Securities Law

41-201 - Income Trusts and Other Indirect Offerings [NP - Rescinded]

Published Date: 2007-12-21
Effective Date: 2007-12-31
Rescinded Date: 2008-12-15

Concurrently Published:

Table of Contents


Part 1 - Introduction

1.1       What is the purpose of the policy?

1.2       What do we mean when we refer to an income trust in this policy?

1.3       What is an operating entity?

1.4       How is an income trust structured?

1.5       What is an income trust offering?

1.6       How does an indirect offering differ from a direct offering?


Part 2 - Distributable cash

2.1       What is distributable cash?

2.2       Do income trusts provide investors with a consistent rate of return?

2.3       How do the distribution policies of the income trust and the operating entity affect an investor’s rate of return?

2.4       What prospectus cover page disclosure do we expect about distributable cash?

2.5       What disclosure do we expect about non-GAAP financial measures such as distributable cash?

2.6       What are our expectations about the format of the distributable cash reconciliation?

2.7       What disclosure do we expect about the adjustments and assumptions underlying distributable cash?

2.8       When should the estimate of distributable cash be derived from a forecast?


Part 3 - Other disclosure issues

A.        Material debt

3.1       Why are we concerned about material debt?

3.2       What disclosure do we expect about material debt?

3.3       Are agreements relating to the material debt considered to be material contracts of the income trust?

3.4       Do we expect the income trust to include a separate risk factor about the material debt?

B.         Stability ratings

3.5       What is a stability rating?

3.6       Does an income trust need to obtain a stability rating?

3.7       What disclosure do we expect about an income trust’s stability rating?

C.        Executive compensation

3.8       What disclosure do we expect the income trust to provide about executive compensation for the operating entity?

3.9       What disclosure do we expect about the income trust’s management contracts and management incentive plans?

3.10     Do we expect management contracts and management incentive plans to be filed on SEDAR?

D.        Risk factors

3.11     General


Part 4 - Offering - specific issues

A.        Determination of offering price

4.1       What disclosure do we expect about the determination of the price of an income trust’s units?

B.         Prospectus liability

4.2       What is the regulatory framework?

4.3       How does the regulatory framework related to prospectus liability apply to indirect offerings?

4.4       Promoter liability

4.4.1    What is the meaning of promoter?

4.4.2    What constitutes the “business” of the income trust?

4.4.3    What disclosure do we expect about the implications of the operating entity being identified as a promoter?

4.5       Contractual accountability

4.5.1    What accountability for prospectus disclosure is typically assumed by vendors through contractual arrangements?

4.5.2    What are our concerns about the application of the regulatory requirements to indirect offerings?

4.5.3    What disclosure do we expect about the accountability of the vendors?

4.5.4    What are our concerns about the nature and extent of the representations, warranties and indemnities provided by vendors in the acquisition agreement?


Part 5 - Sales and marketing materials

5.1       What are out concerns about sales and marketing materials?

5.2       What information do we expect the green sheets to contain?

5.3       Do we expect income trusts to provide us with copies of their green sheets?


Part 6 - Continuous disclosure - specific issues

6.1       What continuous disclosure do we expect about the operating entity?

6.2       Comparative financial information

6.3       Recognition of intangible assets

6.4       Are “insiders” of the operating entity also insiders of the income trust for purposes of insider reporting obligations?

6.5       MD&A

6.5.1    Risks and uncertainties

6.5.2    Discussion of distributed cash


Part 7 - Corporate governance

7.1       CEO/CFO certification, audit committees, and effective corporate governance

7.2       Broader corporate law concerns


Part 8 - Other issues

8.1       Income trust names