NIN 93/16 - Draft National Policy Statement No. 53 Foreign Issuer Prospectus and Continuous Disclosure System [NIN - Rescinded]
| Published Date: | 1993-08-20 |
|---|---|
| Effective Date: | 1993-08-19 |
Introduction
The Canadian Securities Administrators (the "CSA") are releasing for comment draft National Policy Statement No. 53 (the "Draft Policy"). The Draft Policy sets out the CSA view that it is in the public interest to implement a national policy to facilitate world-class foreign issuers offering securities in Canada as part of an international offering.
The Draft Policy is intended to reduce barriers to entry to the Canadian capital markets for world-class foreign issuers and to provide increased opportunity for investment by Canadian investors in the securities of such issuers while maintaining an appropriate level of investor protection.
Background
The CSA has been advised that the Canadian market for foreign securities is inhibited by the restricted access of Canadian investors to primary distributions. Primary distributions are generally sold at a discount to current market prices and are sold without commissions. To the extent that Canadian investors are excluded from the primary distribution market, they cannot benefit from such pricing. In addition, primary offerings provide for the dissemination of an offering document containing information that might not otherwise be readily available in secondary market transactions alone.
Primary offerings of foreign securities have grown dramatically in recent years and continued expansion is expected given the increasing globalization of investment, trend towards reduced government ownership of major enterprises, liberalization of world economic markets and increasing size and placement capability of major dealers.
It has also been suggested that increased participation by Canadian investors at a retail level may encourage Canadian stock exchange listings which, in turn, may provide increased domestic liquidity for foreign securities.
In global terms, Canada is a relatively small capital market. Historically, the Canadian investor participation in most foreign offerings has represented less than 5% to 10% of the global offering (8% to 13% of the international tranche) when the issue was offered publicly in Canada.
The CSA believe it is important to implement a policy to facilitate world-class foreign issuers offering securities in Canada as part of an international offering.
The Draft Policy is restricted to equity security offerings and is not available for offerings of convertible securities, debt securities or derivative products.
When the Draft Policy is finalized the Canadian securities regulatory authorities will issue blanket rulings and orders to provide the necessary relief.
Theory
One of the basic premises of the Draft Policy is that the securities of the world's most senior issuers have or will have substantial liquidity and market following in the world's most sophisticated capital markets. The Draft Policy defines the world's most sophisticated capital markets as being the markets in Japan, United States, United Kingdom, Germany, Canada, France and Italy (the current G-7 countries). In the aggregate, the stock markets of these countries represent approximately 90% of global market capitalization.
In order to be considered world-class, the Draft Policy requires that the issuer have a market capitalization of Cdn $3 billion and a public float of Cdn $1 billion, both after giving effect to the offering.
The second premise of the Draft Policy is that the document used in Canada must be receipted as a prospectus and will therefore comply with the requirement of full, true and plain disclosure of all material facts. The civil liability provisions of applicable Canadian legislation will apply.
The Draft Policy also preserves the requirements applicable to the exercise of discretion under applicable securities legislation to grant or refuse a receipt for a prospectus. In addition, the securities regulators must be satisfied the continuous disclosure regime which the issuer proposes to use meets certain fundamental requirements.
Under the Draft Policy the Canadian tranche will be limited to 10% of the offering and the issuer must have less than 10% of its equity securities held by Canadian residents. Both of these requirements ensure that Canada is not one of the principal markets for the offering or likely secondary trading.
Request for Comments
The Draft Policy requires that the issuer have less than 10% of its equity securities held by Canadian residents. The CSA invite specific comment on whether this provision is necessary or desirable and, if so, on the methods provided in the Draft Policy for foreign issuers to determine that percentage, particularly where shares are held in bearer form. In the event that commentators find that the tests included in the Draft Policy are not appropriate, they are invited to provide alternatives.
The Draft Policy does not contain a provision requiring that transfer facilities for the issuer be maintained in Canada. The CSA invite specific comment on whether such a provision is necessary or desirable and, if so, how such a provision should be implemented.
The Draft Policy requires that all experts provide the necessary consents. The CSA invite specific comment on whether this provision is necessary or desirable for foreign experts.
Written comment responding to these specific requests for comment, as well as any other aspect of the Draft Policy are invited.
Seven copies of any comment letters should be submitted by September 17, 1993 to:
Canadian Securities Administrators
c/o Office of the Secretary
Ontario Securities Commission
Suite 800, Box 55
20 Queen Street West
Toronto, Ontario
M5H 3S8
Comment letters submitted in response to Requests for Comments are placed in the public file in certain jurisdictions and form part of the public record unless confidentiality is requested. Comment letters will be circulated among the securities regulatory authorities for purposes of finalizing the Draft Policy whether or not confidentiality is requested. Accordingly, although comment letters for which confidentiality is requested will not be placed in the public file, freedom of information legislation may require the securities regulatory authorities in certain jurisdictions to make the comment letters available. Persons submitting comment letters should be aware that the press and members of the public may be able to obtain access to any comment letter.
For further information, please contact any of the following:
Susan I. McCallum Robert Garneau
Director, Corporate Finance Directeur des Opérations financières et de l'Information continue
Ontario Securities Commission Commission des valeurs mobilières du Québec
(416) 593-8248 (514) 873-5326
Catherine E. Wade Rosetta Gagliardi
Deputy Director, Corporate Finance Policy Coordinator
Ontario Securities Commission Commission des valeurs mobilières du Québec
(416) 593-8211 (514) 873-5326
Ava Yaskiel Brenda Benham
Special Assistant, to the Executive Director Acting Executive Director Legal & Policy
Ontario Securities Commission British Columbia Securities Commission
(416) 593-8225 (604) 660-4800
Ron Sczinski Louyse Gauvin
Director of Securities Analysis Policy Advisor
Alberta Securities Commission British Columbia Securities Commission
(403) 427-5201 (604) 660-4800
Dated at Vancouver, British Columbia, on August 19, 1993
Douglas M. Hyndman
Chair