Canadian Securities Law : Canadian Securities Lawyer & Attorney : Stikeman Elliott Law Firm : Montreal, Ottawa, Calgary, Vancouver, Montreal, Toronto

Stewart Sutcliffe and Ramandeep Grewal

Amendments to National Instrument 51-102 Continuous Disclosure Obligations (NI 51-102) and consequential amendments to other instruments are intended to streamline regulations regarding forward-looking information (FLI) and provide clarified expectations.

Currently, National Policy 48 (NP 48) specifies how future-oriented financial information (FOFI) is to be prepared, disclosed and updated in certain types of disclosure and offering documents.  After many years of confusion with the scope and breadth of NP 48, the Canadian Securities Administrators (CSA) have decided to revoke NP 48 and replace it with new FLI and FOFI disclosure requirements. These requirements will be added to NI 51-102 and are expected to be effective as of December 31, 2007.

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In Canada, disclosure of forward-looking information (FLI) (including disclosure of future-oriented financial information (FOFI) and financial outlooks) has been governed by the somewhat outdated and imprecise National Policy 48 (NP 48). Effective December 31, 2007, the Canadian Securities Administrators (CSA) will be revoking NP 48 and replacing it with harmonized national rules in the form of amendments to National Instrument 51-102 Continuous Disclosure (NI 51-102).

These amendments to NI 51-102 will apply to all disclosure of FLI and will primarily govern disclosure of FLI by entities that are "reporting issuers" in a Canadian jurisdiction. Notably, however, disclosure of FLI contained in prospectuses, rights offering circulars and offering memoranda issued by non-reporting issuers will also be subject to these requirements. While many non-reporting issuers may not previously have been subject to NP 48, there has long been some confusion about its application and breadth. The clear and concise requirements of the proposed amendments are therefore a welcome development, particularly as they largely reflect similar disclosure requirements in other jurisdictions.

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Canada moves towards implementing the next phase of the Passport System to further simplify securities regulation, despite the OSC’s lack of participation.

Alex Colangelo and Ramandeep Grewal

In September, 2004, the provincial and territorial Ministers responsible for the regulation of securities in Canada, other than Ontario, agreed to a memorandum of understanding with the intent of providing market participants with a single window of access in a harmonized securities regulatory regime. To that end, Phase I of the Passport System was introduced with Multilateral Instrument 11-101 (“MI 11-101”), which came into force on September 19, 2005. Phase I of the Passport System was considered an interim step towards the greater harmonization and streamlining of securities regulations across Canada. The proposed Phase II of the Passport System builds upon the system’s foundations by, amongst other things, further harmonizing the regulation of prospectus reviews and processes for obtaining exemptive relief.

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As of February 1, 2008, the Ontario Securities Commission (OSC) and securities regulators from all other Canadian jurisdictions will implement parallel but separate rules to govern take-over bids and issuer bids.

Brian Pukier, Ramandeep Grewal and Alex Colangelo

In April 2006, all of the Canadian Securities Administrators (CSA), including the OSC, published for comment a proposed national instrument to govern take-over bids and issuer bids which was designed to harmonize and streamline the requirements for take-over bids and issuer bids across Canada. The proposed course of action envisioned removing detailed bid provisions from provincial statutes, replacing them with general “platform provisions” in the form of a national instrument and national policy. Since the time of that original publication, however, the OSC decided to take a different course of action and subsequently proposed its own parallel but separate bid regime, to take the form of amendments to the Securities Act (the OSA), supplemented by an OSC rule. The comment and review process for both the OSC and the multilateral initiative has culminated in proposed final versions of both of these separate but similar regimes.   Effective February 1, 2008, the Canadian take-over and issuer bid regime will therefore be comprised of the following:

In Ontario,

• new and/or amended provisions contained in Part XX of the OSA (OSA Amendments);
• OSC Rule 62-504 Take-Over Bids and Issuer Bids (OSC Rule); and
• National Policy 62-203 Take-Over Bids and Issuer Bids (National Policy)

In all jurisdictions other than Ontario,

• Multilateral Instrument 62-104 Take-Over Bids and Issuer Bids (Multilateral Instrument); and
• the National Policy

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On November 24, 2007, Canada's federal Department of Finance announced proposed new regulations under the Bank Act, Cooperative Credit Associations Act and Trust and Loan Companies Act that will apply to Principal Protected Notes (PPNs). As reported in the Canada Gazette, the new regulations would define PPNs and specify "the content, manner and timing of disclosure that federally regulated deposit-taking institutions are required to provide at the point of sale for various sales channels" as well as other consumer-related requirements. The proposal is part of the federal government's "Advantage Canada" competitiveness program, designed to promote flexible outcomes-focussed approaches to regulation in response to rapid developments in global financial markets. Those wishing to comment have 30 days from the date of publication to respond.

The draft regulation is available online in the Canada Gazette, Part I for November 24, 2007, beginning on page 3279.

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Adrian C. Lang and Andrew Cunningham

The Supreme Court of Canada has upheld the Ontario Court of Appeal's ruling in this much-anticipated decision, released on October 12, 2007.  While the Supreme Court largely followed the Court of Appeal's reasoning, the Court narrowed the application of the business judgment rule, held that there is an implied statement of reasonable belief with respect to forecasts, and narrowly interpreted "material changes" in the securities context.  Surprisingly to some, the Court also awarded costs against the unsuccessful class plaintiff. 

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Amendments included as sections 628 and 629 of the TSX Company Manual and contain new filing and reporting forms

Ramandeep Grewal and Alex Colangelo

Effective June 1, 2007, changes to the TSX Company Manual amended the policies on Normal Course Issuer Bids (NCIB) and Debt Substantial Issuer Bids (DSIB). Meanwhile, proposed changes relating to the use of derivatives and accelerated buy backs in connection with NCIBs have been postponed due to the number of comments received by the TSX.

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Proposed Form 51-102F6, Statement of Executive Compensation, is touted by the CSA as improving clarity and context regarding corporate compensation practices.

Ramandeep Grewal and Alex Colangelo

On March 29, 2007, the CSA announced that they had begun to accept comments on Proposed Form 51-102F6 Statement of Executive Compensation.  The changes are intended to improve the transparency of executive compensation disclosure and to provide greater insight into this aspect of corporate governance.

The requirements for compensation disclosure have not substantially changed since the current obligations were introduced in 1994.  According to the CSA, the current disclosure requirements provide investors with fragmented information, which makes assessing total compensation difficult.  In support of increasing the requirements of disclosure, the CSA notes that many reporting issuers already provide executive compensation disclosure beyond that which is required under the current form.

In proposing Form 51-102F6, the CSA studied the new rules recently introduced by the Securities and Exchange Commission in the United States (the SEC).  The CSA’s proposed rules, however, while similar to those of the SEC, do not adopt all of the changes made in the United States, and in many cases reflect standards tailored to meet the needs of Canadian capital markets.

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