Investor Alert:
CIRO is issuing a warning to Canadian investors regarding Canada Token Trade.
This Notice provides guidance, which is effective on March 1, 2023, on the process to be followed by a Participant or Access Person seeking to obtain from IIROC either:
Background
Rule 11.1 of UMIR provides that IIROC may exempt a particular transaction from the application of a provision of UMIR, provided that such exemption:
In addition, one of the primary roles of the Market Regulation Policy Department is to assist in the administration of UMIR by providing Participants, Access Persons, and / or advisors acting on their behalf with interpretations of UMIR provisions in a responsive and timely manner.
Seeking an Interpretation
A Participant, Access Person, or advisor acting on behalf of either may contact Market Regulation Policy by e-mail to seek an interpretation of one or more UMIR provisions to [email protected].
If the interpretation sought relates to a particular transaction, Market Regulation Policy staff may require that details of the transaction (and related transactions) be provided (e.g. the name of the security, pricing, timing and parties to the transaction). Depending upon the complexity of the issues presented, Market Regulation Policy staff may seek additional information.1
Market Regulation Policy staff may provide an interpretation over the telephone or, if more appropriate, in writing via e-mail.
General Application Procedure for Exemption Requests
Anyone seeking to obtain an exemption from a provision of UMIR should contact Market Regulation Policy staff by e-mail at [email protected]. At a minimum, Market Regulation Policy staff will require the following information:
We have provided templates at Appendix A for certain exemption requests to help ensure the required information is provided to us. The use of these templates is not mandatory, however they are meant to serve as a useful tool when preparing an exemption request.
In some cases, Market Regulation Policy staff may request additional information to assist in their decision.
Market Regulation Policy staff may deliver an exemption ruling over the telephone or with a short e-mail message. Regardless of whether an exemption has been granted or denied, Market Regulation Policy staff will follow up with a more formal written ruling in a timely fashion. The formal ruling will include the following:
In those cases where an exemption is not required, Market Regulation Policy staff will deliver a clarification or interpretation of UMIR as necessary. Market Regulation Policy staff may also refer a Participant or Access Person to previously issued guidance.2
Exemptions granted by Market Regulation Policy staff apply to the specific transaction discussed. An exemption should never be considered to be a “blanket exemption” applicable to similar or other situations.3
Regulatory Exemption from Requirement for Trades to be on a Marketplace
One of the most common exemptions requested from Market Regulation Policy staff is approval for a Participant to act as principal or agent in respect of a trade which will be completed “off-marketplace” in accordance with Rule 6.4(2)(b). IIROC is prepared to grant an exemption from this requirement if the execution of the trade on a marketplace would be:
Before seeking an exemption to complete a transaction off-marketplace, a Participant should determine whether it will be undertaking the transaction as principal or agent. If the Participant is merely performing an “administrative” function, an exemption under Rule 6.4 is not required.4
The following are examples of exemptions that may be granted by IIROC to a Participant or Access Person.
Exempt Distribution from Control
Where a controlling shareholder of an issuer wishes to trade securities of that issuer, the shareholder may do so in accordance with National Instrument 45-102 (NI 45-102). NI 45-102 provides an exemption from prospectus requirements for a distribution from control that satisfies certain conditions.
Form 45-102F1, which the seller must file at least seven days before the first trade, must disclose whether the securities are to be sold privately or on a marketplace. If the securities are to be sold privately, the transaction cannot be completed on a marketplace and a Participant will be granted an exemption to act as underwriter or agent when completing the distribution “off-marketplace”. If the Form 45-102F1 discloses that the distribution will occur on a marketplace, Market Regulation Policy staff nonetheless may permit the sales by the controlling shareholder to be completed by a Participant, as underwriter or agent, “off-marketplace” if the completion of the distribution on a marketplace would be considered disruptive to a “fair and orderly market”. In addition to the information listed above under “General Application Procedure”, Market Regulation Policy staff will require the name of the controlling shareholder and written confirmation that the transactions comply with the terms of the applicable securities legislation and NI 45-102 – see Template 2 in Appendix A for more information.
Exempt Take-over Bid
A take-over bid5 may be exempt from the formal take-over bid requirements if it complies with the conditions set out in Part XX of the Securities Act (Ontario) and/or NI 62-104.
In those circumstances where compliance with these conditions requires that the purchases made by the offeror not take place on a marketplace,6 Market Regulation Policy staff will grant an exemption to permit the purchases to be completed by a Participant, as underwriter or agent, “off-marketplace”.
In addition to the information listed above under “General Application Procedure”, Market Regulation Policy staff will require the name of the offeror and written confirmation that the transaction complies with the terms of the applicable securities legislation – see Template 3 in Appendix A for more information.
Trades by a Controlling Shareholder under a Normal Course Issuer Bid
Where an issuer wishes to complete a normal course issuer bid through the facilities of a marketplace, the issuer will often seek an exemption from the rules of the marketplace to permit it to purchase shares from its controlling shareholder under the bid. This is done so that the interest of the controlling shareholder remains at the level it held prior to the commencement of the normal course issuer bid.
Typically, issuers intend that shares purchased by them from the controlling shareholder on a particular day will be at a price equal to the volume-weighted average price of purchases made by the issuer on the marketplace from shareholders other than the controlling shareholder on that day. This method usually requires that the purchases made by the issuer from the controlling shareholder must be completed by a Participant by means other than the entry of orders on the marketplace.
In these circumstances, Market Regulation Policy staff will grant an exemption to permit the purchases by the issuer from the controlling shareholder to be completed by a Participant “off-marketplace”. In addition to the information listed above under “General Application Procedure”, Market Regulation Policy staff will require written confirmation that the issuer has complied with the terms of the approval of the normal course issuer bid that may be established by the marketplace.
Certain Designated Trades as Principal
Where a Participant seeks to act as principal with respect to a “designated trade”7 under UMIR that involves a distribution to clients of a significant block of shares, the Participant must first seek an exemption from IIROC pursuant to Market Integrity Notice 2006-009 - Guidance – Trades to be on a Marketplace When Acting as Agent (March 24, 2006) – see Template 1 in Appendix A for more information.
Contact Information
Please contact Market Regulation Policy staff by email at [email protected]:
For all other general Market Regulation Policy inquiries, please contact Market Regulation Policy staff by email at [email protected].
Applicable Rules
This Guidance Note relates to the following provisions of UMIR and IIROC Rules:
Previous Guidance Notes
This Guidance repeals and replaces the following Guidance as shown:
Related Documents
This Guidance is related to the following Notices:
Appendix A – Templates for Certain UMIR Exemption Applications
Template 1 – Exemption for a Take-On Trade / Designated Trade
Information Required | Applicant to Provide: |
---|---|
Name of the Participant and Contact Person | |
UMIR provision from which the exemption is sought | Exemption under UMIR 6.4(2)(b) for the first leg of the transaction to allow the Participant to take on a block of securities from the seller off-marketplace |
Reason for exemption | |
Name and symbol of security | |
Listing Exchange | |
Seller | |
Indicate whether the seller is currently an insider of the issuer. If so, provide the seller’s percentage holding of the issuer before and after the proposed transaction. | |
Number of securities | |
Target date for proposed transaction | |
Price at which the “take-on” trade will be executed (or the price range if the take-on price has not been determined) and discount to current market. | |
Intended price of the “distribution” (or the highest price in a range of possible distribution prices if the price of the distribution has not been determined) | |
Describe the “marketing efforts” undertaken by the Participant prior to the take-on trade | |
Number of client accounts that have been solicited or which the Participant intends to solicit to purchase the securities | |
Number and volume of orders from committed buyers prior to the proposed “take-on” trade | |
Indicate whether any potential buyers are currently insiders or would become insiders after the proposed transaction. If so, provide the percentage ownership for each buyer before and after the proposed transaction. | |
Confirm the following: | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Template 2 – Exempt Distribution from Control
Information Required | Applicant to Provide: |
---|---|
Name of the Participant and Contact Person | |
UMIR provision from which the exemption is sought | UMIR 6.4(2)(b) |
Reason for exemption | Exempt Distribution from Control to be completed pursuant to NI 45-102 |
Name and symbol of security | |
Listing Exchange | |
Number of securities | |
Price | |
Target Date of Proposed Transaction | |
Name of Controlling Shareholder | |
Confirm the following: | |
|
|
|
Template 3 – Exempt Take-over Bid
Information Required | Applicant to Provide: |
---|---|
Name of the Participant and Contact Person | |
UMIR provision from which the exemption is sought | UMIR 6.4(2)(b) |
Reason for exemption | Exempt Take-over Bid to be completed pursuant to NI 62-104 |
Name and symbol of security | |
Listing Exchange | |
Number of securities | |
Price | |
Target Date of Proposed Transaction | |
Number of Sellers9 | |
Name of Each Seller | |
Name of Buyer | |
Percentage ownership of the issuer for Buyer before and after the Proposed Transaction | |
Confirm that the Proposed Transaction complies with all applicable securities legislation, including NI 62-104 |