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Early Warning Report

By: Mujir A. Muneeruddin | Regulatory Compliance | April 15, 2016

On May 9th, 2016 legislative and regulatory amendments will come into force in respect of the Early Warning System (subject to applicable legislative and regulatory approvals). In summary, while the early warning threshold as to ownership of the securities of a reporting issuer did not change from 10% (the "Threshold"), there were nonetheless a number of substantive changes. For example, disclosure will now be required when a securityholder’s ownership, control or direction falls below the Threshold or when such decreases by 2% or more. Other changes include, for example:

  • requiring an early warning report to be certified and signed;
  • requiring more detailed disclosure in the early warning report such as the intentions of the acquiror and the purpose of the transaction;
  • requiring disclosure by acquirors of any interest in a related financial instrument, a securities lending arrangement and other agreement, arrangement or understanding that has the effect of altering the acquiror’s economic exposure to the applicable class of securities;
  • clarifying the timeframe to issue and file a news release and an early warning report;
  • exempting lenders from having to count securities lent or transferred towards the Threshold (provided the securities were lent pursuant to a specified securities lending arrangement);
  • exempting borrowers from having to count securities borrowed towards the Threshold (provided the securities were acquired as part of a short sale, and will be disposed of no later than 3 business days from the date of the transfer or loan); and
  • making the alternative monthly reporting (AMR) system unavailable to eligible institutional investors (EIIs) (i.e. those who engage in proxy battles to contest director elections or with respect to reorganizations, amalgamations, mergers, arrangements or similar corporate actions).

For more information, kindly refer to [http://www.osc.gov.on.ca/documents/en/Securities-Category6/csa_20160225_62-104_early-warning-system-take-over-bids.pdf]



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