Canadian Imperial Bank of Commerce
Headnote
National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- relief to permit issuer to distribute Canadian depositary receipts qualified by base shelf prospectus and prospectus supplement to investors through the facilities of a marketplace -- relief from prospectus delivery requirement in section 71 of the Securities Act and related two-day right of withdrawal and remedies of rescission or damages for non-delivery of the prospectus and related prospectus form requirements -- relief from the requirement in section 7.1 of NI 41-101 to distribute securities under a prospectus at a fixed price and the requirement in section 8.1 NI 44-102 to file a pricing supplement -- relief from requirement in section 59 of the Securities Act to provide an underwriter's certificate -- relief from the requirements in section 8.2 of NI 41-101 to cease distribution after a specified period of time -- relief from the requirement in section 2.1(1) and 2.1(2) of NI 33-105 that no specified firm registrant shall act as a direct underwriter in a distribution of securities of a connected issuer of the specified firm and that no specified firm registrant shall act as a direct underwriter of a related issuer of the specified firm registrant -- relief from section 2.2 of OSC Rule 48-501 that prohibits issuer-restricted persons from purchasing CDRs over a marketplace during the period of the offering -- subject to conditions -- relief will terminate upon the coming into force of any legislation regulating Canadian depositary receipts.
Applicable Legislative Provisions
Securities Act (Ontario), R.S.O. 1990, c. S.5, as am., ss. 59(1), 71(1), 71(2), 133 and 147.
National Instrument 33-105 -- Underwriter Conflicts Requirements, ss. 2.1(1), 2.1(2) and 5.1(1).
National Instrument 41-101 -- General Prospectus Requirements, ss. 7.2, 8.2 and 19.1.
National Instrument 44-101 -- Short Form Prospectus Distributions, s. 8.1; and Item 20 of Form 44-101F1.
National Instrument 44-102 -- Shelf Distributions, ss. 5.5(2) and 5.5(3), 6.7, 8.1 and 11.1.
OSC Rule 48-501 -- Trading during Distributions, Formal Bids, and Share Exchange Transactions, ss. 2.2 and 5.1.
July 16, 2021
IN THE MATTER OF THE SECURITIES LEGISLATION OF ONTARIO (the Jurisdiction) AND IN THE MATTER OF THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS IN MULTIPLE JURISDICTIONS AND IN THE MATTER OF CANADIAN IMPERIAL BANK OF COMMERCE (the Filer)
DECISION
Background
The Ontario Securities Commission (the Decision Maker), being the principal regulator in the Jurisdiction, has received an application (the Application) from the Filer for a decision under the securities legislation of the Jurisdiction (the Legislation) for the following relief (the Relief Sought):
(a) that the requirements to deliver to the purchaser or its agent the latest prospectus (including applicable prospectus supplements) and any amendment to the prospectus in respect of CDRs (as defined below) that are being distributed (the Prospectus Delivery Requirement) do not apply to the Filer or any other person in respect of CDR Distributions (as defined below); and related purchaser rights to withdraw from the purchase and sale transaction (Withdrawal Right) and any purchaser right of action for rescission or damages (Right of Action for Non-Delivery) if the Prospectus Delivery Requirement is not fulfilled or the relevant rescission period has not elapsed do not apply in respect of CDR Distributions;
(b) that the requirement in section 7.2 of National Instrument 41-101 -- General Prospectus Requirements (NI 41-101) to distribute securities under a prospectus at a fixed price and the requirement in section 8.1 of National Instrument 44-102 -- Shelf Distributions (NI 44-102) to file a pricing supplement in order to distribute securities under a base shelf prospectus by way of a continuous distribution (the Pricing Requirements) do not apply in respect of the CDR Distributions;
(c) that the following prospectus form requirements (collectively, the Prospectus Form Requirements) do not apply to the Shelf Prospectus (as defined below), any Prospectus Supplement (as defined below) or an amendment thereto:
(i) subsection 5.5(2.) and 5.5(3.) of NI 44-102, which each require the inclusion in a base shelf prospectus of statements specified therein related to the delivery to purchasers of one or more applicable prospectus supplements; and
(ii) the prospectus form requirement that a statement respecting purchasers' statutory rights of withdrawal and remedies of rescission or damages in substantially the form prescribed by Item 20 of Form 44-101F1 Short Form Prospectus (Form 44-101F1) be included in the prospectus;
provided that the Filer include in the Shelf Prospectus or an amendment thereto the revised description set out below of a purchaser's statutory rights of withdrawal and remedies for rescission or damages;
(d) exemptive relief from the requirement to include a certificate of an underwriter in a base shelf prospectus for the CDRs or any Prospectus Supplement for a Series of CDRs (or any amendments or supplements thereto) (the Underwriter's Certificate Requirement), provided that the alternative disclosure described below is provided;
(e) that the requirements pursuant to section 8.2 of NI 41-101 to cease distribution after a specified period of time (not to exceed 180 days from the date of receipt for the final prospectus) if securities are being distributed on a best efforts basis (the Distribution Time Limit) does not apply in respect of CDR Distributions;
(f) that the requirement pursuant to section 2.1(1) of NI 33-105 -- Underwriter Conflicts Requirements (NI 33-105) that no specified firm registrant shall act as a direct underwriter in a distribution of securities of a connected issuer of the specified firm unless the prescribed disclosure is included in the relevant prospectus (the Connected Issuer Requirement) does not apply in respect of CDR Distributions;
(g) that the requirement pursuant to section 2.1(2) of NI 33-105 that no specified firm registrant shall act as a direct underwriter of a related issuer of the specified firm registrant unless certain conditions are satisfied (the Independent Underwriter Requirement) does not apply to the Filer in connection with CDR Distributions; and
(h) exemptive relief from the Decision Maker from the restrictions (the 48-501 Purchasing Restrictions) imposed by section 2.2 of OSC Rule 48-501 -- Trading during Distributions, Formal Bids and Share Exchange Transactions (Rule 48-501) on issuer-restricted persons bidding for or purchasing CDRs or other restricted securities during the period of the Offering or attempting to induce or cause a purchase of CDRs or other restricted securities (as such terms are defined in Rule 48-501).
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):
(a) pursuant to subsection 3.6(3)(b) National Policy 11-203 -- Process for Exemptive Relief Applications in Multiple Jurisdictions, as the Filer's head office is located in Ontario, the Ontario Securities Commission is the principal regulator for the Application;
(b) the Filer has provided notice that subsection 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in each of British Columbia, Alberta, Saskatchewan, Manitoba, Québec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, the Northwest Territories, Nunavut and the Yukon Territory (collectively and together with the Jurisdiction, the Reporting Jurisdictions); and
(c) the decision is the decision of the principal regulator and evidences the decision of the securities regulatory authority.
Interpretation
Terms defined in National Instrument 14-101 -- Definitions, in National Instrument 13-101 -- System for Electronic Document Analysis and Retrieval (SEDAR), in MI 11-102 or in NI 44-102 have the same meaning if used in this decision, unless otherwise defined herein. References herein to "C$" mean Canadian dollars and references to "US$" mean United States dollars.
Representations
This decision is based on the following facts represented by the Filer:
The Filer
1. The Filer is a Schedule I bank governed by the Bank Act (Canada) that operates as a diversified financial institution directly and through its subsidiaries. The registered and head office of the Filer is located in Toronto, Ontario.
2. The Filer is a reporting issuer or the equivalent under the securities legislation of each Jurisdiction and is in compliance in all material respects with the applicable requirements of the securities legislation of each Jurisdiction.
The CDRs
3. The Filer proposes to offer securities of the Filer that are identified as "Canadian Depositary Receipts" (CDRs) pursuant to a series of continuous offerings (the Offerings).
4. CDRs will be issued in one or more series (each a Series), with each Series of CDRs relating to a single class of equity securities (the Underlying Shares) of an issuer incorporated or formed outside of Canada (each an Underlying Issuer).
5. CDRs are transferrable depositary receipts and are designed to provide Canadian investors with efficient and direct access to ownership of the Underlying Shares of the Underlying Issuers through Canadian-dollar denominated trading on Canadian markets.
6. Each CDR represents the interest of the holder of the CDR (each, a CDR Holder) in the pool of Underlying Shares held for the relevant Series (the Underlying Share Pool for the Series) in a segregated securities account (the Custody Account) with a specified Custodian (as defined below) pursuant to the terms of a deposit agreement (the Deposit Agreement). Each CDR's interest in the pool of Underlying Shares is economically equivalent to beneficially owning a number of the Underlying Shares equal to the CDR Ratio (as defined below) for the Series with a notional hedge to Canadian dollars.
7. The CDR Ratio in respect of a Series of CDRs will be equal to the initial CDR Ratio specified in respect of such Series of CDRs in the applicable Prospectus Supplement, as automatically adjusted from time to time on the terms set out in the Deposit Agreement. The economic effect of these automatic adjustments is to provide an embedded daily notional currency hedge of such Underlying Shares' U.S. dollar market value into Canadian dollars.
8. The Deposit Agreement sets out the terms of the interests and rights of holders of CDRs (CDR Holders), including their entitlements to receive dividends and other distributions in respect of Underlying Shares (which is based on the number of CDRs held times the applicable CDR Ratio) and, upon the surrender and cancellation of CDRs, the right to withdraw Underlying Shares equal to the number of CDRs held multiplied by the applicable CDR Ratio.
9. Each CDR represents an equal undivided direct beneficial interest in the relevant Underlying Share Pool. CDR Holders (individually or collectively) do not have any ownership interest in any particular Underlying Shares or number or fraction thereof, and CDR Holders will not be considered to be shareholders of the Underlying Issuer for the purposes of Canadian or U.S. securities laws.
10. In addition to the undivided co-ownership interest represented by all CDRs of a Series, the Filer will also own an undivided co-ownership interest in the Underlying Share Pool for that Series. The Filer will deposit Underlying Shares in respect of each Series to the Custody Account pursuant to the Deposit Agreement to acquire its undivided co-ownership interest. Consequently, CDR Holders of a Series and the Filer will be co-owners of the Underlying Share Pool for each Series, each with undivided co-ownership interests therein.
11. The undivided co-ownership interests in the Underlying Share Pool represented by all CDRs of a Series is referred to as the CDR Holder Interest for the Series, and the Filer's undivided co-ownership interest in the Underlying Share Pool is referred to as the Issuer Interest for the Series.
Custodial arrangements
12. For each Series of CDRs, the Underlying Shares deposited under the Deposit Agreement shall be held with one or more custodians (each a Custodian) that qualify as "custodians" or "sub-custodians", as applicable, that may be appointed under Part 6 of National Instrument 81-102 -- Investment Funds. It is expected that each qualified custodian will hold deposited Underlying Shares and related proceeds including all cash held for CDR Holders and the Issuer Interest in a segregated Custody Account separate and apart from the qualified custodian's own property using an account number or other designation in its records sufficient to show that the securities deposited under the relevant Deposit Agreement are held for the benefit of the CDR Holders for the Series and the Filer. Custodians will maintain these positions in the Underlying Shares (directly or indirectly through subcustodians) through the relevant central depositary generally used in the home market for trading of the Underlying Shares (e.g., in the United States, The Depository Trust Company).
Offerings and Cancellations of CDRs
13. Each Offering of CDRs of a particular Series will be conducted by the offering and sale of CDRs on a continuous basis through non-fixed-price open-market distributions (CDR Distributions) primarily completed on regulated marketplaces (which are expected to include the securities exchange operated by Neo Exchange Inc.). Each Offering will be made pursuant to a single base shelf prospectus (the Shelf Prospectus) that applies to all Series of CDRs and a separate prospectus supplement prepared for one or more particular Series of CDRs (each a Prospectus Supplement, and the Shelf Prospectus as supplemented by a Prospectus Supplement being referred to as a Supplemented Prospectus). For each Offering, the Issuer will issue the CDRs to registered dealers purchasing as principals or as agent on behalf of a subscriber, and such registered dealers when purchasing as principal are expected to distribute the CDRs on regulated marketplaces but may also complete distributions by private sales.
14. Each Series of CDRs may be issued on a continuous basis and there is no minimum or maximum number of CDRs (in the aggregate or with respect to any particular Series) that may be issued.
15. The Filer may enter into various agreements with registered dealers (that may or may not be Dealers), including CIBC World Markets Inc. (CIBC WMI), pursuant to which Dealers may subscribe for and purchase CDRs. All subscriptions for newly issued CDRs from the Filer in its capacity as depositary must be placed by or through a Dealer. Dealer means any registered or exempted securities dealer that is permitted to subscribe for CDRs of any Series.
16. CIBC WMI is a wholly-owned subsidiary of the Filer. By virtue of such ownership, the Filer is a "related issuer" and a "connected issuer" of CIBC WMI within the meaning of applicable securities legislation in connection with any offering of CDRs under the Supplemented Prospectus.
17. CDR Holders of a Series may irrevocably request to cancel any whole number of CDRs and to withdraw the applicable related Underlying Shares. All such requests to CIBC to cancel CDRs must be placed by or through a Dealer.
Termination of CDRs
18. CIBC has the discretion to terminate any or all Series of CDRs at any time in its sole discretion on not less than 30 days' prior notice, provided however that CIBC may terminate any Series of CDRs on not less than three Trading Days' notice if (i) the Underlying Shares of such Series cease to be listed on their primary trading market; (ii) the Series of CDRs is suspended from trading on a Canadian stock exchange; (iii) the number of CDR Holders of the Series of CDRs and/or of other Series of CDRs is such that it is uneconomic for CIBC to continue to offer that Series of CDRs or to offer the CDRs and other Series of CDRs; or (iv) there is a change in law or regulation (including tax law or regulation) which makes it impractical or uneconomic for CIBC to continue to maintain or offer CDRs, to hold the Issuer Interest, or to operate its CDR business. CIBC will post any such termination notice on the CDR Website and will file a news release in respect of the termination of any Series not less than 15 days, nor more than 90 days, prior to the termination of the applicable Series (or, if CIBC is only required to provide three Trading Days' notice of the termination, not less than two Trading Days, nor more than 90 days, prior to, such termination). CIBC also has discretion to terminate a Series of CDRs without any prior advance notice in certain limited circumstances, including (i) during any period when normal trading is suspended on a stock exchange or other market on which the Underlying Shares are listed and traded; (ii) if at any time it is not possible for CIBC to maintain its Issuer Interest in compliance with the Deposit Agreement, or (iii) if the obligations of CIBC under the Deposit Agreement are uneconomical or raise regulatory, prudential or commercial concerns. Trading Day means a Toronto business day that ordinary trading is scheduled to occur on both the primary Canadian securities exchange identified for the Series of CDRs and the foreign stock exchange which is the primary trading market for the relevant Underlying Shares.
Fees and Expenses
19. No fees or expenses will be charged to CDR holders or applied to reduce the CDR Ratio upon the issuance of CDRs, and no fees or expenses will be directly charged to CDR Holders while holding CDRs, provided that CIBC shall be entitled to adjust the CDR Ratio as set out in the Deposit Agreement to compensate CIBC for actual out-of-pocket costs and expenses incurred in connection with a Corporate Action ("Specified Corporate Action Expenses"), such adjustment to the CDR Ratio reflecting a reduction in the aggregate value of all outstanding CDRs of the relevant Series by the amount of the relevant Specified Corporate Action Expense; and further provided that CIBC may amend the fees and expenses it charges, or introduce new types of fees and expenses, for any Series of CDRs upon 30 business days' prior notice posted to the CDR Website. The amount of any Specified Corporate Action Expense shall not exceed 0.10% of the aggregate value of the CDRs of the relevant Series. "Corporate Action" means any event resulting in a distribution of cash, securities or other property by the relevant Issuer or a third-party to the holders of relevant Underlying Shares (other than an ordinary course dividend payment), a conversion in whole or in part of the relevant Underlying Shares into a different series or class of securities and/or a mandatory, voluntary or elective exchange of all or any part of the relevant Underlying Shares (or any right or entitlement in respect thereof) for other securities, cash and/or other property. There will be no increases to fees or expenses and no introduction of any new type of fee or expense (including, in each case, any change to the adjustments to the CDR Ratio to reflect fees or expenses) unless disclosed in an amendment to or replacement of the Shelf Prospectus or in a Prospectus Supplement at least 30 business days prior to the effective date of such change to fees or expenses. Dealers that subscribe for newly issued CDRs or place a Withdrawal Notice with the Depositary (for themselves or on behalf of a client) may also be charged fees directly by the Depositary in an amount not to exceed 0.20% of the value of the related CDRs. These subscription and cancellation fees do not have any impact on the CDR Ratios applicable to CDRs and they do not apply in respect of purchases or sales of CDRs by CDR Holders on any exchange or other secondary market.
20. The notional forward rate to be used for each new Notional FX Hedge will be CIBC's institutional offered forward rate for an equivalent cash-settled overnight FX forward transaction as determined by CIBC on the relevant Trading Day provided that the notional forward rate so determined will on average not include a spread of greater than 60 basis points on an annualized basis.
Disclosure in Respect of CDRs
21. The Deposit Agreement will be filed by the Filer on SEDAR as a material contract.
22. If the Filer elects to commence the Offering of a Series of CDRs, it will immediately do the following:
(a) file the Prospectus Supplement on SEDAR;
(b) issue a news release and a notice on the CDR Website each indicating that the Prospectus Supplement for the Series of CDRs has been filed on SEDAR; and
(c) provide copies of the Shelf Prospectus and Prospectus Supplement on the CDR Website.
23. The Filer will maintain by way of continuous disclosure a website for the CDR program (the CDR Website) on which it will post on each Trading Day for each Series of CDRs:
(a) the Deposit Agreement;
(b) the CDR Ratio calculated on the immediately preceding Trading Day;
(c) the current notional forward rate for the Notional FX Hedges;
(d) the ticker and country of the Underlying Shares and the foreign stock exchange that is the primary trading venue of the Underlying Shares;
(e) all current Prospectus Supplements for the CDRs and all notices provided to CDR Holders in respect of the CDRs; and
(f) copies of documents incorporated by reference into the current Prospectus for each Series of CDRs or, in respect of applicable continuous disclosure documents of the Filer that are incorporated by reference, a link to a webpage of the Filer which provides such continuous disclosure documents.
24. The Offerings will be conducted without the knowledge or consent of Underlying Issuers. Accordingly, the Filer will as a general matter not have direct knowledge or access to material information regarding the Underlying Issuers or Underlying Shares other than publicly available information.
25. In similar circumstances under CSA Staff Notice 44-304 -- Linked Notes Distributed under Shelf Prospectus System (SN 44-304), it has been recognized that it is appropriate for a Canadian issuer of a structured note linked to the market performance of a security of a non-Canadian issuer to provide only "abbreviated disclosure" based on basic information from publicly available sources regarding the underlying issuer and reference securities that subscribers should not rely upon to provide full, plain and true disclosure in respect of the non-Canadian issuer and the relevant reference securities, and instead the Canadian issuer may direct investors to public disclosure made available by the non-Canadian issuer in accordance with the rules of the relevant non-Canadian jurisdiction, provided that there is sufficient market interest and publicly available information about an underlying issuer.
26. The Filer proposes to only provide such abbreviated disclosure in respect of Underlying Shares for the CDRs, and accordingly the Filer proposes to issue CDRs if (i) the related Underlying Issuer and Underlying Shares satisfy the Capitalization and Liquidity Standards set out below at the time of listing of the CDRs, or (ii) the Filer has pre-cleared with the applicable regulators the disclosure contained in the Prospectus Supplement(s) pertaining to such CDRs. The Capitalization and Liquidity Standards are as follows: (a) any Underlying Issuer must (i) be incorporated in the United States; (ii) be listed in the S&P 500 Index; and (iii) have a market capitalization in excess of US$20 billion; (b) the Underlying Shares must be listed on the NASDAQ or the New York Stock Exchange; and (c) the average daily trading volume of the Underlying Shares in the month before the date of the first Prospectus Supplement for such Series of CDRs must exceed US$100 million.
27. In respect of requirements under the Legislation and NI 44-102 that each Supplemented Prospectus contain full, true and plain disclosure of all material facts relating to the securities to be distributed in the Offering, the Filer shall comply with SN 44-304 in relation to disclosure in respect of Underlying Issuers and Underlying Shares for each Series of CDRs. The Filer intends to meet the principles set out in SN 44-304 as if the CDRs were linked notes, and the Filer intends to meet the full, true and plain disclosure requirement in connection with the CDRs without having responsibility for the accuracy of disclosure issued by the Underlying Issuer. Each Prospectus Supplement will clearly state that the Filer is not the source of disclosure relating to the Underlying Shares and will clearly disclaim the Filer's responsibility both for verifying the accuracy of such disclosure and for updating such disclosure.
Prospectus Delivery Requirement
28. Pursuant to the Prospectus Delivery Requirement, a dealer effecting a trade of securities offered under a prospectus is required to deliver a copy of the prospectus (including the applicable prospectus supplement(s) in the case of a base shelf prospectus) to the purchaser within prescribed time limits.
29. Delivery of a prospectus is not practicable in the circumstances of a CDR Distribution conducted on a regulated Canadian marketplace because neither the Filer nor the Dealer effecting the trade will know the identity or address of the purchasers or have a mechanism to directly deliver the prospectus to purchasers.
30. The Supplemented Prospectus will be filed and readily available electronically via SEDAR and the CDR Website to all purchasers under CDR Distributions. As stated in paragraph 22 above, the Filer will disclose by news release where and how copies of the Supplemented Prospectus may be obtained.
31. The liability of an issuer for a misrepresentation in a prospectus pursuant to the civil liability provisions of the Legislation will not be affected by the grant of an exemption from the Prospectus Delivery Requirement because purchasers of securities offered by a prospectus during the period of distribution have a right of action for damages or rescission where a prospectus contains a misrepresentation, without regard to whether or not the purchaser relied on the misrepresentation or in fact received a copy of the prospectus.
Withdrawal Right and Right of Action for Non-Delivery
32. Pursuant to the Legislation, an agreement to purchase a security in respect of a distribution to which the prospectus requirement applies is not binding on the purchaser if the dealer from whom the purchaser purchases the security receives a notice in writing evidencing the intention of the purchaser not to be bound by the agreement of purchase not later than midnight on the second day (exclusive of Saturdays, Sundays and holidays) after receipt by the purchaser of the latest prospectus or any amendment to the prospectus (the Withdrawal Right).
33. Pursuant to the Legislation, a purchaser of securities to whom a prospectus was required to be sent or delivered in compliance with the Prospectus Delivery Requirement, but was not so sent or delivered, has a right of action for rescission or damages against the dealer who did not comply with the Prospectus Delivery Requirement (the Right of Action for Non-Delivery).
34. Neither the Withdrawal Right nor the Right of Action for Non-Delivery is workable in the context of the CDR Distributions because of the impracticability of delivering the Prospectus to a purchaser that purchases CDRs on a Canadian marketplace.
Pricing Requirements
35. Rather than completing separate prospectuses in respect of each new Series of CDRs to be issued, the Filer considers that the use of a base shelf prospectus and a prospectus supplement covering different Series of CDRs, which in each case provides the mechanism for pricing of the offering and reference to the CDR Website that includes the current CDR Ratio, is appropriate to provide necessary disclosure in respect of each Series of CDRs, and no purpose would be served by also requiring a pricing supplement to be filed as contemplated by section 8.1 of NI 44-102.
36. Similarly, the general requirement that securities must be issued at a fixed price is not appropriate in respect of a continuous distribution of CDRs that are issued to registered dealers (purchasing as principal or as agent) in exchange for the deposit of a number of Underlying Shares based on the current CDR Ratio, with such dealers typically selling such CDRs in open-market trades at market prices prevailing from time to time.
Prospectus Form Requirements
37. The proposed CDR Distribution method involves a continuous distribution, and does not involve (a) the use of pricing supplements, (b) the delivery of prospectuses or amendments thereto, (c) typical Withdrawal Rights and Rights of Action for Non-Delivery, (d) a typical dealer compensation model, or (e) a predetermined set of Dealers that will participate in CDR Distributions (other than CIBC WMI). Accordingly, a number of changes to prescribed form disclosure and descriptions of statutory rights are required to implement the proposed CDR Distribution method.
38. A different statement of purchasers' rights than that required by the Legislation is necessary so that each Supplemented Prospectus will accurately reflect the relief granted from the Prospectus Delivery Requirement. Accordingly, each Prospectus Supplement will state that:
The rights of investors relying on this Prospectus in respect of newly issued CDRs differ from those of investors in other equity securities. See "Notice Regarding Non-Standard Securityholder Rights" in the Base Prospectus.
and each base shelf prospectus for the CDRs will state the following, with the definition of "Exemptive Relief Order" identifying this Decision by reference to the date hereof:
Securities legislation in certain of the provinces and territories of Canada provides purchasers with the right to withdraw from an agreement to purchase securities and with remedies for rescission or, in some jurisdictions, revisions of the purchase price, or damages if the prospectus, prospectus supplements relating to securities purchased by a purchaser and any amendment are not delivered to the purchaser, provided that the remedies are exercised by the purchaser within the time limit prescribed by securities legislation. However, purchasers of CDRs will not have the right to withdraw from an agreement to purchase the CDRs and will not have remedies of rescission or, in some jurisdictions, revisions of the price, or damages for non-delivery of the prospectus supplement, the accompanying prospectus and any amendment thereto relating to CDRs purchased by such purchaser because the prospectus supplement, the accompanying prospectus and any amendment thereto relating to the CDRs purchased by such purchaser will not be delivered as permitted under a decision dated [?], 2021 and granted pursuant to National Policy 11-203 -- Process for Exemptive Relief Applications in Multiple Jurisdictions.
Securities legislation in certain of the provinces and territories of Canada further provides purchasers with remedies for rescission or, in some jurisdictions, revisions of the purchase price or damages if the prospectus, prospectus supplements relating to securities purchased by a purchaser and any amendment contains a misrepresentation (as defined in the applicable legislation), provided that the remedies are exercised by the purchaser within the time limit prescribed by securities legislation. Any remedies under securities legislation that a purchaser of CDRs under a distribution of CDRs may have for rescission, revisions of the purchase price or damages if the prospectus, prospectus supplements relating to securities purchased by a purchaser and any amendment thereto contain a misrepresentation will remain unaffected by the non-delivery and the Exemptive Relief Order except that neither CIBC nor any other person involved in the distribution of CDRs accepts any responsibility for any disclosure provided by any Underlying Issuer (including information included herein or in any Prospectus Supplement that has been extracted from any Underlying Issuer's publicly disseminated disclosure), and accordingly purchasers shall have no remedies or rights in respect of or against CIBC, any dealer or any of their respective affiliates, agents, officers and employees for any misrepresentations that pertain to such disclosure in respect of an Underlying Issuer or Underlying Share.
A purchaser should refer to any applicable provisions of the securities legislation of the purchaser's province and the terms of the Exemptive Relief Order for the particulars of these rights or consult with a legal adviser.
Underwriter's Certificate Requirement
39. Unlike under an ordinary public offering where a subscriber and an underwriter determine the terms of a subscription on a private bilateral basis and the subscriber can reasonably look to the underwriter as owing particular duties to its client, a purchaser of a CDR on a Canadian marketplace will not know in advance the identity of the seller from which it will purchase securities or whether or not such securities are being newly issued. Furthermore, investment dealers are not and will not be involved in the preparation of the prospectus for any Series of CDRs. The Relief Sought in respect of the Underwriter's Certificate Requirement reflects that the role of Dealers participating in CDR Distributions is to facilitate liquidity of the CDR trading market. The Underwriter's Certificate Requirement is not necessary in light of the Dealers' role in CDR Distributions and would introduce a barrier to a diversity of dealers performing such role.
40. Similarly, any requirement to list in a prospectus the Dealers that may be selling newly issued CDRs is not necessary for these same reasons, would introduce an unnecessary barrier to dealers providing liquidity and could inappropriately lead some investors to consider that such Dealers are responsible for the prospectus disclosure or are performing a traditional underwriting role in respect of the CDR issuances. Accordingly, the Relief Sought from the Underwriter Listing Requirement will reflect the role of the Dealers in CDR Distributions and is consistent with the disclosure provided in respect of Exchange-Traded Funds that also obtain relief from the Underwriter's Certificate Requirement given that Exchange-Traded Funds are not subject to a separate Underwriter Listing Requirement.
51-102 Delivery Requirements
41. A reporting issuer is required under NI 51-102 to offer to deliver financial statements and MD&A to the registered holders and beneficial owners of its "voting securities" (i.e., any securities, other than debt securities, carrying a voting right either under all circumstances or under some circumstances that have occurred and are continuing) (the 51-102 Delivery Requirements).
42. The CDRs will not provide CDR holders with any rights to vote in respect of CIBC or its internal governance and management; and voting instructions that may be provided by CDR holders will relate to the property of CDR holders and will be exercised by third-parties with the Filer simply facilitating the communication of such instructions. Accordingly, the Filer has taken the view that it is appropriate to consider that the CDRs will not constitute "voting securities", and accordingly that the 51-102 Delivery Requirements do not apply to CDR Holders, and similarly that other provisions of securities legislation in the Jurisdiction and the Reporting Jurisdictions that require the delivery of proxy statements, management information circulars or any other materials that are not typically provided to holders of debt instruments of an issuer do not apply in respect of the CDRs.
Distribution Time Limit
43. Section 8.2 of NI 41-101 requires that, if securities are being distributed on a best efforts basis, the distribution must cease after a specified period of time (not to exceed 180 days from the date of receipt for the final prospectus).
44. An exception to Distribution Time Limit is provided pursuant to Section 8.1 of NI 41-101 for an investment fund in continuous distribution, but this exception does not apply to CDRs. However, the distribution model of CDRs is similar to that of certain investment funds in continuous distribution, and accordingly, the policy basis for the exception applicable to investment funds in continuous distribution applies equally in the case of the CDR Distributions.
Connected Issuer Requirement
45. Pursuant to Section 2.1(1) of NI 33-105, specified firm registrants are prohibited from acting as direct underwriters for securities issued by a connected issuer or a related issuer of the specified firm registrants unless prescribed disclosure describing potential conflicts of interest arising from the underwriter's dealings with or relationship to the issuer.
46. Given that CDR distributions do not result in the Filer receiving subscription proceeds or other payments from CDR investors, the intended policy basis for the Connected Issuer Requirement does not apply in respect of the Offerings.
47. The Filer's related party status in respect of each of its affiliates that is a specified firm registrant will be disclosed in accordance with the requirements under NI 33-105.
Independent Underwriter Requirement
48. Pursuant to Section 2.1(2) and 2.1(3) of NI 33-105, a specified firm registrant is prohibited from acting as a direct underwriter of an offering if a related issuer of the specified firm registrant is the issuer in the distribution unless an "independent underwriter" (a) purchases the requisite portion of securities (where underwriters purchase the offered securities as principals) or (b) receives the requisite portion of the total agents' fees (where underwriters are acting as agents).
49. The Independent Underwriter Requirement is not workable in the context of CDR Distributions, as these will generally take place by way of open-market transactions and it is not possible for the Filer to know in advance whether any particular independent dealer will distribute a particular proportion of any newly issued CDRs.
48-501 Purchasing Restrictions
50. The stated policy rationale for Rule 48-501 is to prohibit "purchases of or bids for restricted securities in circumstances where there is heightened concern over the possibility of manipulation by those with an interest in the outcome of the distribution or transaction". In particular, an issuer or person selling securities under a prospectus and its affiliates and insiders, as well as any underwriters or other persons acting jointly or in concert with any of them, should not bid for offered securities or induce others to purchase offered securities since such purchases could be used to artificially and temporarily inflate the market price of a security that is the subject of a prospectus offering.
51. The policy rationale for the purchase restrictions in Rule 48-501 does not apply in respect of CDR Offerings because the Filer does not materially benefit from any temporary or artificial increase in the valuation of CDRs. As noted above, the Filer does not receive a subscription payment for CDRs and all or substantially all of the consideration delivered for CDRs is in the form of a fixed number per CDR of Underlying Shares that are deposited with the Custodian for the benefit of the CDR Holders. Accordingly, there is no material risk that any issuer-restricted person or dealer-restricted person will seek to temporarily manipulate the CDR trading price in order to benefit the Filer or any other issuer-restricted person or dealer-restricted person. CDRs should also be recognized as generally not susceptible to manipulation given the CDR creation and security withdrawal features and their linkage to market pricing of the widely-traded Underlying Shares.
52. No exemption from the 48-501 Purchasing Restrictions is available in Part 3 of OSC Rule 48-501 to the Filer's affiliates in respect of anticipated market-making in CDRs (which is a necessary element of maintaining a narrow bid-ask spread for CDRs with pricing that actively tracks the market price of the Underlying Shares).
Decision
The Decision Maker is satisfied that this decision satisfies the test set out in the Legislation for the Decision Maker to make the decision.
The decision of the Decision Maker under the Legislation is that the Relief Sought is granted, provided that:
(a) the Underlying Issuer and Underlying Shares satisfy the Capitalization and Liquidity Standards at the time of listing of the CDRs or, if this is not the case in respect of a Series of CDRs, the Filer has pre-cleared with the OSC a prospectus supplement for the Series and the OSC has not objected to reliance by the Filer on the Relief Sought;
(b) the Filer shall have filed an undertaking that it will not distribute under the Supplemented Prospectus CDRs linked to equity securities that do not satisfy the Capitalization and Liquidity Standards unless it has first pre-filed for clearance the related Prospectus Supplement with the OSC;
(c) the Filer will maintain by way of continuous disclosure a website for the CDR program (the CDR Website) on which it will post for each Series of CDRs:
(i) the Deposit Agreement;
(ii) the CDR Ratio calculated on the immediately preceding Trading Day;
(iii) the current notional forward rate for the Notional FX Hedges;
(iv) the ticker and country of the Underlying Shares and the foreign stock exchange that is the primary trading venue of the Underlying Shares;
(v) all current Prospectus Supplements for the CDRs and all notices provided to CDR Holders in respect of the CDRs; and
(vi) copies of documents incorporated by reference into the current Prospectus for each Series of CDRs or, in respect of applicable continuous disclosure documents of the Filer that are incorporated by reference, a link to a webpage of the Filer which provides such continuous disclosure documents.
(d) the Filer will not cooperate with Underlying Issuers or any persons acting jointly or in concert with any Underlying Issuer so as to permit the CDRs to be used as a financing vehicle by Underlying Issuers or to permit an indirect offering of Underlying Shares into a jurisdiction of Canada and the Offerings will be conducted without the prior knowledge or consent of Underlying Issuers.
(e) the CDRs are issued in exchange for the deposit of a number of Underlying Shares based on the CDR Ratio calculated after acceptance of the related subscription request;
(f) a statement of purchasers' rights described in paragraph 38 is included in the Supplemented Prospectus;
(g) the Filer's related party status in respect of each of its affiliates that is a specified firm registrant that at any time may offer or distribute CDRs will be disclosed in accordance with the requirements under NI 33-105; and
(h) this Decision will terminate upon the coming into force of any legislation or rule of the principal regulator specifically regulating CDRs or similar products.
As to the Relief Sought from the Prospectus Delivery Requirement and the Underwriter's Certificate Requirement:
As to the Relief Sought from the Pricing Requirements, Prospectus Form Requirements, Distribution Time Limit, Connected Issuer Requirement, Independent Underwriter Requirement and the 48-501 Purchasing Restrictions:
"Darren McKall"Manager, Investment Funds & Structured Products BranchOntario Securities Commission
Application File #: 2020/0388