William Scott and Laura Levine -
On January 15, 2016, the Toronto Stock Exchange (TSX) issued Staff Notice 2016-0001 (the Staff Notice) which answers questions on the application of sections 628 and 629 of the TSX Company Manual (the Manual) to normal course issuer bids (NCIBs) by listed issuers. While some of the guidance underscores information from the Manual, a number of points have been helpfully clarified.
Intersection between TSX and ATS purchases
Notably, the TSX has drawn a clear distinction between securities purchased through the facilities of the TSX and those purchased on other exchanges or alternative trading systems (ATSs). Issuers and their buying brokers making purchases on ATSs or any other marketplace must satisfy themselves that they are properly relying on, and in compliance with, an exemption from the issuer bid rules under applicable securities laws. In particular, under the Securities Act (Ontario) and under Multilateral Instrument 62-104 – Take-Over Bids and Issuer Bids, separate exemptions from the issuer bid rules are found for purchases made through the facilities of a “designated exchange”, which includes the TSX, and for purchases made on a “published market”, which would generally include an ATS, and the requirements of these exemptions differ. The Staff Notice further reminds issuers that they must properly disclose in their notice to the TSX and press release where securities are being purchased, including that purchases may be made on ATSs, if applicable. Where an issuer has publicly disclosed that NCIB purchases will only be made through the facilities of the TSX, the issuer should ensure that its buying broker is aware of the limitation, particularly as many brokers may use smart order routers which direct purchases to multiple marketplaces. Purchases made on other marketplaces and ATSs will not be subject to TSX rules. However, such securities will be included for the purposes of calculating an issuer’s annual NCIB limit under the TSX rules.