Securities Regulation – Law School Notes

You can grab notes for other law subjects from here.

These notes cover Securities Regulation in Canada.

The best material to have an in-depth understanding of Capital markets irrespective of what jurisdiction you are based in. Especially helpful if you are an Indian law student due to lack of good material covering the fundamentals. OCRed text, might suffer from few readability issues.

• Major Themes in Course
  1. Three Goals of Securities Regulation
  2. Three Methods of Achieving these goals 
     1. Registration requirement
     2. Disclosure Requirement
     3. Remedies for Breach of Registration or Disclosure Requirements
  3. General Policy of the Course 
• Introductory Concepts
  1. Purpose of Selling Securities
  2. Types of Securities
  3. Securities Trading
     1. Open Market in Capital
     2. Private Trades
  4. Sources, History & Constitutional Division of Powers of Securities Regulation
     1. Division of power 
     2. History of securities regulation 
     3. Sources of Provincial Securities Regulation
• Going Public
  1. Introduction to Going Public
     1. General Rule– Securities Act, ss 25 and 33
     2. How Companies Go About Raising Capital
     3. Why Go Public?
     4. Why do we regulate public offerings (3 objectives)
  2. The Prospectus Requirement: Does the Securities Act Apply?
     1. What is a security?
     2. What is a trade? –> Statutory Definition
     3. What is a distribution?
  3. Prospectus Preparation
     1. Prospectus General Rule
  4. Prospectus/ Distribution Process (After making decision to go public)
  5. Summary of Steps Creating the Preliminary Prospectus:
     1. What must be included
     2. The Waiting Period, Vetting/ Comment Letter and Amendments
     3. Filing the Final and Obtaining a Receipt and Changes Post-Filing
     4. Closing & Any Post-Final Amendments
     5. Consequences for Failure to Deliver/ File Prospectus (practically none as that is unlikely to happen unless one wants to personally face the wrath of OSC Indian students here should check PACL and Sahara securities dispute.)
     6. Failure to File (likely not needed)
     7. Liability for Misrepresentation in a Prospectus
     8. Registration Requirement ( Section 25 of the OSA –> so to satisfy, get an underwriter )
     9. Underwriting Agreement
     10. Sample Prospectus
• After Going Public: Continous Disclosure

Five aspects of continuous disclosure:
(1) Regular disclosure (quarterly/annually);
(2) timely disclosure (of material changes);
(3) Early Warning (if buying up 10%- could signal takeover bid);
(4) Insider Reporting (allowed to trade, but we want to know what you’re doing);
(5) Insider Trading (to keep things fair, can’t do)
Want to make sure investors are protected and a fundamental tenet of that Is disclosure Companies change, and people are still trading on secondary market, the info from prospectus goes stale (to ensure ppl buy on primary market, must maintain efficiency of secondary market)

1. Policy Behind Continuous Disclosure Regime – Merger Report (3 objectives)
2. PART I: Regular Disclosure
   1. Application to Reporting Issuers
   2. Obligation to File Financial Statements
3. PART II: Timely Disclosure (of changes)
   1. Statutory Provision: Ontario Securities Act (OSA), Part XVIII – Continuous Disclosure
   2. Material Change vs Material Fact
   3. What must be filed with a material change (3 Report Options)
4. PART III: Early Warning
   1. STEPS
   2. STATUTORY PROVISIONS
5. PART IV: Insider Reporting
   1. Analysis: When do insider reporting rules apply?
   2. STATUTORY PROVISIONS
6. PART V: Insider Trading

TWO PARTS:
(1) Trading: You cannot sell with insider information and
(2) Tipping: you cannot tell anyone else about that information 

1. Policy Discussion about Insider Trading / Tipping Prohibition
2. Steps
3. Statutory Provisions (OSA)
4. Meaning of Generally Disclosed (Defence)
5. Defences to Insider Trading / Tipping
6. Actions, Sanctions & Penalties for Insider Trading

• The Closed System
  1. Private Placement & Exemptions
  2. General Rule
  3. Advantages & Objectives of Private Placement
  4. The Private Placement Exemptions Offering Memorandum (and problems with it)
  5. Registration Requirement for Private Placement Exemptions
  6. Resale Rules General Rule: 2 Components of Resale Rules
  7. Resale Rules for Non-Control Persons
  8. Resale Rules for Control Persons (Separate Regime)
  9. Control TransactionsTakeover: change in control over mgmt. of the issuer/ firm^ can be friendly (approach target mgmt.) OR hostile (more frequent, by force) – Battle for control and to manage assetsTakeover bid: general offer to shareholders to purchase shares of a part issuer, which results in offeror obtaining enough shares to control the targetPUBLIC POLICY: on the balance of things, legislators and regulators have decided that takeover bids are a good thing for society ^If you’re not a reporting issuer in province of Ontario, not subject to takeover bid rules
  1. Reasons for Takeover Bids Socially
     1. Useful Reasons for Takeover Bids
     2. Non-Socially Useful Reasons for Takeover Bids
     3. Policy Reasons for why we regulate takeover bids and the legislative objectives wrt them
  2. Overview of How Takeover Bids
     1. What is a takeover bid?
     2. Deemed Ownership
  3. Mechanics of a Vendor Takeover Bid – The following mechanics are for a vendor takeover bid.
     1. Takeover Bid Circular (Information)
     2. Minimum Period of Bid (Time)
     3. Pro Rata (Equality)
     4. Withdrawal and Change of Info or Variation in Terms (time and info)
     5. Conditions (just investor protection)
     6. Payment for Securities (investor protection generally)
     7. No collateral agreements
  4. Post-Bid: Directors’ Circular (Response)
     1. Section 95: Offeree Issuer’s Obligations
     2. Legislative Goal Met
  5. Pre & Post-Bid Integration
     1. Lock-up Agreements/ Tendering Agreements (Allowed)
     2. Pre-Bid Integration
     3. Post-Bid Integration
  6. Exemption from Pre-Bid and Post-Bid Restrictions – EXEMPT Takeover Bids! (Sometimes can take over 100% without doing t/o bid circular)
     1. Private Agreement Exemption (s 100.1(1) of OSA, most important)
     2. Section – 100 Normal Course Exemption – Don’t Exceed 5% in 12Months
     3. Voting & Non-Voting Shares
  7. Director’s Duties and Responsibilities in a Takeover Bid Situation – Defensive Tactics to Buy Time
     1. Fiduciary Duty in the Context of Takeover Bid
     2. Examples of Defensive Tactics
     3. Defensive Tactic Rules – NP 62-202

You can grab notes for other law subjects from here.