Securities Law & Instruments

Section 6.1 of NI 62-104 – Issuer bid – relief from the requirements applicable to issuer bids in Part 2 of NI 62-104 – issuer proposes to purchase, pursuant to a repurchase program and at a discounted purchase price, up to a specified number of its common shares under its normal course issuer bid from a third party – the third party will abide by the requirements governing normal course issuer bids as though it was the issuer, subject to certain modifications, including that the third party will not make any purchases under the program pursuant to a pre-arranged trade – common shares delivered to the issuer for cancellation will be common shares from the third party's existing inventory – the third party will purchase common shares under the program on the same basis as if the Issuer had conducted the bid in reliance on the normal course issuer bid exemptions set out in securities legislation – no adverse economic impact on, or prejudice to, the Issuer or its security holders – acquisition of securities exempt from the requirements applicable to issuer bids in Part 2 of NI 62-104, subject to conditions, including that the number of common shares transferred by the third party from its existing inventory to the issuer for purchase under the program be equivalent to the number of common shares that the third party has purchased, or had purchased on its behalf, on Canadian markets.

 

Applicable Legislative Provisions

 

National Instrument 62-104 Take-Over Bids and Issuer Bids, Part 2 and s. 6.1.

 

IN THE MATTER OF

THE SECURITIES ACT,

R.S.O. 1990, c. S.5, AS AMENDED

 

AND

 

IN THE MATTER OF

THE TORONTO-DOMINION BANK AND

THE BANK OF NOVA SCOTIA

 

ORDER

(Section 6.1 of National Instrument 62-104)

 

                UPON the application (the “Application”) of The Toronto-Dominion Bank (the “Issuer”) and The Bank of Nova Scotia (“BNS”, and together with the Issuer, the “Filers”) to the Ontario Securities Commission (the “Commission”) for an order pursuant to section 6.1 of National Instrument 62-104 Take-Over Bids and Issuer Bids (“NI 62-104”) exempting the Issuer from the requirements applicable to issuer bids in Part 2 of NI 62-104 (the “Issuer Bid Requirements”) in respect of the proposed purchases by the Issuer of up to 4,400,000 (the “Program Maximum”) of its common shares (the “Common Shares”) from BNS pursuant to a share repurchase program (the “Program”);

 

                AND UPON considering the Application and the recommendation of staff of the Commission;

 

                AND UPON the Issuer having represented to the Commission the matters set out in paragraphs 1 to 4, inclusive, 7, 11 to 19, inclusive, 21 to 30, inclusive, 33, 35, 37 to 43, inclusive, as they relate to the Issuer;

 

                AND UPON BNS and Scotia Capital Inc. (“SCI” and together with BNS, the “Scotia Entities”) having, together, represented to the Commission the matters set out in paragraphs 5 to 10 inclusive, 18, 20 to 22 inclusive, 26, 30 to 34 inclusive, 36, 40, 42 and 43 as they relate to the Scotia Entities, as applicable;

 

1.             The Issuer is a Schedule I bank governed by the Bank Act (Canada).

 

2.             The Issuer maintains its registered office at Toronto-Dominion Centre, Toronto, Ontario, M5K 1A2.

 

3.             The Issuer is a reporting issuer in each of the provinces and territories of Canada (the “Jurisdictions”) and the Common Shares are listed for trading on the Toronto Stock Exchange (the “TSX”) and the New York Stock Exchange. The Issuer is not in default of any requirement of the securities legislation of the Jurisdictions.

 

4.             The authorized share capital of the Issuer consists of an unlimited number of Common Shares and an unlimited number of Class A First Preferred Shares which may be issued in one or more series. As at August 31, 2017, 1,848,896,530 Common Shares, 5,387,491 Series S Class A First Preferred Shares, 4,612,509 Series T Class A First Preferred Shares, 5,481,853 Series Y Class A First Preferred Shares, 4,518,147 Series Z Class A First Preferred Shares, 20,000,000 Series 1 Class A First Preferred Shares, 20,000,000 Series 3 Class A First Preferred Shares, 20,000,000 Series 5 Class A First Preferred Shares, 14,000,000 Series 7 Class A First Preferred Shares, 8,000,000 Class 9 Series A First Preferred Shares, 6,000,000 Series 11 Class A First Preferred Shares, 28,000,000 Series 12 Class A First Preferred Shares, 40,000,000 Series 14 Class A First Preferred Shares and 14,000,000 Series 16 Class A First Preferred Shares were issued and outstanding.

 

5.             BNS is a Schedule I bank governed by the Bank Act (Canada). The corporate headquarters of BNS is located in Toronto, Canada.

 

6.             SCI is registered as an investment dealer under the securities legislation of British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Quebec, Nova Scotia, Newfoundland and Labrador, New Brunswick, Prince Edward Island, Yukon, the Northwest Territories and Nunavut. It is also registered as a futures commission merchant under the Commodity Futures Act (Ontario), as a derivatives dealer under the Derivatives Act (Québec), and as dealer (futures commission merchant) under The Commodity Futures Act (Manitoba). SCI is a member of the Investment Industry Regulatory Organization of Canada (“IIROC”) and the Canadian Investor Protection Fund, a participating organization or member of the TSX, TSX Venture Exchange and Canadian Securities Exchange, and an approved participant of the Bourse de Montréal. The head office of SCI is located in Toronto, Ontario.

 

7.             Each proposed purchase will be executed and settled in the Province of Ontario.

 

8.             BNS does not directly or indirectly own more than 5% of the issued and outstanding Common Shares.

 

9.             BNS is the beneficial owner of at least 4,400,000 Common Shares, none of which were acquired by, or on behalf of, BNS in anticipation or contemplation of resale to the Issuer (such Common Shares over which BNS has beneficial ownership, the “Inventory Shares”). All of the Inventory Shares are held by BNS in the Province of Ontario. No Common Shares were purchased by, or on behalf of, BNS on or after August 20, 2017, being the date that was 30 days prior to the date of the Application, in anticipation or contemplation of a sale of Common Shares by BNS to the Issuer.

 

10.          BNS is at arm's length to the Issuer and is not an “insider” of the Issuer, an “associate” of an “insider” of the Issuer, or an “associate” or “affiliate” of the Issuer, as such terms are defined in the Securities Act (Ontario) (the “Act”). BNS is an “accredited investor” within the meaning of National Instrument 45-106 Prospectus Exemptions.

 

11.          Pursuant to a Notice of Intention to Make a Normal Course Issuer Bid (the “Original Notice”) which was accepted by the TSX effective March 16, 2017, the Issuer was permitted to make a normal course issuer bid (the “NCIB”) to purchase up to 15,000,000 Common Shares (excluding purchases by non-independent trustees) representing approximately 0.9% of the Issuer’s then outstanding Common Shares. As of April 20, 2017, the Issuer had completed the repurchase of the entire 15,000,000 Common Shares pursuant to the Original Notice. On September 19, 2017, the TSX accepted an amendment (the “Amendment” together with the Original Notice, the “Notice”) to permit the Issuer to purchase an additional 20,000,000 Common Shares (the “Additional Common Shares”) pursuant to the NCIB, for an aggregate of 35,000,000 Common Shares representing approximately 1.9% of the Issuer’s then outstanding Common Shares. In accordance with the Notice, the NCIB is conducted through the facilities of the TSX or alternative Canadian trading platforms, or such other means as may be permitted by the TSX in accordance with sections 628 to 629.3 of Part VI of the TSX Company Manual (the “TSX Rules”) or by such other means as may be permitted by a securities regulatory authority, including private agreements or share repurchase programs under issuer bid exemption orders issued by securities regulatory authorities.

 

12.          The NCIB is being conducted in reliance upon the exemption from the Issuer Bid Requirements set out in subsection 4.8(2) of NI 62-104 (the “Designated Exchange Exemption”).

 

13.          The NCIB is also being conducted in the normal course on other permitted published markets in Canada (the “Other Published Markets”) in reliance upon the exemption from the Issuer Bid Requirements set out in subsection 4.8(3) of NI 62-104 (the “Other Published Markets Exemption”, and together with the Designated Exchange Exemption, the “Exemptions”).

 

14.          Pursuant to the TSX Rules, the Issuer has appointed TD Securities Inc. as its designated broker in respect of the NCIB (the “Responsible Broker”).

 

15.          Any automatic share repurchase plan established by the Issuer in connection with the NCIB prior to the commencement of the Program Term (as defined below) will not be in effect during the Program Term. Any automatic share repurchase plan established by the Issuer in connection with the NCIB prior to the commencement of the Program Term (as defined below) has been completed and no other automatic share repurchase plans will be implemented or operative during the Program Term.

 

16.          During the course of the NCIB, Common Shares may be purchased by trustees or administrators that are not independent of the Issuer pursuant to the TSX Rules (a “Plan Trustee”) in the open market to satisfy net requirements of certain employee plans (“Plan Trustee Purchases”).

 

17.          Pursuant to relief granted by the TSX on March 28, 2017, certain of the Issuer’s broadly-based, market-sourced, employee-directed employee share purchase plans were exempted from the provisions of the TSX Rules that would deem the plans to have non-independent trustees (the “Exempted Plans”). Other than purchases made under the Exempted Plans (“Exempted Plan Trustee Purchases”), no Plan Trustee Purchases will be made during the Program Term (as defined below).

 

18.          The Filers wish to participate in the Program during, and as part of, the NCIB to enable the Issuer to purchase from BNS, and for BNS to sell to the Issuer, that number of Common Shares equal to the Program Maximum.

 

19.          To the best of the Issuer's knowledge the “public float” (calculated in accordance with the TSX Rules) for the Common Shares as at August 31, 2017 represented more than 99.0% of all issued and outstanding Common Shares. The Common Shares are “highly-liquid securities” as that term is defined in section 1.1 of OSC Rule 48-501 Trading during Distributions, Formal Bids and Share Exchange Transactions (“OSC Rule 48-501”) and section 1.1 of the Universal Market Integrity Rules (“UMIR”).

 

20.          Pursuant to the terms of the Program Agreement (as defined below), SCI will acquire Common Shares through the facilities of the TSX and on Other Published Markets in Canada (each, a “Canadian Other Published Market” and collectively with the TSX, the “Canadian Markets”) under the Program. No Common Shares will be acquired under the Program on any other published markets other than Canadian Other Published Markets.

 

21.          The Program will be governed by, and conducted in accordance with, the terms and conditions of a Share Repurchase Program Agreement (the “Program Agreement”) that will be entered into among the Filers and SCI prior to the commencement of the Program and a copy of which will be delivered by the Filers to the Commission promptly thereafter.

 

22.          The Program will commence on the Trading Day (defined below) following completion or termination of the BMO Program (defined below) and will terminate on the earlier of December 1, 2017 and the date on which the Issuer will have purchased the Program Maximum under the Program (the “Program Term”). Neither the Issuer nor any of the Scotia Entities may unilaterally terminate the Program Agreement during the Program Term, except in the case of an event of default by a party thereunder or a change in law or announced change in law that would have adverse consequences to the transactions under the Program or the Issuer or either of the Scotia Entities.

 

23.          Concurrently with this Application, the Issuer has filed an additional application with the Commission for exemptive relief from the Issuer Bid Requirements in connection with the proposed purchase by the Issuer of up to 3,580,000 Common Shares (“BMO Program Maximum”) from BMO Nesbitt Burns Inc. pursuant to a share repurchase program (the “BMO Program”, and together with the Program, the “Programs”). The BMO Program will begin on a date determined by the Issuer and will terminate on the earlier of December 1, 2017 and the date on which the Issuer will have purchased the BMO Program Maximum (the “BMO Program Term”).

 

24.          At least two clear Trading Days prior to the commencement of the BMO Program, the Issuer will issue and file a press release (the “Commencement Press Release”) that will have been pre-cleared by the TSX that (a) describes the material features of the Programs, including the Program Term and the BMO Program Term; (b) discloses the Issuer's intention to participate in the Programs during the NCIB; (c) states that it is the Issuer’s current intention to purchase the Program Maximum and the BMO Program Maximum, but that the number of Common Shares purchased pursuant to the Programs may be less than the Program Maximum and the BMO Program Maximum, respectively; (d) provides an explanation as to why less than the Program Maximum and the BMO Program Maximum may be purchased; and (e) states that, immediately following the completion of the Program, the Issuer will issue and file the Completion Press Release (as defined below).

 

25.          The Program Maximum will not exceed the number of Common Shares remaining that the Issuer is entitled to acquire under the NCIB, calculated as at the date of the Program Agreement.

 

26.          The Program will:

 

(a)           be an “automatic securities purchase plan” as defined in National Instrument 55-104 Insider Reporting Requirements and Exemptions (as applied, mutatis mutandis, to purchases made by an issuer) and SCI will conduct the Program in its sole discretion, in accordance with the irrevocable instructions to be established by the Issuer, and conveyed by the Issuer to SCI, pursuant to the Program Agreement (the “Irrevocable Instructions”); and


(b)           comply with applicable securities regulatory requirements and guidance, including, inter alia, clause 175(2) of Regulation 1015 of the Act, OSC Staff Notice 55-701 Automatic Securities Disposition Plans and Automatic Securities Purchase Plans and similar rules and regulations regarding automatic acquisitions of securities under Canadian securities laws.

 

27.          The Program Agreement will be entered into, and the Irrevocable Instructions will be given, at a time when the Issuer is not (i) in a regularly scheduled quarterly blackout period that is imposed by the Issuer on its directors, executive officers and other insiders pursuant to the Issuer's internal insider trading policy, or (ii) aware of Undisclosed Information (as defined below).

 

28.          The TSX has been advised of the Issuer's intention to enter into the Program and has confirmed that it has no objection to the Issuer conducting the Program as part of the NCIB. The TSX will be provided with a copy of the Program Agreement.

 

29.          The Irrevocable Instructions will be of the same nature as the instructions that the Issuer would have given to the Responsible Broker, if the Issuer was conducting the NCIB in reliance on the Exemptions.

 

30.          All Common Shares acquired for the purposes of the Program by SCI on a day during the Program Term on which Canadian Markets are open for trading (each, a “Trading Day”) must be acquired on Canadian Markets in accordance with the TSX Rules and any by-laws, rules, regulations or policies of any Canadian Markets upon which purchases are carried out (collectively, the “NCIB Rules”) that would be applicable to the Issuer in connection with the NCIB, provided that:

 

(a)           the aggregate number of Common Shares to be acquired on Canadian Markets by SCI on each Trading Day shall not exceed the maximum daily limit that is imposed upon the NCIB pursuant to the TSX Rules, determined with reference to an average daily trading volume that is based on the trading volume of the Common Shares on all Canadian Markets rather than being limited to the trading volume on the TSX only (the “Modified Maximum Daily Limit”), it being understood that the aggregate number of Common Shares to be acquired on the TSX by SCI on each Trading Day will not exceed the maximum daily limit that is imposed on the NCIB pursuant to the TSX Rules; and

 

(b)           notwithstanding the block purchase exception provided for in the TSX Rules, no purchases will be made by SCI on any Canadian Markets pursuant to any pre-arranged trade.

 

31.          The aggregate number of Common Shares acquired by SCI in connection with the Program:

 

(a)           shall not exceed the Program Maximum; and

 

(b)           on Canadian Other Published Markets, shall not exceed that number of Common Shares remaining eligible for purchase by the Issuer pursuant to the Other Published Markets Exemption, calculated as at the date of the Program Agreement.

 

32.          On every Trading Day, SCI will purchase the Number of Common Shares. The “Number of Common Shares” will be no greater than the least of:

 

(a)           the maximum number of Common Shares established in the instructions set out in the Program Agreement;

 

(b)           the Program Maximum less the aggregate number of Common Shares previously purchased by SCI under the Program;

 

(c)           on a Trading Day where trading ceases on the TSX or some other event that would impair SCI's ability to acquire Common Shares on Canadian Markets occurs (a “Market Disruption Event”), the number of Common Shares acquired by SCI on such Trading Day up until the time of the Market Disruption Event; and

 

(d)           the Modified Maximum Daily Limit.

 

The “Discounted Price” per Common Share will be equal to (i) the volume weighted average price of the Common Shares on the Canadian Markets on the Trading Day on which purchases were made less an agreed upon discount, or (ii) upon the occurrence of a Market Disruption Event, the volume weighted average price of the Common Shares on the Canadian Markets at the time of the Market Disruption Event less an agreed upon discount.

 

33.          BNS will deliver to the Issuer that number of Inventory Shares equal to the number of Common Shares purchased by SCI on a Trading Day under the Program no later than the third Trading Day thereafter, and the Issuer will pay BNS a purchase price equal to the Discounted Price for each such Inventory Share. Each Inventory Share purchased by the Issuer under the Program will be cancelled upon delivery to the Issuer.

 

34.          BNS will not sell any Inventory Shares to the Issuer unless SCI has purchased the equivalent number of Common Shares on Canadian Markets under the Program. The number of Common Shares that are purchased by SCI on Canadian Markets on a Trading Day under the Program will be equal to the Number of Common Shares for such Trading Day. SCI will provide the Issuer with a daily written report of SCI's purchases, which report will indicate, inter alia, the aggregate number of Common Shares acquired under the Program, the Canadian Market on which such Common Shares were acquired, and the Modified Maximum Daily Limit.

 

35.          During the Program Term, the Issuer will: (a) not purchase, directly or indirectly, any Common Shares (other than Inventory Shares purchased under the Program); (b) prohibit the Responsible Broker from acquiring any Common Shares on its behalf; and (c) prohibit any Plan Trustee from undertaking any Plan Trustee Purchases, other than Exempted Plan Trustee Purchases.

 

36.          All purchases of Common Shares under the Program will be made by SCI and neither of the Scotia Entities will engage in any hedging activity in connection with the conduct of the Program.

 

37.          The Issuer will report its purchases of Common Shares under the Program to the TSX in accordance with the TSX Rules. In addition, immediately following the completion of the Program, the Issuer will: (a) report the total number of Common Shares acquired under the Program to the TSX and the Commission; and (b) issue and file a press release that announces the completion of the Program and sets out the number of Common Shares acquired under the Program and the aggregate dollar amount paid for such Common Shares (the “Completion Press Release”).

 

38.          The Issuer is of the view that: (a) it will be able to purchase Common Shares from BNS at a lower price than the price at which it would be able to purchase an equivalent quantity of Common Shares under the NCIB in reliance on the Exemptions; and (b) the purchase of Common Shares pursuant to the Program is in the best interests of the Issuer and constitutes a desirable use of the Issuer's funds.

 

39.          The entering into of the Program Agreement, the purchase of Common Shares by SCI in connection with the Program, and the sale of Inventory Shares by BNS to the Issuer will not adversely affect the Issuer or the rights of any of the Issuer's security holders and it will not materially affect control of the Issuer.

 

40.          The sale of Inventory Shares to the Issuer by BNS will not be a “distribution” (as defined in the Act).

 

41.          The Issuer will be able to acquire the Inventory Shares from BNS without the Issuer being subject to the dealer registration requirements of the Act.

 

42.          At the time the Issuer and the Scotia Entities enter into the Program Agreement, neither the Issuer, nor any member of the Global Equity Derivatives group of BNS, nor any personnel of either of the Scotia Entities that negotiated the Program Agreement or made, participated in the making of, or provided advice in connection with, the decision to enter into the Program Agreement and sell the Common Shares, will be aware of any “material change” or “material fact” (each as defined in the Act) with respect to the Issuer or the Common Shares that has not been generally disclosed (the “Undisclosed Information”).

 

43.          The Issuer and each of the Scotia Entities:

 

(a)           has policies and procedures in place to ensure that the Program will be conducted in accordance with, among other things, the Program Agreement and this Order, and to preclude those persons responsible for administering the Program from acquiring any Undisclosed Information during the conduct of the Program; and

 

(b)           will, prior to entering into the Program Agreement, (i) ensure that its systems are capable of adhering to, and performing in accordance with, the requirements of the Program and this Order, and (ii) provide all necessary training and take all necessary actions to ensure that the persons administering and executing the purchases under the Program are aware of, and understand the terms of this Order.

 

                AND UPON the Commission being satisfied that to do so would not be prejudicial to the public interest;

 

                IT IS ORDERED pursuant to section 6.1 of NI 62-104 that the Issuer be exempt from the Issuer Bid Requirements in respect of the purchase of Inventory Shares from BNS pursuant to the Program, provided that:

 

(a)           at least two clear Trading Days prior to the commencement of the BMO Program the Issuer issues and files the Commencement Press Release;

 

(b)           all purchases of Common Shares under the Program are made on Canadian Markets by SCI, and are:

 

(i)            made in accordance with the NCIB Rules applicable to the NCIB, as modified by paragraph 30 of this Order;

 

(ii)           taken into account by the Issuer when calculating the maximum annual aggregate limits that are imposed upon the NCIB in accordance with the TSX Rules, with those Common Shares purchased on Canadian Other Published Markets being taken into account by the Issuer when calculating the maximum aggregate limits that are imposed upon the Issuer in accordance with the Other Published Markets Exemption;

 

(iii)          marked with such designation, as would be required by the applicable marketplace and UMIR for trades made by an agent of the Issuer; and

 

(iv)          monitored by the Scotia Entities on a continual basis for the purposes of ensuring compliance with the terms of this Order, the NCIB Rules, and applicable securities law;

 

(c)           during the Program Term, (i) the Issuer does not purchase, directly or indirectly, any Common Shares (other than Inventory Shares purchased under the Program), (ii) no Common Shares are purchased on behalf of the Issuer by the Responsible Broker and (iii) no Plan Trustee Purchases (other than Exempted Plan Trustee Purchases) are undertaken by any Plan Trustee;

 

(d)           the number of Inventory Shares transferred by BNS to the Issuer for purchase under the Program in respect of a particular Trading Day is equal to the number of Common Shares purchased by SCI under the Program on Canadian Markets in respect of the Trading Day;

 

(e)           no hedging activity is engaged in by the Scotia Entities in connection with the conduct of the Program;

 

(f)            at the time of the commencement of the Program Term:

 

(i)            the Common Shares are “highly liquid securities”, as that term is defined in section 1.1 of OSC Rule 48-501 and section 1.1 of UMIR; and

 

(ii)           none of the Issuer, any member of the Global Equity Derivatives group of BNS, or any personnel of either of the Scotia Entities that negotiated the Program Agreement or made, participated in the making of, or provided advice in connection with, the decision to enter into the Program Agreement and sell the Common Shares, was aware of any Undisclosed Information;

 

(g)           no purchase instructions in respect of the Program are given by the Issuer to SCI and no automatic securities purchase plan is entered into in respect of the Program at any time that the Issuer is aware of Undisclosed Information;

 

(h)           the Scotia Entities maintain records of all purchases of Common Shares that are made by SCI pursuant to the Program, which will be available to the Commission and IIROC upon request; and

 

(i)            in addition to reporting its purchases of Common Shares under the Program to the TSX in accordance with the TSX Rules, immediately following the completion of the Program, the Issuer will: (i) report the total number of Common Shares acquired under the Program to the TSX and the Commission, and (ii) issue and file the Completion Press Release.

 

                DATED at Toronto, Ontario, this 4th day of October, 2017.

 

“Naizam Kanji”

Director, Office of Mergers & Acquisitions

Ontario Securities Commission