May 2, 2016
Amendments changing the early warning reporting system take effect on May 9, 2016, provided all necessary approvals are obtained (except in Ontario, where some of the changes will take effect on the later of May 9 and the day on which certain sections of Schedules 18 of the Budget Measures Act, 2015 (Ontario) are proclaimed in force). Announced by the Canadian Securities Administrators (CSA) on February 25, 2016, the amendments make five key incremental changes to the early warning reporting system designed to provide greater transparency about holdings of reporting issuers’ securities by enhancing the quality and integrity of the early warning reporting regime. One such amendment is of particular interest to securities lenders and borrowers: in certain circumstances, lenders and borrowers of securities will be exempt from including the securities lent or borrowed for the purposes of determining whether an early warning reporting obligation is triggered.
The Early Warning Reporting System. Canadian securities laws include an early warning reporting system to provide transparency about investors’ holdings of reporting issuers’ securities. The system imposes “early warning” obligations on the purchaser of public company securities:
Securities lending arrangements. A “securities lending arrangement” is an arrangement between a lender and a borrower in which the lender transfers or lends a security to the borrower in circumstances where it is expected that the borrower will transfer or return the security, or an identical security. Securities lending arrangements are generally included in determining whether the early warning threshold is met, triggering the requirement for an early warning report. The general rule is that lenders and borrowers must include securities lent (disposed) and borrowed (acquired) under securities lending arrangements when determining whether an early warning reporting obligation is triggered.
New exemptions for securities lenders and borrowers. One of the changes to the early warning reporting system is to exempt securities lenders and borrowers, in certain circumstances, from including the securities lent or borrowed for the purposes of determining whether an early warning reporting obligation is triggered. Here are the three key aspects of the new exemptions for lenders and borrowers:
Please contact your McInnes Cooper lawyer or any member of our McInnes Cooper Corporate Finance & Securities Team to discuss this topic or any other legal issue.
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