National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Application for exemptive relief to permit issuer and underwriter, acting as agent for the issuer, to enter into an equity distribution agreement to make "at the market" (ATM) distributions of trust units over the facilities of the TSX or another marketplace -- ATM distributions to be made pursuant to shelf prospectus procedures in Part 9 of NI 44-102 Shelf Distributions -- issuer will issue a press release and file agreements on SEDAR -- application for relief from prospectus delivery requirement -- delivery of prospectus not practicable in circumstances of an ATM distribution -- relief from prospectus delivery requirement has effect of removing two-day right of withdrawal and remedies of rescission or damages for non-delivery of the prospectus -- application for relief from certain prospectus form requirements -- relief granted to permit modified forward-looking certificate language -- relief granted on terms and conditions set out in decision document -- Issuer required additional flexibility to take advantage of market opportunities to efficiently raise capital pursuant to an ATM distribution over Canadian marketplaces -- 10% aggregate cap and 25% daily cap conditions not included in decision -- decision will terminate 25 months after the issuance of a receipt for the shelf prospectus -- decision and application also held in confidence by decision makers until the earlier of a public announcement of an ATM offering, the entering into of an equity distribution agreement, waiver of confidentiality or 90 days from the date of the decision.
Applicable Legislative Provisions
Securities Act, R.S.O. 1990, c. S.5, as am., ss. 71 and 147.
National Instrument 44-101 Short Form Prospectus Distributions, Part 8 and Item 20 of Form 44-101F1.
National Instrument 44-102 Shelf Distributions, ss. 6.3 and 6.7, Part 9 and ss. 2.1 and 2.2 of Appendix A.
National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions.
August 7, 2020
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 CHEMTRADE LOGISTICS INCOME FUND (THE ISSUER) AND BMO NESBITT BURNS INC. (THE AGENT AND TOGETHER WITH THE ISSUER, THE FILERS)
The Ontario Securities Commission, being the principal regulator in the Jurisdiction, has received an application (the Application) from the Filers for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) for the following relief (the Exemptions Sought):
(a) that the requirement that a dealer, not acting as agent of the purchaser who receives an order or subscription for a security offered in a distribution to which the prospectus requirement applies, send or deliver to the purchaser the latest prospectus (including the applicable prospectus supplement(s) in the case of a base shelf prospectus) and any amendment to the prospectus (the Prospectus Delivery Requirement) does not apply to the Agent or any other TSX participating organization or other marketplace participant acting as selling agent for the Agent (each, a Selling Agent) in connection with any at-the-market distribution (each, an ATM Distribution and collectively, the ATM Offering), as defined in National Instrument 44-102 -- Shelf Distributions (NI 44-102) of trust units (Units) of the Issuer pursuant to an equity distribution agreement (the Equity Distribution Agreement) to be entered into between the Issuer and the Agent;
(b) that the requirements to include in a prospectus supplement or an amendment thereto:
(i) a forward-looking issuer certificate of the Issuer in the form specified in section 2.1 or section 2.4, as applicable, of Appendix A to NI 44-102;
(ii) a forward-looking underwriter certificate in the form specified by section 2.2 or section 2.4, as applicable, of Appendix A to NI 44-102; and
(iii) a statement respecting purchasers' statutory rights of withdrawal and remedies of rescission or damages in substantially the form prescribed in Item 20 of Form 44-101F1 -- Short Form Prospectus;
(collectively, the Prospectus Form Requirements) do not apply to the Prospectus Supplement (as defined below) or an amendment thereto provided that the Issuer includes in the Prospectus Supplement or an amendment thereto the form of issuer certificate and form of underwriter certificate and includes in the Prospectus Supplement or an amendment thereto the revised description of a purchaser's statutory rights of withdrawal and remedies for rescission or damages described below, in each case (other than with respect to the underwriter certificate) superseding and replacing the corresponding language in the Shelf Prospectus solely with regards to the ATM Offering; and
(c) that the requirement under subsection 9.1(1) of NI 44-102, that limits the number of Units that the Issuer may issue and sell pursuant to any ATM Distribution to an amount that does not exceed 10% of the aggregate market value of the then outstanding Units calculated in accordance with section 9.2 of NI 44-102 (the 10% Aggregate Cap), does not apply to the Issuer in connection with the ATM Offering.
The principal regulator has also received a request from the Filers for a decision that the Application and this decision (together, the Confidential Material) be kept confidential and not be made public until the earliest of: (a) the date on which the Filers publicly announce the ATM Offering, (b) the date on which the Filers first enter into an Equity Distribution Agreement; (c) the date any of the Filers advise the principal regulator that there is no longer any need for the Confidential Material to remain confidential; and (d) the date that is 90 days after the date of this decision (the Confidentiality Relief).
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):
(a) the Ontario Securities Commission is the principal regulator for this Application; and
(b) the Filers have provided notice that subsection 4.7(1) of Multilateral Instrument 11-102 -- Passport System (MI 11-102) is intended to be relied upon in British Columbia, Alberta, Saskatchewan, Manitoba, Quebec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, Nunavut, Yukon and Northwest Territories (collectively the Passport Jurisdictions and together with the Jurisdiction, the Reporting Jurisdictions).
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. All dollar figures in this decision refer to Canadian dollars.
This decision is based on the following facts represented by the Filers.
1. The Issuer is a limited purpose trust governed by the laws of the Province of Ontario. The head office of the Issuer is located at 155 Gordon Baker Road, Suite 300, Toronto, Ontario, M2H 3N5.
2. The Issuer is a reporting issuer in each province and territory of Canada and is not in default of securities legislation in any jurisdiction of Canada.
3. The Units are listed on the Toronto Stock Exchange (the TSX).
4. The Agent is a corporation incorporated under the laws of Canada with its head office in Toronto, Ontario.
5. The Agent is registered as an investment dealer under the securities legislation in each province and territory of Canada, is a member of the Investment Industry Regulatory Organization of Canada and is a participating organization of the TSX.
6. The Agent is not in default of any requirements under applicable securities legislation in any of the jurisdictions of Canada.
Proposed ATM Distribution
7. Subject to mutual agreement on terms and conditions, the Filers propose to enter into the Equity Distribution Agreement for the purpose of the ATM Offering involving the periodic sale of Units by the Issuer through the Agent, as agent, under the shelf prospectus procedures prescribed by Part 9 of NI 44-102.
8. The Issuer filed a short form base shelf prospectus in each of the Reporting Jurisdictions on July 10, 2020 providing for the distribution from time to time of Units and such other securities as the Issuer deems appropriate (the Shelf Prospectus). Prior to making an ATM Distribution, the Issuer will have filed in each of the Reporting Jurisdictions a prospectus supplement describing the terms of the ATM Offering, including the terms of the Equity Distribution Agreement, and otherwise supplementing the disclosure in the Shelf Prospectus (the Prospectus Supplement, and together with the Shelf Prospectus as supplemented or amended and including any documents incorporated by reference therein (which shall include any Designated News Release as defined below), the Prospectus).
9. If the Equity Distribution Agreement is entered into, the Issuer will immediately do both of the following:
(a) issue and file a news release pursuant to section 3.2 of NI 44-102 announcing the Equity Distribution Agreement and indicating that the Shelf Prospectus and the Prospectus Supplement have been filed on SEDAR and specifying where and how purchasers of Units under the ATM Offering may obtain copies; and
(b) file the Equity Distribution Agreement on SEDAR.
10. The Issuer will conduct ATM Distributions only through the Agent (as agent) directly or via a Selling Agent, and only through methods constituting "at-the-market distributions" within the meaning of NI 44-102, including sales made on (a) the TSX or (b) another marketplace (as defined in National Instrument 21-101 -- Marketplace Operation) upon which the Units are listed, quoted or otherwise traded (each, a Marketplace).
11. The Issuer may sell Units on a Marketplace pursuant to an ATM Distribution on any trading day that may exceed 25% of the trading volume of the Units on all Marketplaces on that day in order to provide the Issuer with additional flexibility to take advantage of market opportunities that may exist for efficiently raising capital pursuant to ATM Distributions over Marketplaces.
12. The Agent will act as the sole agent of the Issuer in connection with an ATM Distribution directly or through one or more Selling Agents on the TSX or any other Marketplace, and will be paid an agency fee or commission by the Issuer in connection with such sales. If sales are effected through a Selling Agent, the Selling Agent will be paid a seller's commission for effecting the trades on behalf of the Agent. The Agent will sign an agent's certificate, in the form set out in paragraph 28 below, in the Prospectus Supplement.
13. A purchaser's rights and remedies under applicable securities legislation against the Agent, as agent of an ATM Distribution through a Marketplace, will not be affected by a decision to effect the sale directly or through a Selling Agent.
14. The Equity Distribution Agreement will provide that, at the time of each sale of Units pursuant to an ATM Distribution, the Issuer will represent to the Agent that the Prospectus (which shall include any news release that has been designated and filed as a Designated News Release (as defined below)) and any subsequent amendment to the Prospectus, contains full, true and plain disclosure of all material facts relating to the Issuer and the Units being distributed. The Issuer will, therefore, be unable to proceed with sales pursuant to an ATM Distribution when it is in possession of undisclosed information that would constitute a material fact or a material change in respect of the Issuer or the Units.
15. During the period after the date of the Prospectus Supplement and before the termination of any ATM Distribution, if the Issuer disseminates a news release disclosing information that, in the Issuer's determination, constitutes a "material fact" (as such term is defined in the Legislation), the Issuer will identify such news release as a "designated news release" for the purposes of the Prospectus. This designation will be made on the face page of the version of such news release filed on SEDAR (any such news release, a Designated News Release). The applicable Prospectus Supplement will provide that any such Designated News Release will be deemed to be incorporated by reference into the Prospectus. A Designated News Release will not be used to update disclosure in the Prospectus by the Issuer in the event of a "material change" (as such term is defined in the Legislation).
16. If, after the Issuer delivers a sell notice to the Agent directing the Agent to sell Units on the Issuer's behalf pursuant to the Equity Distribution Agreement (a Sell Notice), the sale of the Units specified in the Sell Notice, taking into consideration prior sales under the ATM Offering, would constitute a material fact or material change, the Issuer will suspend sales under the Equity Distribution Agreement until either: (a) it has filed a Designated News Release or material change report, as applicable, or amended the Prospectus; or (b) circumstances have changed such that a sale would no longer constitute a material fact or material change.
17. In determining whether the sale of the number of Units specified in a Sell Notice would constitute a material fact or material change, the Issuer will take into account a number of factors, including, without limitation:
(a) the parameters of the Sell Notice, including the number of Units proposed to be sold and any price or timing restrictions that the Issuer may impose with respect to the particular ATM Distribution;
(b) the percentage of the outstanding Units that the number of Units proposed to be sold pursuant to the Sell Notice represents;
(c) sales under earlier Sell Notices;
(d) trading volume and volatility of the Units;
(e) recent developments in the business, operations or capital of the Issuer; and
(f) prevailing market conditions generally.
18. It is in the interest of the Issuer and the Agent to minimize the market impact of sales under an ATM Distribution. Therefore, the Agent will closely monitor the market's reaction to trades made on any Marketplace pursuant to an ATM Distribution in order to evaluate the likely market impact of future trades. The Agent has experience and expertise in managing sell orders to limit downward pressure on trading prices. If the Agent has concerns as to whether a particular sell order placed by the Issuer may have a significant effect on the market price of the Units, the Agent will recommend against effecting the trades pursuant to the sell order at that time.
Disclosure of Units Sold in ATM Offering
19. The Issuer will disclose the number and average price of Units sold pursuant to ATM Distributions, as well as gross proceeds, commissions and net proceeds, in its annual and interim financial statements and management discussion and analysis filed on SEDAR.
Prospectus Delivery Requirement
20. 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.
21. Delivery of a prospectus is not practicable in the circumstances of an ATM Distribution, because neither the Agent nor a Selling Agent, as applicable, effecting the trade will know the identity of the purchasers.
22. The Prospectus will be filed and readily available electronically via SEDAR to all purchasers under ATM Distributions. As stated in paragraph 9 above, the Issuer will issue a news release that specifies where and how copies of the Prospectus may be obtained.
23. The liability of an issuer or an underwriter (or others) 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, 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
24. Pursuant to the Legislation, an agreement to purchase a security in respect of a distribution to which the prospectus requirement applies is not binding upon the purchaser if the dealer from whom the purchaser purchases the security receives, 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, a notice in writing evidencing the intention of the purchaser not to be bound by the agreement of purchase and sale (the Withdrawal Right).
25. 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).
26. Neither the Withdrawal Right nor the Right of Action for Non-Delivery is workable in the context of the ATM Offering because of the impracticability of delivering the Prospectus to a purchaser of Units thereunder.
Modified Certificates and Statements
27. To reflect the fact that the ATM Offering is a continuous distribution, the Prospectus Supplement and any amendment thereto will include the following issuer certificate (with appropriate modifications in respect of the filing of an amendment prescribed by section 2.4 of Appendix A to NI 44-102), such issuer certificate to supersede and replace the issuer certificate in the Shelf Prospectus solely with regard to the ATM Offering:
The short form prospectus, together with the documents incorporated in the prospectus by reference, as supplemented by the foregoing, as of the date of a particular distribution of securities under the prospectus, will, as of that date, constitute full, true and plain disclosure of all material facts relating to the securities offered by the prospectus and this supplement as required by the securities legislation of each of the provinces and territories of Canada.
28. To reflect the fact that the ATM Offering is a continuous distribution, the Prospectus Supplement and any amendment thereto will include the following underwriter certificate (with appropriate modifications in respect of the filing of an amendment prescribed by section 2.4 of Appendix A to NI 44-102):
To the best of our knowledge, information and belief, the short form prospectus, together with the documents incorporated in the prospectus by reference, as supplemented by the foregoing, as of the date of a particular distribution of securities under the prospectus, will, as of that date, constitute full, true and plain disclosure of all material facts relating to the securities offered by the prospectus and this supplement as required by the securities legislation of each of the provinces and territories of Canada.
29. A different statement of purchasers' rights than that required by the Legislation is necessary so that the Prospectus Supplement will accurately reflect the relief granted from the Prospectus Delivery Requirement. Accordingly, the Prospectus Supplement will state the following, with the date reference completed:
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 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 Units under an at-the-market distribution by the Issuer will not have the right to withdraw from an agreement to purchase the Units 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 Units purchased by such purchaser because the prospectus supplement, the accompanying prospectus and any amendment thereto relating to the Units purchased by such purchaser will not be delivered as permitted under a decision dated • 2020 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 price or damages if the prospectus, prospectus supplements and any amendment thereto relating to securities purchased by a purchaser contains a misrepresentation, 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 Units under an at-the-market distribution by the Issuer may have against the Issuer or the Agent for rescission or, in some jurisdictions, revisions of the price, or damages if the prospectus supplement, the accompanying prospectus and any amendment thereto relating to securities purchased by a purchaser and any amendment contain a misrepresentation will remain unaffected by the non-delivery and the decision referred to above.
A purchaser should refer to any applicable provisions of the securities legislation of the purchaser's province or territory and the decision referred to above for the particulars of these rights or consult with a legal adviser.
30. The Prospectus Supplement will disclose that, solely with regards to the ATM Offering, the statement prescribed in paragraph 29 above supersedes and replaces the statement of purchasers' rights in the Shelf Prospectus.
The principal regulator is satisfied that this decision satisfies the test set out in the Legislation for the principal regulator to make the decision.
The decision of the principal regulator under the Legislation is that the Exemptions Sought are granted, provided that:
(a) during the 60-day period ending not earlier than 10 days prior to the commencement of an ATM Offering, the Units have traded, in total, on one or more Marketplaces, as reported on a consolidated market display:
(i) an average of at least 100 times per trading day; and
(ii) with an average trading value of at least $1,000,000 per trading day;
(b) the Issuer complies with the disclosure requirements set out in paragraphs 19 and 27 through 30 above; and
(c) the Issuer and Agent respectively comply with the representations made in paragraphs 9, 10, 12 and 14 through 18 above.
This decision will terminate on August 10, 2022 (being the date that is 25 months from the date of the receipt for the Shelf Prospectus).
The further decision of the principal regulator is that the Confidentiality Relief in respect of the Exemptions Sought is granted.
As to the Exemptions Sought from the Prospectus Delivery Requirement and the Confidentiality Relief:
"Cecilia Williams"CommissionerOntario Securities Commission"Mary Anne De Monte-Whelan"CommissionerOntario Securities Commission
As to the Exemptions Sought from the Prospectus Delivery Requirement, the Prospectus Form Requirements, the 10% Aggregate Cap and the Confidentiality Relief:
"Winnie Sanjoto"Manager, Corporate FinanceOntario Securities Commission