or indirectly by the broker making purchases for the bid which are made in order to facilitate a subsequent block purchase by the issuer at a certain price.
The TSX prohibits an issuer from making purchases of its securities under an NCIB if the issuer possesses any material information which has not been disseminated. The Amendments expressly exclude from this restriction purchases under an NCIB which are made pursuant to an automatic purchase plan conducted in compliance with securities legislation and also explicitly state that all such plans must be pre-cleared by the TSX.
Effective Date and Transition
The Amendments take effect June 1, 2007. However, a bid, the commencement date of which was prior to June 1, 2007 or for which a notice of intention has been accepted by the TSX but has not yet commenced, may continue to comply with the former policy. Grandfathered issuers may elect to comply with the Amendments by filing a revised notice of intention with the TSX and issuing a news release reflecting changes to the bid.