Final Rule: NI - 62-102 - Disclosure of Outstanding Share Data

NOTICE OF RULE
UNDER THE SECURITIES ACT
NATIONAL INSTRUMENT 62-102
DISCLOSURE OF OUTSTANDING SHARE DATA

Notice of Rule

The Commission has, under section 143 of the Securities Act (the "Act"), made National Instrument 62-102 Disclosure of Outstanding Share Data (the "National Instrument") as a Rule under the Act.

The National Instrument and the material required by the Act to be delivered to the Minister of Finance were delivered on December 14, 1999. If the Minister does not approve the National Instrument, reject the National Instrument or return it to the Commission for further consideration by February 28, 2000, or if the Minister approvesthe National Instrument, the National Instrument will come into force, pursuant to section 4.1 of the National Instrument, on March 15, 2000.

The National Instrument has been made a rule concurrently with National Instrument 62-101 Control Block Distribution Issues and National Instrument 62-103 The Early Warning System and Related Take-over Bid and Insider Reporting Issues (collectively, the "Early Warning Instruments").

The National Instrument is an initiative of the Canadian Securities Administrators ("CSA"), and the NationalInstrument is expected to be adopted as a rule in each of British Columbia, Alberta, Manitoba, Ontario and NovaScotia, as a Commission regulation in Saskatchewan, and as a policy in all other jurisdictions represented by theCSA.

The CSA published for comment a draft of the National Instrument, and the other Early Warning Instruments, inSeptember 1998.⁽¹⁾ During the comment periods on the Early Warning Instruments, the CSA received submissionsfrom a number of commenters. Three commenters commented specifically on National Instrument 62-102. Thenames of these commenters and the summary of their comments, together with the CSA responses to thosecomments, are contained in Appendix A of this Notice. Reference should be made to the Notice of Rule for each ofNational Instruments 62-101 and 62-103 for a summary and discussion of the specific comments on thoseinstruments. In addition, some of the comments related generally to the Early Warning Instruments; thosecomments are summarized and discussed in the Notice of Rule for National Instrument 62-103.

The version of National Instrument 62-102 published in 1998 is referred to in this Notice as the "1998 Draft".

As the result of consideration of the comments, the CSA have made a number of minor amendments to NationalInstrument 62-102 and the other Early Warning Instruments. However, as these changes are not material, the CSAare not republishing those instruments for a further comment period.

Substance and Purpose of the National Instrument

The primary purpose of the National Instrument is to ensure reliable public dissemination by reporting issuers of thedesignation and number or principal amount of outstanding securities of the reporting issuer. Reliable disclosure isessential for the purposes of the early warning requirements and the alternative monthly reporting system, containedin National Instrument 62-103.

Summary of Changes to the National Instrument from the 1998 Draft

This section describes the substantive changes made in the National Instrument from the 1998 Draft. For a detailedsummary of the contents of the 1998 Draft, reference should be made to the notice that was published with the 1998Draft.

Section 4.1 has been added to provide that the National Instrument comes into force on March 15, 2000.

Text of National Instrument

The text of the National Instrument follows.

DATED: December 17, 1999

APPENDIX A
SUMMARY OF COMMENTS RECEIVED
ON
DRAFT NATIONAL INSTRUMENT 62-102
AND
RESPONSE OF THE CANADIAN SECURITIES ADMINISTRATORS

1. INTRODUCTION

On September 4, 1998, the Canadian Securities Administrators (the "CSA") published for comment NationalInstrument 62-102 Disclosure of Outstanding Share Data. National Instrument 62-102 was published concurrentlywith National Instrument 62-101 Control Block Distribution Issues and National Instrument 62-103 The EarlyWarning System and Related Take-over Bid and Insider Reporting Issues.

In this Notice, the version of the National Instrument 62-102 published in September 1998 is called the "1998 Draft"and the version published with this Notice is called the "National Instrument". National Instruments 62-101, 62-102and 62-103 are collectively called the "Early Warning Instruments".

The CSA received three submissions on the 1998 Draft from the following three commenters:

• - Canadian Bankers Association ("CBA")
• - The Investment Funds Institute of Canada ("IFIC")
• - Simon Romano ("Romano")

Copies of the comment letters may be viewed at the office of Micromedia, 20 Victoria Street, Toronto, Ontario (416)312-5211 or (800) 387-2689; the office of the British Columbia Securities Commission, 200-865 Hornby Street,Vancouver, British Columbia (604) 899-6660; the office of the Alberta Securities Commission, 410-3005th Avenue S.W., Calgary, Alberta (403) 297-6454; and the office of the Commission des valeurs mobilières duQuébec, Stock Exchange Tower, 800 Victoria Square, 22nd Floor, Montréal, Québec (514) 940-2150.

In addition, the CSA received a number of comments on National Instrument 62-101 and 62-103, which aresummarized and discussed in the Notices of Rule for those National Instrument published concurrently with thisNotice. A number of the comments related generally to the Early Warning Instruments; reference should be made tothe Notice of Rule for National Instrument 62-103, which contains a summary and discussion of those comments.

The CSA have considered the comments received and thank all commenters for providing their comments.

The following is a summary of the comments received, together with the CSA's responses and, where applicable, theproposed changes in response to the comments. Terms used in this summary that are defined in the NationalInstrument have the meanings ascribed to them in that Instrument.

2. COMMENTS

General

IFIC, in commenting on the Early Warning Instruments generally, stated that the regime for disclosure of outstandingshare data and the reliance that can be placed on that information, is extremely helpful.

Special Warrants and Convertible Securities

IFIC commented that, since 1996, securities regulatory authorities have allowed securityholders to "look through"special warrants to the actual ownership they represent of a reporting issuer. IFIC recommended that this approachbe carried forward in the National Instrument.

CSA Response

The CSA have not made special provision for special warrants in the National Instrument and believe thatoutstanding special warrants should be disclosed in accordance with the requirements of section 2.1, therebyensuring that the information about the number of special warrants outstanding and the number of securities forwhich they are exercisable is made public.

Investment Funds

The CBA sought clarification about the applicability of the National Instrument to investment funds.

CSA Response

The National Instrument will apply to investment funds to the same extent and on the same basis that it will apply toother issuers.

Section 2.1

Romano stated that paragraph 2.1(1)(b) refers to interim financial statements "sent" to securityholders, and askedwhether this takes into account that under National Policy Statement No. 41-related deemed rule or blanket relief,these reports may not need to be sent to all securityholders. Romano commented that perhaps a reference to"filing" rather than "sent" would be sufficient in this paragraph.

CSA Response

The CSA do not believe that the proposed change is necessary. It is noted that the provision does not require thesupplement to be sent to "all" securityholders.

NATIONAL INSTRUMENT 62-102
DISCLOSURE OF OUTSTANDING SHARE DATA
TABLE OF CONTENTS

PART TITLE

 

PART 1 INTERPRETATION
1.1 Interpretation

PART 2 DISCLOSURE OF OUTSTANDING SHARE DATA
2.1 Disclosure of Outstanding Share Data
2.2 Relief

PART 3 EXEMPTION
3.1 Exemption

PART 4 EFFECTIVE DATE
4.1 Effective Date

 

NATIONAL INSTRUMENT 62-102

DISCLOSURE OF OUTSTANDING SHARE DATA

PART 1 INTERPRETATION

1.1 Interpretation - Terms defined or interpreted in National Instrument 62-103 The Early Warning System andRelated Take-over Bid and Insider Reporting Issues and used in this Instrument have the respective meaningsascribed to them in National Instrument 62-103.

PART 2 DISCLOSURE OF OUTSTANDING SHARE DATA

2.1 Disclosure of Outstanding Share Data

(1) A reporting issuer shall include the disclosure required by this section in

(a) its annual and interim financial statements filed under securities legislation, or

(b) a supplement to each of its annual and interim financial statements filed under securitieslegislation, if the supplement is filed and sent to securityholders with the applicable annual andinterim financial statements.

(2) The disclosure prepared by a reporting issuer under this section shall be prepared as of the latestpracticable date and shall include disclosure as of that date.

(3) The disclosure prepared by a reporting issuer under this section shall consist of the designation andnumber or principal amount of

(a) each class and series of voting or equity securities of the reporting issuer that are outstanding;

(b) each class and series of securities of the reporting issuer that are outstanding and that areconvertible into, or exercisable or exchangeable for, voting or equity securities of the reportingissuer; and

(c) to the extent determinable, each class and series of voting or equity securities of the reportingissuer into which, or for which, any outstanding securities of the reporting issuer are convertible,exercisable or exchangeable.

2.2 Relief - Section 2.1 does not apply to a reporting issuer that is not incorporated, continued or organized underthe laws of Canada or a jurisdiction if

(a) both

(i) the number of voting or equity securities of each class of the reporting issuer held by registeredor beneficial security holders in Canada is less than 10 per cent of the outstanding securities ofthe class, and

(ii) the reporting issuer publicly reports outstanding share information periodically; or

(b) the reporting issuer

(i) has a class of securities registered under section 12(b) or 12(g) of the 1934 Act or is required tofile reports under section 15(d) of the 1934 Act,

(ii) reports outstanding share information in compliance with the 1934 Act, and

(iii) files a copy of all filings made under the 1934 Act promptly after their filing with the SEC.

PART 3 EXEMPTION

3.1 Exemption

(1) The regulator or the securities regulatory authority may grant an exemption to this Instrument, in wholeor in part, subject to such conditions or restrictions as may be imposed in the exemption.

(2) Despite subsection (1), in Ontario only the regulator may grant such an exemption.

PART 4 EFFECTIVE DATE

4.1 Effective Date - This Instrument comes into force on March 15, 2000.

 

 

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1. ¹ In Ontario, at (1998) 21 OSCB 5645.