Securities Regulation – Law School Notes

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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.

  • 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)
      6. Failure to File (likely not needed)
      7. Liability for Misrepresentation in a Prospectus
      8. Registration Requirement
      9. Underwriting Agreement
      10. Sample Prospectus
  • After Going Public: Continous Disclosure
    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
      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 Resale Rules for Control Persons (Separate Regime)
  • Control Transactions
    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. Work What is a takeover bid?
      2. Deemed Ownership
    3. Mechanics of 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!
      1. Private Agreement Exemption (s 100.1(1) of OSA, most important)
      2. S – 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

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