On October 10, 2014, the Canadian Securities Administrators published a notice stating that they are not going to proceed with certain key aspects of original proposals to amend the early warning reporting regime in Canada (the Draft Amendments) published for comment by the CSA in 2013.  The objective of the Draft Amendments was to provide greater transparency about significant holdings of issuers’ securities by:

  • reducing the early warning reporting threshold from 10% to 5%;
  • requiring disclosure of both increases and decreases in ownership of at least 2%;
  • proposing that certain equity derivative positions be included within the early warning calculation; and
  • enhancing the content of the disclosure in the early warning disclosure to be filed.

For an overview of the Draft Amendments, please see our March 2013 MarketCaps.

In its recent notice, the CSA announced that, as a result of the comments received, they are not going to proceed with reducing the reporting threshold from 10% to 5% or  including “equity equivalent derivatives” for the purposes of determining the threshold for early warning reporting disclosure.

The CSA does intend to proceed with other aspects of the Draft Amendments.  They currently expect to publish final amendments (the Final Amendments) in the second quarter of 2015, that will continue to enhance transparency by:

  • requiring disclosure of both increases and decreases in ownership of at least 2%;
  • requiring disclosure when a shareholder’s ownership interest falls below the 10% threshold;
  • making the alternative monthly reporting system unavailable to eligible institutional investors who solicit, or intend to solicit, proxies from security holders of a reporting issuer on certain matters, with additional clarification on when such investors would be precluded from reporting through such system;
  • providing guidance on the existing application of early warning reporting requirements to certain derivatives (including required disclosure of such derivatives in the early warning report);
  • enhancing the content of the disclosure in the early warning disclosure to be filed; and
  • clarifying the timeframe to file the early warning report and news release.

The Final Amendments would also exempt lenders from disclosure requirements if they lend shares pursuant to a specified securities lending arrangement and exempt borrowers, in certain circumstances, from disclosure requirements if they borrow shares under a securities lending arrangement.