Notice and Amendment: OSCP - 62-601 - Securities Exchange Take-Over Bids - Trades in the Offeror's Securities

Introduction

The Commission has, under section 143 of the Securities Act (Ontario) (the "Act"), made Rule 62-501 Prohibited Stock Market Purchases of the Offeree's Securities by the Offeror During a Take-over Bid (the "Rule") and an amendment (the "Amendment") to Commission Policy 62-601.

The Rule and the Amendment were delivered to the Minister of Finance on May 29, 2002. If the Minister does not approve or reject the Rule or return the Rule for further consideration, the Rule will come into force on August 12, 2002. If the Minister approves the Rule, the Rule will come into force 15 days after it is approved.

The Amendment will become effective on the day that the Rule comes into force.

Substance and Purpose of Rule

The Rule will restrict the circumstances under which an offeror making a take-over bid is permitted, during the course of the bid, to acquire securities of the class for which the bid is made, otherwise than pursuant to the bid itself. The Rule will vary the current conditions under which purchases during the course of the bid, under subsection 94(3) of the Act, are permitted so as to make them similar to the conditions applicable under subsection 94(7) to permitted pre-bid and post-bid purchases.

By allowing only unsolicited, normal course purchases, the Rule is intended to ensure that the principle that offeree security holders should be treated equally in a take-over bid is not violated by purchases made by the bidder under subsection 94(3) of the Act.

Substance and Purpose of Amendment

The Amendment will revoke Parts A and B of Commission Policy 62-601 as a housekeeping matter. Part A deals with subject matter that is covered by subsections 94(2) and 94(3) of the Act while the subject matter of Part B is covered by subsections 94(5) and 94(7) of the Act.

Summary of Comments Received and Commission’s Response

The Rule and Amendment were published for comment on December 14, 2001, at (2001), 24 OSCB 7564.

The Commission received a submission on the Rule from one commenter, Osler, Hoskin & Harcourt LLP ("Osler"). The Commission thanks Osler for providing its comments.

The commenter fully supported the Rule. The commenter was of the view that allowing purchases by way of private agreement can lead to unequal treatment of offeree shareholders, a result which is contrary to one of the principal tenets of Part XX of the Act. The commenter believed that protections for offeree shareholders during a bid should be aligned with the protections already in place for the pre-bid and post-bid periods. The commenter noted that enforcement of the protections set out in the Rule will also be important.

The Commission agrees with the commenter.

The Commission received no comments on the Amendment.

Changes to Rule and Amendment

The Commission has made some minor drafting changes to the Rule as it was previously published. However, as these changes are not material, the Rule is not being published for a further comment period. No changes have been made to the Amendment.

Text of Rule and Amendment

The text of the Rule and Amendment follow.

AMENDMENT TO
ONTARIO SECURITIES COMMISSION
POLICY 62-601

Ontario Securities Commission Policy 62-601 is amended by:

1. changing the title of the Policy to "Securities Exchange Take-over Bids - Trades in the Offeror's Securities";
   
2. deleting Parts A and B; and
   
3. deleting the heading "C. Securities Exchange Take-over Bids - Market "Support, Maintenance or Stabilization"vs. Market Balancing Transactions in Accordance with Stock Exchange Rules".