Final Rule (effective June 10, 1998): OSC Rule - 45-502 - Dividend or Interest Reinvestment and Stock Dividend Plans

Final Rule (effective June 10, 1998): OSC Rule - 45-502 - Dividend or Interest Reinvestment and Stock Dividend Plans

OSC Rule



NOTICE OF FINAL RULE UNDER THE SECURITIES ACT
RULE 45-502 - DIVIDEND OR INTEREST
REINVESTMENT AND STOCK DIVIDEND PLANS

On May 26, 1998 the Minister of Finance approved Rule 45-502:Dividend or Interest and Stock Dividend Plans(the "Rule"). The Rule came into force on June10, 1998.

The related regulation revoking clause 14(e) and subsection 19(5) of Regulation 1015 (the "Regulation") of the Revised Regulations of Ontario, 1990 madeunder the Securities Act, and subsection 21(2) of Schedule 1 to the Regulation, and amending subsection 21(1) of Schedule 1 to the Regulation was filed as O.Reg. 268/98 on June 4, 1998 and is expected to be published in the Ontario Gazette on June 20, 1998.

The Rule is published in Chapter 5 of the Bulletin.

ONTARIO SECURITIES COMMISSION RULE
RULE 45-502
DIVIDEND OR INTEREST REINVESTMENT
AND STOCK DIVIDEND PLANS

PART 1 DEFINITIONS AND INTERPRETATION
1.1 Definitions 1
1.2 Interpretation

PART 2 EXEMPTION FOR TRADES UNDER A DIVIDEND OR INTEREST REINVESTMENT PLAN
2.1 Exemption for Trades Under a Dividend or Interest Reinvestment Plan

PART 3 EXEMPTION FOR TRADES UNDER THE CASH PAYMENT OPTION OF A COMBINED PLAN
3.1 Exemption for Trades Under the Cash Payment Option of a Combined Plan

PART 4 RESTRICTIONS ON FIRST TRADES IN SECURITIES ACQUIRED UNDER SECTION 2.1 OR 3.1
4.1 Restrictions on First Trade in Securities Acquired Under Section 2.1 or 3.1 3

PART 5 DISCLOSURE OF EXEMPT TRADES 4
5.1 Disclosure
5.2 Disclosure Before Resale
5.3 Annual Disclosure
5.4 Monthly Disclosure
5.5 Form of Disclosure

PART 6 FEES
6.1 Fees 6

PART 7 EXEMPTION
7.1 Exemption

 

PART 1 DEFINITIONS AND INTERPRETATION

1.1 Definitions - In this Rule

"administrator" means, for an issuer, a trustee, a custodian or an administrator of a plan of the issuer;

"cash payment option" means a provision in a plan under which a participant is permitted to make cash payments to purchase from the issuer or an administratorof the issuer securities of the issuer's own issue, in addition to the securities

(a) purchased using the amount of the dividend or interest payable to or for the account of the participant; or

(b) acquired as a stock dividend or other distribution out of earnings or surplus;

"class of securities" means the class or the series of a class of securities that are issuable under the relevant plan;

"combined plan" means a plan that contains a cash payment option;

"dividend or interest reinvestment plan" means an arrangement under which a holder of securities of an issuer is permitted to direct that the dividends or interestpaid on those securities be applied to the purchase from the issuer or an administrator of the issuer of securities of the issuer's own issue;

"plan" means a dividend or interest reinvestment plan or a stock dividend plan; and

"stock dividend plan" means an arrangement under which securities of an issuer are issued by the issuer to holders of securities of the issuer as a stock dividendor other distribution out of earnings or surplus.

1.2 Interpretation - The term "special relationship", when used in reference to a person or company in a special relationship with a reporting issuer, shall beinterpreted in accordance with subsection 76(5) of the Act.

PART 2 EXEMPTION FOR TRADES UNDER A DIVIDEND OR INTEREST REINVESTMENT PLAN

2.1 Exemption for Trades Under a Dividend or Interest Reinvestment Plan - Sections 25 and 53 of the Act do not apply to a trade by an issuer or anadministrator of the issuer in a security of the issuer's own issue under a dividend or interest reinvestment plan of the issuer.

PART 3 EXEMPTION FOR TRADES UNDER THE CASH PAYMENT OPTION OF A COMBINED PLAN

3.1 Exemption for Trades Under the Cash Payment Option of a Combined Plan - Sections 25 and 53 of the Act do not apply to a trade by an issuer or anadministrator of the issuer in a security of the issuer's own issue under the cash payment option of a combined plan of the issuer

(a) if the issuer is

(i) a reporting issuer and, to the best of its belief, is not in default under the Act or the regulations, or

(ii) an issuer other than a reporting issuer and the class of securities is listed and posted for trading, traded, or quoted, on

(A) The Montreal Exchange,

(B) the Alberta Stock Exchange,

(C) the Vancouver Stock Exchange,

(D) the New York Stock Exchange,

(E) the American Stock Exchange,

(F) the Nasdaq Stock Market, or

(G) the London Stock Exchange Limited; and

(b) if

(i) in the financial year of the issuer during which the trade takes place, the aggregate number of securities issued under the cash payment option of the combinedplan before the trade, plus the aggregate number of securities issued in the trade, does not exceed two percent of the number of the securities of the class ofsecurities outstanding at the commencement of that financial year,

(ii) at the time of the trade, persons or companies whose last address as shown on the books of the issuer is in Ontario and who held securities of the class ofsecurities

(A) did not hold more than 10 percent of the outstanding securities of the class of securities, and

(B) did not represent in number more than 10 percent of the total number of holders of securities of the class of securities; or

(iii) at the time of the trade, persons or companies who are in Ontario and who beneficially own securities of the class of securities

(A) did not beneficially own more than 10 percent of the outstanding securities of the class of securities, and

(B) did not represent in number more than 10 percent of the total number of holders of securities of the class of securities.

PART 4 RESTRICTIONS ON FIRST TRADES IN SECURITIES ACQUIRED UNDER SECTION 2.1 OR 3.1

4.1 Restrictions on First Trade in Securities Acquired Under Section 2.1 or 3.1 - A person or company may trade a security acquired under an exemptioncontained in section 2.1 or 3.1 only

(a) if the first trade is made under a prospectus for which a receipt has been obtained from the Director;

(b) if the first trade is made under an exemption in Ontario securities law from section 53 of the Act; or

(c) if

(i) at the time of the trade, the issuer of the security is a reporting issuer and has been a reporting issuer for at least 12 months,

(ii) in the case of a person or company that is in a special relationship with the issuer, the person or company has reasonable grounds to believe that the issuer isnot in default under the Act or the regulations,

(iii) disclosure to the Commission has been made of the trade under section 2.1 or section 3.1 in accordance with Part 5,

(iv) no unusual effort is made to prepare the market or to create a demand for the security and no extraordinary commission or consideration is paid for thetrade, and

(v) the trade is not a control person distribution.

PART 5 DISCLOSURE OF EXEMPT TRADES

5.1 Disclosure - The disclosure contemplated by section 4.1 for securities acquired under the exemptions contained in sections 2.1 and 3.1 shall, and thedisclosure contemplated by clause 72(5)(b) of the Act for securities acquired under the exemption contained in subclause 72(1)(f)(i) of the Act may, be made bythe issuer in accordance with this Part.

5.2 Disclosure Before Resale - The disclosure referred to in section 5.1 may be made by the issuer by disclosing the date of the trade, the number of securitiespurchased and the purchase price paid or to be paid, in

(a) an information circular or take-over bid circular filed in accordance with the regulations; or

(b) a letter filed by a person or company certifying that the person or the company has knowledge of the facts contained in the letter

if in either case the filing is effected before any resale of the securities.

5.3 Annual Disclosure - The disclosure referred to in section 5.1 may also be made by the issuer when the plan is commenced and not less frequently thanannually after the first disclosure, if the number of securities of the class of securities issued under the plan in any calendar month in reliance on the exemptionsdescribed in section 5.1 does not exceed one percent of the securities of that class that were outstanding at the beginning of the calendar month in which thesecurities were issued.

5.4 Monthly Disclosure

(1) If the number of securities of the class of securities issued under the plan in any calendar month in reliance on the exemptions described in section 5.1 doesexceed one percent of the securities of that class that were outstanding at the beginning of the calendar month in which the securities were issued, the disclosurereferred to in section 5.1 may be made by the issuer for that calendar month, within 10 days after the end of the month.

(2) The issuer may make disclosure in accordance with section 5.3 for the other calendar months in the annual period excluding such month or months for whichdisclosure has been made under subsection (1).

5.5 Form of Disclosure - For the purposes of sections 5.3 and 5.4, the disclosure may be made in the form of a letter filed by a person or company disclosingthe date of the trade, the number of securities purchased and the purchase price paid or to be paid, and certifying that the person or the company has knowledgeof the facts contained in the letter.

PART 6 FEES

6.1 Fees - The issuer shall pay a fee of $100.00 for securities issued under each of the exemptions contained in subclause 72(1)(f)(i) of the Act and sections 2.1and 3.1

(a) on the date the plan is commenced; and

(b) on each anniversary of the date of commencement of the plan, if securities were issued or distributed in Ontario under the plan during the twelve-monthperiod preceding the date of the anniversary.

PART 7 EXEMPTION

7.1 Exemption - The Director may grant an exemption to this Rule, in whole or in part, subject to such conditions or restrictions as may be imposed in theexemption.