CSA Backs Away from Early Warning Proposals

par Andrew Rickard | October 15 2014 07:07AM

The Canadian Securities Administrators (CSA) have decided not to proceed with many of the amendments they had proposed in their draft regulations governing early warning reporting for take-over and issuer bids.

In draft amendments published in March 2013, the CSA proposed a lower early warning reporting threshold of 5%, that any decreases in ownership of 2% or more of securities be disclosed, and that early warning news releases and reports also be enhanced. Regulators also wanted to see certain hidden ownership and empty voting arrangements revealed, and restrict the use of the alternative monthly reporting system.

In a notice published on October 10, the CSA says it received more than 70 letters from various market participants on these draft amendments, and that the majority of them raised concerns about problems that the regulatory changes might cause if implemented.

Commenters pointed out, among other things, that the Canadian market has smaller issuers and limited liquidity, and that the proposed amendments could make it difficult for investors to rapidly accumulate or reduce a large position. The CSA says there were also concerns about the significant administrative and compliance burden the additional reporting obligations would entail.

"Based on comments received and our further consideration, we have decided not to proceed with certain of the Draft Amendments, including the lower early warning reporting threshold of five per cent," says CSA chair Bill Rice. "The final amendments, while not as extensive as the 2013 CSA proposals, are intended to address certain key issues and enhance the quality and integrity of the early warning reporting regime in a manner that is appropriate for the Canadian capital markets."

The CSA intends to publish the final amendments in the second quarter of 2015.