What must be filed with a material change – Securities Regulation

Subject to subsection (2), if a material change occurs in the affairs of a reporting issuer, the reporting issuer must

• (a) immediately issue and file a news release authorized by an executive officer disclosing the nature and substance of the change; and
• (b) as soon as practicable, and in any event within 10 days of the date on which the change occurs, file a Form 51-102F3 Material Change Report with respect to the material change.

• 2.2 of NP 51-201: Comparative: Detriment outweighing benefits of disclosure (undue economic detriment). Might happen where disclosure would interfere with a company’s pursuit of a specific objective or strategy, with ongoing negotiations, or ability to complete a transaction. If that harm outweighs the general benefits to the market of immediate disclosure, then withholding disclosure is justified.
• WHY THIS IS A PROBLEM: You are admitting that it’s material and discloseable, and you’re obligated to disclose: so if your request is denied, you’re screwed and you have to disclose. You’ve removed any judgment from you or your client. This hardly ever applies, so may as well stay away from it.
• POLICY Tensions:

o Investor protection: should be able to assume all material changes have been published and can be pissed about making inv decision w/o that info vs

o Efficient Markets/Having People Play: There are circumstances where disclosure may be unduly detrimental, doing long-term harm to all investors potentially, making commission surrogate for investors

Basically, just keep in mind that application of this is difficult (of whether it’s a material material change) e.g. the Harold Ballard heart condition – disclosable or not?

of a decision to implement a change made by senior management of the reporting issuer who believe that confirmation of the decision by the board of directors is probable, and senior management of the reporting issuer has no reason to believe that persons with knowledge of the material change have made use of that knowledge in purchasing or selling securities of the reporting issuer,

• Where senior management has decided to do something, will give you confidential disclosure as of right until board has approved it and when they

have, you ’re into regular disclosure

• Why do they allow a material change not to be reported to the world yet? ^Preserve right of directors to make decisions: Forces directors to do it, if you’ve announced it, taking decision away from the directors

o BUT HAVE TO DISCLOSE WHEN:

• (a) board has approved decision
• or as punishment when: (b) if you let it leak and people are trading with it
• No sympathy b/c should have protected info, b/w innocent parties, have to protect investors in marketplace. Have to let them know that no one is trading with that knowledge.
• The point of this confidential disclosure request to the commission (vs just not disclosing if you decide it is confidential):

o So that commission knows insiders aren’t trading, they can monitor the stock, make sure people aren’t trading with the information

o If regulator sees trading, corp has to disclose fact – seems to have looked

• Tension b/w investor protection and efficient capital markets: don’t want people using info to exploit, but don’t want to create situation where management can pre-empt board and this is the compromise.
• Once approved by board, under obligation to disclose ^ issue press release and file material change report

• Must advise commission every 10 days until disclosed
• If board says no – therefore, nothing to release

o and the reporting issuer immediately files the report required under paragraph (1)(b) marked so as to indicate that it is confidential, together with written reasons for non-disclosure.

• Material change in affairs of company but you do not file a press release or a report, and you seek a confidential ruling from the securities commission