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Q: Threshold for early warning reporting in Canada?

A: In Canada, the threshold for early warning reporting is when an acquirer obtains beneficial ownership of, or control or direction over, voting or equity securities of any class of a reporting issuer that, together with the acquirer's securities of that class, constitute 10% or more of the outstanding securities of that class. This is outlined in National Instrument 62-104, Part 5, Section 5.2.


National Instrument 62-103 The Early Warning System and Related Takeover Bid and Insider Reporting Issues
Part 4 Alternative Monthly Reporting System
Section 4.1

Exemption from the Early Warning Requirements

The early warning requirements do not apply to an eligible institutional investor for a reporting issuer if the eligible institutional investor

(a) is not disqualified by section 4.2 from filing reports under this Part for the reporting issuer; and

(b) either

(i) intends to file reports under this Part for the reporting issuer, if no reports are yet required to be filed; or

(ii) is not in arrears of filing reports under this Part for the reporting issuer, if a report has been required by this Part to be filed.


National Instrument 62-103 The Early Warning System and Related Takeover Bid and Insider Reporting Issues
Part 3 Early Warning Requirements
Section 3.1

Contents of News Releases and Reports

(1) A news release and report required under the early warning requirements shall contain the information required by Form 62-103F1 Required Disclosure under the Early Warning Requirements.

(2) Despite subsection (1), a news release required under the early warning requirements may omit the information otherwise required by Items 2.3, 3.3, 3.5 through 3.8, 4.2, 4.3, 6 and 9, and Item 7 to the extent that the information relates to those sections and items, of Form 62-103F1 Required Disclosure under the Early Warning Requirements, if

(a) the omitted information is included in the corresponding report required by the early warning requirements, and

(b) the news release indicates the name and telephone number of an individual to contact to obtain a copy of the report.

(3) The acquiror shall send a copy of the report referred to in paragraph (2)(a) promptly to any entity requesting it.


National Instrument 62-103 The Early Warning System and Related Takeover Bid and Insider Reporting Issues
Part 3 Early Warning Requirements
Section 3.2

Filing Relief for Joint Actors

The early warning requirements and the acquisition announcement provisions do not apply to a joint actor of an acquiror in connection with the obligation to make a specific filing of a news release or report if

(a) the acquiror files a news release or report at the time that the joint actor would be required to file; and

(b) the news release or report filed discloses the information concerning the joint actor required by securities legislation.


National Instrument 62-103 The Early Warning System and Related Takeover Bid and Insider Reporting Issues
Part 2 General Reliance and Reporting Provisions
Section 2.3

No Duplication of News Releases or Reports

(1) An entity that is required to issue a news release under both the early warning requirements and the acquisition announcement provisions is exempt from the requirement to issue the news release contained in the provision requiring the later release if

(a) the news release is filed under the provision with the earlier reporting requirement; and

(b) the facts required to be contained in the two news releases are identical.

(2) An entity that is required to file a report under the acquisition announcement provisions and either the early warning requirements or Part 4 is exempt from the requirement to file the report under the provision requiring the later report if

(a) the report is filed under the provision requiring the earlier report; and

(b) the facts required to be contained in the two reports are identical.


National Instrument 62-103 The Early Warning System and Related Takeover Bid and Insider Reporting Issues
Part 5 Aggregation Relief
Section 5.4

No Requirement to Satisfy Insider Reporting Requirement

If an eligible institutional investor, or an affiliate or associate of an eligible institutional investor, is relying on this Part so that it is not subject to the insider reporting requirement for a reporting issuer, then every director or senior officer of the eligible institutional investor, or of the affiliate or associate of an eligible institutional investor, who is an insider of the reporting issuer solely as a result of being a director or senior officer of the eligible institutional investor, or the affiliate or associate of an eligible institutional investor, is not subject to the insider reporting requirement for the reporting issuer.


National Instrument 62-103 The Early Warning System and Related Takeover Bid and Insider Reporting Issues
Part 4 Alternative Monthly Reporting System
Section 4.8

Exemptions

The requirement to file a report under this Part does not apply to a joint actor with an eligible institutional investor in connection with a specific filing if

(a) the eligible institutional investor files a report under this Part at the time that the joint actor is required to file; and

(b) the report discloses the information concerning the joint actor required by this Instrument.


National Instrument 62-103 The Early Warning System and Related Takeover Bid and Insider Reporting Issues
Part 4 Alternative Monthly Reporting System
Section 4.3

Reporting and Filing Requirements

(1) If an eligible institutional investor is relying on the exemption in section 4.1 for a reporting issuer and becomes disqualified under section 4.2 from filing, or no longer intends to file, reports under this Part for the reporting issuer, the eligible institutional investor shall

(a) immediately issue and file a news release; and

(b) within two business days after filing the news release, file a report.

(2) The news release and report required by subsection (1) shall contain the information required by Form 62-103F2 Required Disclosure by an Eligible Institutional Investor under Section 4.3.

(3) An eligible institutional investor that is required to file a report under subsection (1) for a reporting issuer is not exempt from the early warning requirements for that reporting issuer as of the date on which the news release required by subsection (1) is required to be filed.

(4) An eligible institutional investor that files reports under this Part for a reporting issuer and that controls securities of the reporting issuer that are owned by another entity shall

(a) on request by the entity, promptly advise the entity of the number of securities held on its behalf; and

(b) if the eligible institutional investor has reason to believe that the securityholding percentage of the entity in a class of voting or equity securities of the reporting issuer equals 10 percent or more, promptly advise the entity of the number of securities held on its behalf.


National Instrument 62-103 The Early Warning System and Related Takeover Bid and Insider Reporting Issues
Part 4 Alternative Monthly Reporting System
Section 4.4

Restrictions on Acquisitions

An eligible institutional investor that has become disqualified under section 4.2 from filing reports under this Part for a reporting issuer, if the securityholding percentage of the eligible institutional investor in a class of voting or equity securities of the reporting issuer is 10 percent or more, shall not acquire ownership of, or control over, any additional securities of the reporting issuer for the period

(a) starting at the time that the news release referred to in paragraph 4.3(1)(a) is required to be filed; and

(b) ending 10 days after the news release is filed.


National Instrument 62-103 The Early Warning System and Related Takeover Bid and Insider Reporting Issues
Part 8 Relief For Pledgees
Section 8.3

Corresponding Insider Reporting Relief

If a person or company is exempt under section 8.1 or 8.2 from the insider reporting requirement for those securities of a reporting issuer that it controls as pledgee, every director or senior officer of the person or company who is an insider of the reporting issuer solely as a result of being a director or senior officer of the person or company that is an insider of the reporting issuer is exempt from the insider reporting requirement for those securities.


National Instrument 62-103 The Early Warning System and Related Takeover Bid and Insider Reporting Issues
Part 1 Definitions and Interpretation
Section 1.1 Definitions

significant change in a related financial instrument position

significant change in a related financial instrument position” means, in relation to an entity and a related financial instrument that involves, directly or indirectly, a security of a reporting issuer, any change in the entity’s interest in, or rights or obligations associated with, the related financial instrument if the change has a similar economic effect to an increase or decrease in the entity’s securityholding percentage in a class of voting or equity securities of the reporting issuer by 2.5 percent or more;


National Instrument 62-103 The Early Warning System and Related Takeover Bid and Insider Reporting Issues
Part 6 Issuer Actions
Section 6.1

Issuer Actions

(1) An entity is exempt from the early warning requirements and the obligation to report under Part 4 in connection with an increase in the securityholding percentage of the entity in a class of securities of a reporting issuer that arises without any action being taken by the entity and solely from a reduction in outstanding securities that occurs as a result of redemptions, retractions or other repurchases by the reporting issuer, that affect or are offered to all security holders of the relevant class.

(2) An entity is exempt from the early warning requirements and the obligation to report under Part 4 in connection with a decrease in the securityholding percentage of the entity in a class of securities of a reporting issuer that arises without any action being taken by the entity and solely from an increase in outstanding securities that occurs as a result of treasury issuances of securities by the reporting issuer.

(3) An entity may rely upon an exemption provided by this section in connection with a class of securities only until the entity undertakes any transaction that changes the securityholding percentage of the entity in that class of securities.

(4) An entity that undertakes a transaction described in subsection (3) shall comply with the early warning requirements or Part 4 in connection with the class of securities referred to in that subsection in a manner that reflects the changes in the securityholding percentage of the entity in that class of securities since the last news release or report made or filed under the early warning requirements or Part 4.


National Instrument 62-103 The Early Warning System and Related Takeover Bid and Insider Reporting Issues
Part 2 General Reliance and Reporting Provisions
Section 2.1

Reliance on Reported Outstanding Shares

(1) Subject to subsection (2), in determining its securityholding percentage in a class of securities for the purposes of the early warning requirements or Part 4, an entity may rely upon information most recently provided by the issuer of the securities in a material change report or under section 5.4 of National Instrument 51-102 Continuous Disclosure Obligations, whichever contains the most recent relevant information.

(2) Subsection (1) does not apply if the entity has knowledge both

(a) that the information filed is inaccurate or has changed; and

(b) of the correct information.


Form 62-103F1 Required Disclosure under the Early Warning Requirements
Item 9

Certification

The acquiror must certify that the information in this report is true and complete in every respect. In the case of an agent, the certification is based on the agent’s best knowledge, information and belief but the acquiror is still responsible for ensuring that the information filed by the agent is true and complete.

This report must be signed by each person on whose behalf the report is filed or his or her authorized representative.

It is an offence to submit information that, in a material respect and at the time and in the light of the circumstances in which it is submitted, is misleading or untrue.


National Instrument 62-103 The Early Warning System and Related Takeover Bid and Insider Reporting Issues
Part 4 Alternative Monthly Reporting System
Section 4.7

Contents of Reports

(1) A report filed under this Part shall contain the information required by Form 62-103F3 Required Disclosure by an Eligible Institutional Investor under Part 4.

(2) Despite subsection (1), a report filed under paragraph 4.5(d) may be limited to

(a) the name and address of the eligible institutional investor;

(b) the name of the reporting issuer and the designation and number or principal amount of voting or equity securities of the reporting issuer in respect of which the report is being filed and the securityholding percentage of the eligible institutional investor in the class of securities; and

(c) a statement that the eligible institutional investor is eligible to file reports under this Part.


National Instrument 62-103 The Early Warning System and Related Takeover Bid and Insider Reporting Issues
Part 4 Alternative Monthly Reporting System
Section 4.5

Filing Obligations under this Part

In order to rely on the exemption provided by section 4.1, an eligible institutional investor shall file a report

(a) within 10 days after the end of the month in which the eligible institutional investor elected to begin to file reports for the reporting issuer under this Part, if the securityholding percentage of the eligible institutional investor in a class of voting or equity securities of the reporting issuer at the end of the month is 10 percent or more;

(b) within 10 days after the end of the month in which the securityholding percentage of the eligible institutional investor in a class of voting or equity securities of the reporting issuer, as at the end of the month, increased to 10 percent or more;

(c) within 10 days after the end of the month in which the securityholding percentage of the eligible institutional investor in a class of voting or equity securities of the reporting issuer, as at the end of the month, increased or decreased past thresholds that are products of whole numbers multiplied by 2.5 percent of the outstanding securities of the class and that are in excess of 10 percent of the outstanding securities of the class; and

(d) within 10 days after the end of the month in which the securityholding percentage of the eligible institutional investor in a class of voting or equity securities of the reporting issuer, as at the end of the month, decreased to less than 10 percent.


National Instrument 62-103 The Early Warning System and Related Takeover Bid and Insider Reporting Issues
Part 1 Definitions and Interpretation
Section 1.1 Definitions

financial institution

financial institution” means

(a) a Canadian financial institution,

(b) an entity that is engaged in financial services activities and that is supervised and regulated under the banking, insurance, trust or similar laws of, and incorporated in, the United States of America or Japan, or

(c) a credit institution, within the meaning of European Union Directive 77/780/EEC, whose home member state for purposes of that European Union Directive is France, Germany, Italy or the United Kingdom of Great Britain and Northern Ireland;


National Instrument 62-103 The Early Warning System and Related Takeover Bid and Insider Reporting Issues
Appendix D

Appendix D – Beneficial Ownership

ALBERTA Sections 5 and 6 of the Securities Act (Alberta) and sections 1.8 and 1.9 of NI 62-104

BRITISH COLUMBIA Subsection 1(4) of the Securities Act (British Columbia) and sections 1.8 and 1.9 of NI 62-104

MANITOBA Subsections 1(6) and 1(7) of the Securities Act (Manitoba) and sections 1.8 and 1.9 of NI 62-104

NEW BRUNSWICK Subsections 1(5) and 1(6) of the Securities Act (New Brunswick) and sections 1.8 and 1.9 of NI 62-104

NEWFOUNDLAND AND LABRADOR Subsections 2(5) and 2(6) of the Securities Act (Newfoundland and Labrador) and sections 1.8 and 1.9 of NI 62-104

NORTHWEST TERRITORIES Section 11 of the Securities Act (Northwest Territories) and sections 1.8 and 1.9 of NI 62-104

NUNAVUT Section 11 of the Securities Act (Nunavut) and Sections 1.8 and 1.9 of NI 62-104

NOVA SCOTIA Subsections 2(5) and 2(6) of the Securities Act (Nova Scotia) and sections 1.8 and 1.9 of NI 62-104

ONTARIO Subsections 1(5) and 1(6) of the Securities Act (Ontario) and sections 1.8 and 1.9 of NI 62-104

PRINCE EDWARD ISLAND Section 11 of the Securities Act (Prince Edward Island) and sections 1.8 and 1.9 of NI 62-104

QUEBEC Sections 1.8 and 1.9 of NI 62-104

SASKATCHEWAN Subsections 2(5) and 2(6) of The Securities Act, 1988 (Saskatchewan) and sections 1.8 and 1.9 of NI 62-104

YUKON TERRITORY Section 11 of the Securities Act (Yukon Territory) and sections 1.8 and 1.9 of NI 62-104


National Instrument 62-103 The Early Warning System and Related Takeover Bid and Insider Reporting Issues
Part 1 Definitions and Interpretation
Section 1.1 Definitions

acquisition announcement provisions

acquisition announcement provisions” means the requirement in securities legislation for an acquiror to issue a news release if, during a formal bid for voting or equity securities of a reporting issuer by an entity other than the acquiror, the acquiror acquires ownership of, or control over, securities of the class subject to the bid that, together with the acquiror’s securities of the class, constitute an amount equal to or greater than the amount specified in securities legislation;


National Instrument 55-104 Insider Reporting Requirements and Exemptions
Part 2 Application
Section 2.2

Reporting Deadline

In Ontario, for the purposes of subsection 107(2) of the Securities Act (Ontario), in the case of a transaction occurring after October 31, 2010, the prescribed period is within five days of any change in the beneficial ownership of, or control or direction over, whether direct or indirect, securities of the reporting issuer or any interest in, or right or obligation associated with, a related financial instrument.


National Instrument 62-104 Takeover Bids and Issuer Bids
Part 5 Reports and Announcements Of Acquisitions
Section 5.2

Early warning

(1) An acquiror who acquires beneficial ownership of, or control or direction over, voting or equity securities of any class of a reporting issuer, or securities convertible into voting or equity securities of any class of a reporting issuer, that, together with the acquiror’s securities of that class, constitute 10% or more of the outstanding securities of that class, must

(a) promptly, and, in any event, no later than the opening of trading on the business day following the acquisition, issue and file a news release containing the information required by section 3.1 of National Instrument 62-103 The Early Warning System and Related Take-Over Bid and Insider Reporting Issues, and

(b) promptly, and, in any event, no later than 2 business days from the date of the acquisition, file a report containing the information required by section 3.1 of National Instrument 62-103 The Early Warning System and Related Take-Over Bid and Insider Reporting Issues.

(2) An acquiror who is required to make disclosure under subsection (1) must make further disclosure, in accordance with subsection (1), each time any of the following events occur:

(a) the acquiror or any person acting jointly or in concert with the acquiror, acquires or disposes beneficial ownership of, or acquires or ceases to have control or direction over, either of the following:

(i) securities in an amount equal to 2% or more of the outstanding securities of the class of securities that was the subject of the most recent report required to be filed by the acquiror under subsection (1) or under this subsection;

(ii) securities convertible into 2% or more of the outstanding securities referred to in subparagraph (i);

(b) there is a change in a material fact contained in the most recent report required to be filed under paragraph (1)(b) or under paragraph (a) of this subsection.

(3) An acquiror must issue and file a news release and file a report in accordance with subsection (1) if beneficial ownership of, or control or direction over, the outstanding securities of the class of securities that was the subject of the most recent report required to be filed by the acquiror under this section decreases to less than 10%.

(4) If an acquiror issues and files a news release and files a report under subsection (3), the requirements under subsection (2) do not apply unless subsection (1) applies in respect of a subsequent acquisition of beneficial ownership of, or control or direction over, voting or equity securities of any class of a reporting issuer, or securities convertible into voting or equity securities of any class of a reporting issuer, that, together with the acquiror’s securities of that class, constitute 10% or more of the outstanding securities of that class.


National Instrument 62-103 The Early Warning System and Related Takeover Bid and Insider Reporting Issues
Part 9 Insider Reporting Exemption
Section 9.1

Insider Reporting Exemption; Early Warning Decrease Reports

(1) Subject to subsections (3.1) and (4), an eligible institutional investor is exempt from the insider reporting requirement for a reporting issuer if

(a) the eligible institutional investor has filed the report required under the early warning requirements or Part 4 for the reporting issuer in connection with the current securityholding percentage of the eligible institutional investor in the classes of voting and equity securities of the reporting issuer;

(a.1) the report referred to in paragraph (a) discloses, in addition to any other required disclosure,

(i) the eligible institutional investor’s interest in any related financial instrument involving a security of the reporting issuer that is not otherwise reflected in the current securityholding percentage of the eligible institutional investor; and

(ii) the material terms of the related financial instrument;

(b) the eligible institutional investor is not disqualified under section 4.2 from filing reports under Part 4;

(c) the eligible institutional investor does not have knowledge of any material fact or material change with respect to the reporting issuer that has not been generally disclosed;

(d) the eligible institutional investor does not receive in the ordinary course of its business and investment activities knowledge of any material fact or material change with respect to the reporting issuer that has not been generally disclosed;

(e) there are no directors or officers of the reporting issuer who were, or could reasonably be seen to have been, selected, nominated or designated by the eligible institutional investor or any joint actor; and

(f) the eligible institutional investor, either alone or together with any joint actors, does not possess effective control of the reporting issuer.

(2) An eligible institutional investor relying on the exemption in subsection (1) shall maintain records that include the information that, absent this section, would have been required to be included in a report filed under the insider reporting requirement.

(3.1) Despite subsection (1), an eligible institutional investor that is filing reports under the early warning requirements or Part 4 for a reporting issuer may rely upon the exemption contained in subsection (1) only if the eligible institutional investor treats a significant change in a related financial instrument position as a change in a material fact for the purposes of securities legislation pertaining to the early warning requirements or section 4.6 of this Instrument.

(4) Despite subsection (1), an eligible institutional investor that is an insider of a reporting issuer may not rely upon the exemption contained in subsection (1) if

(a) the eligible institutional investor, either alone or with a joint actor or joint actors, purchased in the previous month, directly or indirectly, 50 percent or more of all of the securities of a class that were reported sold on stock exchanges, over-the-counter markets or both in the previous month; or

(b) the eligible institutional investor, either alone or with a joint actor or joint actors, sold in the previous month, directly or indirectly, 50 percent or more of all of the securities of a class that were reported sold on stock exchanges, over-the-counter markets or both in the previous month.

(5) If an eligible institutional investor is exempt under subsection (1) from the insider reporting requirement for a reporting issuer, every director or senior officer of the eligible institutional investor who is an insider of the reporting issuer solely as a result of being director or senior officer of the eligible institutional investor is exempt from the insider reporting requirement for the reporting issuer.


Form 62-103F1 Required Disclosure under the Early Warning Requirements
Item 4

Consideration Paid

4.1 State the value, in Canadian dollars, of any consideration paid or received per security and in total.

4.2 In the case of a transaction or other occurrence that did not take place on a stock exchange or other market that represents a published market for the securities, including an issuance from treasury, disclose the nature and value, in Canadian dollars, of the consideration paid or received by the acquiror.

4.3 If the securities were acquired or disposed of other than by purchase or sale, describe the method of acquisition or disposition.


National Instrument 62-103 The Early Warning System and Related Takeover Bid and Insider Reporting Issues
Part 5 Aggregation Relief
Section 5.3

Reporting and Record Keeping

(1) In addition to the requirements of sections 5.1 and 5.2, in order to rely on section 5.1 or 5.2, an eligible institutional investor or an affiliate or associate shall indicate in any document released or filed under the applicable provisions or securities legislation related to the applicable definitions

(a) its reliance on either section 5.1 or 5.2;

(b) the identity of the business units or investment funds for which ownership and control of the securities has been disclosed; and

(c) the fact that securities owned or controlled by other business units or investment funds have not been, or may not have been, disclosed.

(2) An eligible institutional investor or affiliate or associate shall maintain records of the details concerning

(a) business units of the entity that are treated separately, by reason of section 5.1, for the purposes of compliance with the applicable provisions and securities legislation related to the applicable definitions; and

(b) investment funds whose ownership of, or control over, securities are treated separately, by reason of section 5.2, for the purposes of compliance with the applicable provisions and securities legislation related to the applicable definitions.


National Instrument 62-103 The Early Warning System and Related Takeover Bid and Insider Reporting Issues
Part 7 Underwriting Exemption
Section 7.1

Underwriting Exemption

An entity is exempt from the early warning requirements and the obligation to report under Part 4 in respect of securities owned by the entity in its capacity as underwriter or securities into which those securities are convertible, or exerciseable or exchangeable, during the underwriting period, if

(a) the entity is engaged in the business of an underwriter of securities; and

(b) the entity or the issuer of the securities has issued and filed a news release that

(i) announces the proposed underwriting, and

(ii) identifies the reporting issuer and the designation and number or principal amount of the securities underwritten.


Form 62-103F1 Required Disclosure under the Early Warning Requirements
Item 2

Identity of the Acquiror

2.1 State the name and address of the acquiror.

2.2 State the date of the transaction or other occurrence that triggered the requirement to file this report and briefly describe the transaction or other occurrence.

2.3 State the names of any joint actors.

INSTRUCTION

If the acquiror is a corporation, general partnership, limited partnership, syndicate or other group of persons, provide its name, the address of its head office, its jurisdiction of incorporation or organization, and its principal business.


National Instrument 55-104 Insider Reporting Requirements and Exemptions
Part 3 Primary Insider Reporting Requirement
Section 3.2

Initial report

A reporting insider must file an insider report in respect of a reporting issuer, within 10 days of becoming a reporting insider, disclosing the reporting insider’s

(a) beneficial ownership of, or control or direction over, whether direct or indirect, securities of the reporting issuer, and

(b) interest in, or right or obligation associated with, a related financial instrument involving a security of the reporting issuer.


National Instrument 55-104 Insider Reporting Requirements and Exemptions
Part 11 Effective Date and Transition
Section 11.2

Transition

(1) Despite sections 3.3 and 3.4, a reporting insider may file an insider report required by either of those sections within 10 days of a change described in those sections if the change relates to a transaction that occurred on or before October 31, 2010.

(2) Despite section 4.1, a reporting insider may file an insider report required under that section within 10 days of an event described in that section if the event relates to a transaction that occurred on or before October 31, 2010.

(3) Despite paragraph 5.4(2)(a), a reporting insider may file an insider report required under that paragraph within 10 days of a disposition or transfer described in that paragraph if the disposition or transfer occurred on or before October 31, 2010

(4) Despite paragraph 6.4(2)(a), a reporting insider may file an insider report required under that paragraph within 10 days of a disposition or transfer described in that paragraph if the disposition or transfer occurred on or before October 31, 2010.


National Instrument 62-103 The Early Warning System and Related Takeover Bid and Insider Reporting Issues
Part 8 Relief For Pledgees
Section 8.2

Further Relief for de minimis Pledgees

Despite subsection 8.1(2), for securities that are controlled by a person or company as a pledgee, and any securities into which those securities are convertible, exercisable or exchangeable, in either case that are or were pledged, mortgaged or otherwise encumbered as collateral for a debt, under a written pledge agreement and in the ordinary course of the business of the person or company, the person or company is exempt from the applicable provisions, and those securities are not required to be taken into account for the purposes of securities legislation related to the applicable definitions, even if the person or company is legally entitled to dispose of the securities as pledgee for the purpose of applying proceeds of realization in repayment of the secured debt, if

(a) the principal amount of the debt, together with the principal amount of all other debts of or guaranteed by the same borrower to the person or company, does not exceed $2,000,000; and

(b) the pledged securities, and securities into which the pledged securities are convertible, exercisable or exchangeable, constitute less than 10 percent of a class of voting or equity securities.


National Instrument 62-103 The Early Warning System and Related Takeover Bid and Insider Reporting Issues
Part 1 Definitions and Interpretation
Section 1.2

Deemed Effective Control

For the purposes of the definition of “effective control”, an entity that, either alone or together with one or more joint actors, owns or controls voting securities carrying more than 30 percent of the votes attached to all of the outstanding voting securities of a reporting issuer shall, in the absence of evidence to the contrary, be deemed to possess effective control over the reporting issuer.


National Instrument 55-104 Insider Reporting Requirements and Exemptions
Part 3 Primary Insider Reporting Requirement
Section 3.3

Subsequent report

A reporting insider must within five days of any of the following changes file an insider report in respect of a reporting issuer disclosing a change in the reporting insider’s

(a) beneficial ownership of, or control or direction over, whether direct or indirect, securities of the reporting issuer, or

(b) interest in, or right or obligation associated with, a related financial instrument involving a security of the reporting issuer.


National Instrument 62-103 The Early Warning System and Related Takeover Bid and Insider Reporting Issues
Part 4 Alternative Monthly Reporting System
Section 4.2

Disqualification

(1) An eligible institutional investor shall not file reports under this Part for a reporting issuer if the eligible institutional investor, or a joint actor

(a) makes or intends to make a formal bid for securities of the reporting issuer;

(b) proposes or intends to propose a reorganization, amalgamation, merger, arrangement or similar business combination with a reporting issuer that if completed would reasonably be expected to result in the eligible institutional investor, either alone or together with any joint actors, possessing effective control over the reporting issuer or a successor to all or a part of the business of the reporting issuer; or

(c) solicits proxies from securityholders of the reporting issuer in any of the following circumstances:

(i) in support of the election of one or more persons as directors of the reporting issuer other than the persons proposed to be nominated by management of the reporting issuer;

(ii) in support for a reorganization, amalgamation, merger, arrangement or other similar corporate action involving the securities of the reporting issuer if that action is not supported by management of the reporting issuer;

(iii) in opposition to a reorganization, amalgamation, merger, arrangement or other similar corporate action involving the securities of the reporting issuer if that action is proposed by management of the reporting issuer.

(2) For the purposes of this section, “solicit” has the meaning ascribed to that term in National Instrument 51-102 Continuous Disclosure Obligations.


National Instrument 55-104 Insider Reporting Requirements and Exemptions
Part 3 Primary Insider Reporting Requirement
Section 3.4

Reporting requirements in connection with convertible or exchangeable securities

For greater certainty, a reporting insider who exercises an option, warrant or other convertible or exchangeable security must file, within five days of the exercise, separate insider reports in accordance with section 3.3 disclosing the resulting change in the reporting insider’s beneficial ownership of, or control or direction over, whether direct or indirect, each of

(a) the option, warrant or other convertible or exchangeable security, and

(b) the common shares or other underlying securities.


National Instrument 62-103 The Early Warning System and Related Takeover Bid and Insider Reporting Issues
Appendix A

Appendix A – Control Block Distribution Definition

ALBERTA Clause 1(p)(iii) of the Securities Act (Alberta)

BRITISH COLUMBIA Paragraph (c) of the definition of “distribution” contained in subsection 1(1) of the Securities Act (British Columbia)

MANITOBA Paragraph 1(b) of the definition of “primary distribution to the public” contained in subsection 1(1) of the Securities Act (Manitoba)

NEW BRUNSWICK Paragraph (c) of the definition of “distribution” contained in section 1(1) of the Securities Act (New Brunswick)

NEWFOUNDLAND Clause 2(1)(l)(iii) of the Securities Act (Newfoundland)

NORTHWEST TERRITORIES Paragraph (c) of the definition of “distribution” contained in subsection 1(1) of the Securities Act (Northwest Territories)

NUNAVUT Paragraph (c) of the definition of “distribution” contained in subsection 1(1) of the Securities Act (Nunavut)

NOVA SCOTIA Clause 2(1)(l)(iii) of the Securities Act (Nova Scotia)

ONTARIO Paragraph (c) of the definition of “distribution” contained in subsection 1(1) of the Securities Act (Ontario)

PRINCE EDWARD Subclause (iii) of the definition of “distribution” contained in clause 1(k) of the Securities Act (Prince Edward Island)

QUEBEC Subparagraph 9 of the definition of “distribution” contained in section 5 of the Securities Act (Quebec)

SASKATCHEWAN Subclause 2(1)(r)(iii) of The Securities Act, 1988 (Saskatchewan)

YUKON TERRITORY Paragraph (c) of the definition of “distribution” contained in subsection 1(1) of the Securities Act (Yukon Territory)


National Instrument 62-103 The Early Warning System and Related Takeover Bid and Insider Reporting Issues
Part 1 Definitions and Interpretation
Section 1.1 Definitions

control

control” means, for a security

(a) when used in connection with the insider reporting requirements, the take-over bid requirements and related definitions and the early warning requirements, the power to exercise control or direction over the security, or similar term or expression used in securities legislation; and

(b) when used in connection with the control block distribution definition, holding the security, or similar term or expression used in securities legislation;


CSA Staff Notice 55-315 Frequently Asked Questions about National Instrument 55-104 Insider Reporting Requirements and Exemptions

Purpose

The staff of the Canadian Securities Administrators (CSA staff or we) have prepared this notice to assist reporting insiders, [FN 1] issuers and other market participants in relation to the new insider reporting regime established by National Instrument 55-104 Insider Reporting Requirements and Exemptions (NI 55-104) and to promote consistency in electronic filings on the system for electronic disclosure by insiders (SEDI).

This notice sets out a number of frequently asked questions (FAQs) that we have received relating to the transition to the new insider reporting regime contained in NI 55-104.

The notice contains a number of examples of arrangements and transactions together with examples of how to report these arrangements and transactions. The instructions contained in this notice are guidelines only, and do not necessarily represent the only way that such arrangements and transactions may be reported in compliance with securities law.

The Companion Policy to NI 55-104 (Policy 55-104CP) and to National Instrument 55-102 System for Electronic Disclosure by Insiders (SEDI) (NI 55-102) also contain explanation and guidance on the insider reporting requirements.

CSA Staff will also shortly publish the following general guidance:

If you have questions or comments with respect to the contents of this notice, please contact a member of staff. Contact information is included at the end of this notice. This notice is dated April 28, 2010. We may from time to time reissue this notice to reflect additional frequently asked questions or concerns.

FN 1 Prior to April 30, 2010, Canadian securities legislation generally required all persons and companies who are “insiders” (as defined in securities legislation) to file insider reports unless they had an exemption from the insider reporting requirement. On April 30, 2010, the Canadian Securities Administrators introduced a new insider reporting regime established by NI 55-104. Under NI 55-104, the insider reporting requirement is generally limited to “reporting insiders” (as defined in NI 55-104) and certain persons who may be designated insiders for certain historical transactions (see s. 3.5 of NI 55-104). For convenience, this notice will refer to insiders subject to a reporting requirement as “reporting insiders”.


CSA Staff Notice 55-316 Questions and Answers on Insider Reporting and SEDI
5 Public Access
Section 5.5

Does The Weekly Summary Include Reports Only From One Province Or Reports From All Provinces And Territories?

The weekly summary reports includes consolidated reports from all provinces and territories. However, you can search the database for an insider transaction detail report using certain parameters so that such reports include specific provinces or territories, for example, only Ontario reports. For certain provinces you can go to the website of the securities regulatory authority to obtain the weekly summary of reports filed in that province.


National Instrument 62-103 The Early Warning System and Related Takeover Bid and Insider Reporting Issues
Part 8 Relief For Pledgees
Section 8.1

Relief for Pledgees

(1) For securities that are controlled by a person or company as a pledgee, and any securities into which those securities are convertible, exercisable or exchangeable, in either case that are pledged, mortgaged or otherwise encumbered as collateral for a debt under a written pledge agreement and in the ordinary course of the business of the person or company, the person or company is exempt from the applicable provisions, and those securities are not required to be taken into account for the purposes of securities legislation related to the applicable definitions.

(2) Subsection (1) does not apply at any time that the person or company is legally entitled to dispose of the securities as pledgee for the purpose of applying proceeds of realization in repayment of the secured debt.


National Instrument 55-104 Insider Reporting Requirements and Exemptions
Part 8 Exemption for Certain Issuer Events
Section 8.2

Reporting requirement

A reporting insider who relies on the exemption in section 8.1 in respect of a reporting issuer must file an insider report, disclosing all changes in beneficial ownership of, or control or direction over, whether direct or indirect, a security of the reporting issuer as a result of an issuer event if those changes have not previously been reported by or on behalf of the insider, within the time required by securities legislation for the insider to report any other subsequent change in beneficial ownership of, or control or direction over, whether direct or indirect, a security of the reporting issuer.


Companion Policy to NI 55-104 Insider Reporting Requirements and Exemptions
Part 2 Application
Section 2.1

Application in Ontario

In Ontario, the insider reporting requirements are set out in Part XXI of the Ontario Act. For this reason, sections 3.2 and 3.3 of the Instrument do not apply in Ontario. However, the insider reporting requirements set out in the Instrument and in Part XXI of the Ontario Act are substantially harmonized. Accordingly, in this Policy, we omit separate references to the requirements of the Ontario Act except where it is necessary to highlight a difference between the requirements of the Instrument and the Ontario Act.


National Policy 51-201 Disclosure Standards
Part VI Best Disclosure Practices
Section 6.8

Analyst Reports

Establish a policy for reviewing analyst reports. As noted in section 5.2 of the Policy, there is a serious risk of violating the tipping prohibition if you express comfort with or provide guidance on an analyst’s report, earnings model or earnings estimates. There is also a risk of selectively disclosing material non-financial information in the course of reviewing an analyst’s report. If your policy allows for the review of analyst reports, your review should be limited to identifying publicly disclosed factual information that may affect an analyst’s model or to pointing out inaccuracies or omissions with reference to publicly available information about your company.


National Instrument 62-103 The Early Warning System and Related Takeover Bid and Insider Reporting Issues
Part 1 Definitions and Interpretation
Section 1.1 Definitions

securityholding percentage

securityholding percentage” means, in relation to an entity and a class of securities, the percentage of the outstanding securities of the class owned, together with the percentage controlled by the entity, determined in accordance with the provisions of applicable securities legislation listed in Appendix D and after application of any aggregation relief available under Part 5 that is relied on by the entity;


National Instrument 62-103 The Early Warning System and Related Takeover Bid and Insider Reporting Issues
Part 10 Moratorium Relief
Section 10.1

Moratorium Relief

(1) An entity is exempt from the moratorium provisions in respect of the acquisition of, or offers to acquire, securities, if those acquisitions or offers are made by an investment manager acting on behalf of the entity without the direction or prior knowledge of the entity.

(2) Subsection (1) does not apply to an investment manager acting as principal.

(3) An entity is exempt from the moratorium provisions in respect of any acquisitions of, or offers to acquire, securities made solely in its capacity as an approved specialist, or market maker, recognized by a stock exchange or an over-the-counter market that represents a published market for the securities.

(4) An eligible institutional investor is exempt from the moratorium provisions in respect of securities of a reporting issuer at any time in which

(a) the eligible institutional investor is using the exemption in section 4.1 in connection with filings relating to securities of that reporting issuer; or

(b) the eligible institutional investor is subject to the restrictions contained in section 4.4.


Form 51-107B Climate-Related Strategy, Risk Management and Metrics and Targets Disclosure (Proposed)
Item 1

Strategy

(a) Describe the climate-related risks and opportunities the issuer has identified over the short, medium, and long term.*

(b) Describe the impact of climate-related risks and opportunities on the issuer’s businesses, strategy, and financial planning.*

* Lexata note: these disclosure requirements are identical to the Recommendations of the Task-Force on Climate-Related Financial Disclosures (TCFD). However, the TCFD also recommends that companies disclose the resilience of their strategy under different scenarios, including global warming of 2°C or lower.


Companion Policy to NI 55-104 Insider Reporting Requirements and Exemptions
Part 1 Introduction and Definitions
Section 1.3

Policy Rationale for Insider Reporting in Canada

(1) The insider reporting requirements serve a number of functions. These include deterring improper insider trading based on material undisclosed information and increasing market efficiency by providing investors with information concerning the trading activities of insiders of an issuer, and, by inference, the insiders’ views of their issuer’s prospects.

(2) Insider reporting also helps prevent illegal or otherwise improper activities involving stock options and similar equity-based instruments, including stock option backdating, option repricing, and the opportunistic timing of option grants (spring-loading or bullet-dodging). This is because the requirement for timely disclosure of option grants and public scrutiny of such disclosure will generally limit opportunities for issuers and insiders to engage in improper dating practices.

(3) Insiders should interpret the insider reporting requirements in the Instrument with these policy rationales in mind and comply with the requirements in a manner that gives priority to substance over form.


National Instrument 55-104 Insider Reporting Requirements and Exemptions
Part 10 Discretionary Exemptions
Section 10.1

Exemptions from this Instrument

(1) The regulator or securities regulatory authority may grant an exemption from this Instrument, in whole or in part, subject to such conditions or restrictions as may be imposed in the exemption.

(2) Despite subsection (1), in Ontario only the regulator may grant such an exemption.

(3) Except in Ontario, an exemption referred to in subsection (1) is granted under the statute referred to in Appendix B of National Instrument 14-101 Definitions opposite the name of the local jurisdiction.