Final Rule (effective March 15, 2000): NI - 62-101 - Control Block Distribution Issues
Final Rule (effective March 15, 2000): NI - 62-101 - Control Block Distribution Issues
NATIONAL INSTRUMENT 62-101
CONTROL BLOCK DISTRIBUTION ISSUES
PART 1 DEFINITIONS
1.1 Definitions - In this Instrument
"control block distribution" means a trade to which the provisions of securities legislation listed in AppendixA apply; and
"information circular requirement" means the requirement, under some circumstances, to deliver aninformation circular under Policy Statement Q-12 Secondary Distribution through Solicitations under theSecurities Act (Quebec).
1.2 Interpretation - Terms defined or interpreted in National Instrument 62-103 The Early Warning System andRelated Take-over Bid and Insider Reporting Issues and used in this Instrument have the respective meaningsascribed to them in National Instrument 62-103.
PART 2 PROSPECTUS EXEMPTION
2.1 Prospectus Exemption
(1) The prospectus requirement, and in Quebec only, the information circular requirement, does not applyto a control block distribution of securities issued by a reporting issuer made by an eligible institutionalinvestor if
(a) the eligible institutional investor
(i) has filed the reports required under the early warning requirements or Part 4 of NationalInstrument 62-103 for the reporting issuer in connection with the current securityholdingpercentage of the eligible institutional investor in classes of voting and equity securitiesof the reporting issuer,
(ii) does not have knowledge of any material fact or material change with respect to thereporting issuer that has not been generally disclosed,
(iii) does not receive in the ordinary course of its business and investment activitiesknowledge of any material fact or material change with respect to the reporting issuer thathas not been generally disclosed, and
(iv) either alone or together with any joint actors, does not possess effective control of thereporting issuer;
(b) there are no directors or officers of the reporting issuer who were, or could reasonably be seento have been, selected, nominated or designated by the eligible institutional investor or any jointactor;
(c) the control block distribution is made in the ordinary course of business or investment activityof the eligible institutional investor;
(d) if the trade was not a control block distribution, the securities would not be subject to anyrequirements of securities legislation requiring them to be held for a specified period of time; and
(e) no unusual effort is made to prepare the market or to create a demand for the securities and noextraordinary commission or consideration is paid in respect of the control block distribution.
(2) An eligible institutional investor that makes a distribution in reliance on subsection (1) shall file a letterwithin 10 days after the distribution that describes the date and size of the distribution, the market onwhich it was made and the price at which the securities being distributed were sold.
2.2 Pledgees
(1) For purposes of a distribution of securities by a pledgee, the period of time referred to in the provisionof securities legislation set out in Appendix B is considered to commence on the date that the pledgoracquired the securities being distributed.
(2) If a pledgee is distributing securities, then for the purposes of the provisions of securities legislation setout in Appendix C
(a) a reference to a "seller" or "vendor" shall be construed as a reference to the pledgee; and
(b) the pledgee shall be considered to have held the securities being distributed for the applicabletime period provided for in that provision.
PART 3 EXEMPTION
3.1 Exemption
(1) The regulator or the securities regulatory authority may grant an exemption to this Instrument, in wholeor 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.
PART 4 EFFECTIVE DATE
4.1 Effective Date - This Instrument comes into force on March 15, 2000.
JURISDICTION SECURITIES LEGISLATION REFERENCE
ALBERTA Clause 1(f)(iii) of the Securities Act (Alberta)
BRITISH COLUMBIA Paragraph (c) of the definition of "distribution" contained in subsection 1(1) of the Securities Act (BritishColumbia)
MANITOBA Paragraph 1(b) of the definition of "primary distribution to the public" contained in subsection 1(1) of theSecurities Act (Manitoba)
NEW BRUNSWICK Paragraph (b) of the definition of "primary distribution to the public" contained in section 1 of the SecurityFrauds Prevention Act (New Brunswick)
NEWFOUNDLAND Clause 2(1)(l)(iii) of the Securities Act (Newfoundland)
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 Clause 1(b.1)(iii) of the Securities Act (Prince Edward
ISLAND Island)
QUEBEC Policy Statement Q-12 Secondary Distribution through Solicitation under the Securities Act (Quebec)
SASKATCHEWAN Subclause 2(1)(r)(iii) of The Securities Act, 1988 (Saskatchewan)
NATIONAL INSTRUMENT 62-101
APPENDIX B
JURISDICTION SECURITIES LEGISLATION REFERENCE
ALBERTA Subparagraph 112(1)(d)(iii) of the Securities Act (Alberta)
BRITISH COLUMBIA Subparagraph 128(d)(iii) of the Securities Rules (British Columbia)
NEWFOUNDLAND Subsection 73(18) of the Securities Act (Newfoundland)
ONTARIO Subsection 3.11(1) of Rule 45-501 Exempt Distributions
SASKATCHEWAN Subclause 81(10)(b)(iii) of The Securities Act, 1988 (Saskatchewan)
NATIONAL INSTRUMENT 62-101
APPENDIX C
JURISDICTION SECURITIES LEGISLATION REFERENCE
NEWFOUNDLAND Subsection 73(19) of the Securities Act (Newfoundland)
ONTARIO Subsection 3.11(2) of Rule 45-501 Exempt Distributions
SASKATCHEWAN Subclause 81(10)(b)(iv) of The Securities Act, 1988 (Saskatchewan)
NATIONAL INSTRUMENT 62-101
CONTROL BLOCK DISTRIBUTION ISSUES
TABLE OF CONTENTS
PART TITLE
PART 1 DEFINITIONS
1.1 Definitions
1.2 Interpretation
PART 2 PROSPECTUS EXEMPTION
2.1 Prospectus Exemption
2.2 Pledgees
PART 3 EXEMPTION
3.1 Exemption
PART 4 EFFECTIVE DATE
4.1 Effective Date