Securities Law & Instruments

Headnote

 

National Policy 11-203 Process For Exemptive Relief Applications in Multiple Jurisdictions – Application for exemptive relief to permit issuer and underwriters, acting as agents for the issuer, to enter into equity distribution agreements to make "at the market" (ATM) distributions of common shares over the facilities of a marketplace in Canada – ATM distributions to be made pursuant to shelf prospectus procedures in Part 9 of NI 44-102 Shelf Distributions – issuer will issue a press release and file agreements on SEDAR – application for relief from prospectus delivery requirement – delivery of prospectus not practicable in circumstances of an ATM distribution – relief from prospectus delivery requirement has effect of removing two-day right of withdrawal and remedies of rescission or damages for non-delivery of the prospectus – application for relief from certain prospectus form requirements – relief granted to permit modified forward-looking certificate language – relief granted on terms and conditions set out in decision document – decision will terminate 25 months after the issuance of a receipt for the shelf prospectus. Decision and application also held in confidence by decision makers until the earlier of the entering into of an equity distribution agreement, waiver of confidentiality or 90 days from the date of the decision.

 

Applicable Legislative Provisions

 

Securities Act, R.S.O. 1990, c. S.5, as am, ss. 71, 147.

 

Applicable Ontario Rules

 

National Instrument 44-101 Short Form Prospectus Distributions, s. 8.1 and Item 20 of Form 44-101F1.

National Instrument 44-102 Shelf Distributions,s. 6.7, Part 9, s. 11.1, s. 2.2 of Part 2 of Appendix A.

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions.

 

August 29, 2018

 

TRANSLATION

 

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

QUÉBEC AND ONTARIO

 

AND

 

IN THE MATTER OF

THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS

IN MULTIPLE JURISDICTIONS

 

AND

 

IN THE MATTER OF

PROMETIC LIFE SCIENCES INC.

(the Issuer)

 

AND

 

CANACCORD GENUITY CORP.

(the Agent) (the Issuer, together with the Agent, the Filers)

 

DECISION

 

Background

 

The securities regulatory authority or regulator in Québec and Ontario (the Dual Exemption Decision Makers) have received an application (the Application) from the Filers for a decision under the securities legislation of those jurisdictions (the Legislation) for the following relief (collectively, the Dual Exemption):

 

(a)           that the requirement that a dealer, not acting as agent of the purchaser, who receives an order or subscription for a security offered in a distribution to which the prospectus requirement applies, deliver to the purchaser or its agent the latest prospectus (including the applicable prospectus supplement(s) in the case of a base shelf prospectus) and any amendment to the prospectus (the Prospectus Delivery Requirement) does not apply to the Agent or other registered investment dealer acting on behalf of the Agent as a selling agent (each a Selling Agent) in connection with any at-the-market distribution, as defined in Regulation 44-102 respecting Shelf Distributions, CQLR, c. V-1.1, r. 17 (Regulation 44-102), of common shares of the Issuer (the Common Shares) in Canada pursuant to an equity distribution agreement (the Equity Distribution Agreement) to be entered into between the Filers (the ATM Distribution); and

 

(b)           that the requirements (collectively, the Prospectus Form Requirements) to include in any amendment to the Shelf Prospectus (as defined below) or in a prospectus supplement:

 

i.              a forward-looking issuer certificate of the Issuer in the form specified in section 2.1 of Appendix A to Regulation 44-102;

 

ii.             a forward-looking underwriter certificate in the form specified in section 2.2 of Appendix A to Regulation 44-102; and

 

iii.            a statement respecting purchasers’ statutory rights of withdrawal and remedies of rescission or damages in substantially the form prescribed in Item 20 of Form 44-101F1, Short Form Prospectus (the Statement of Purchaser’s Rights);

 

do not apply to any amendment of the Shelf Prospectus and to any prospectus supplement of the Issuer (the Prospectus Supplement) to be filed in respect of an ATM Distribution.

 

The securities regulatory authority or regulator in each of Québec and Ontario (the Coordinated Exemptive Relief Decision Makers) have also received an application from the Filers for a decision under the Legislation that the Application and this decision (together, the Confidential Material) be kept confidential and not be made public until the earliest of (i) the date on which the Filers enter into the Equity Distribution Agreement, (ii) the date on which any of the Filers advise the Decision Makers that there is no longer any need for the Confidential Material to remain confidential, and (iii) the date that is 90 days after the date of this decision (the Confidentiality Sought).

 

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a hybrid application):

 

(a)           the Autorité des marchés financiers is the principal regulator for the Application (the Principal Regulator);

 

(b)           the Filers have provided notice that subsection 4.7(1) of Regulation 11-102 respecting Passport System, CQLR, c. V-1.1, r. 1 (Regulation 11-102), is intended to be relied upon in Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland and Labrador, Nova Scotia, Prince Edward Island and Saskatchewan;

 

(c)           the decision is the decision of the Principal Regulator and the decision evidences the decision of the securities regulatory authority or regulator in Ontario; and

 

(d)           the decision evidences the decision of each Coordinated Exemptive Relief Decision Maker.

 

Interpretation

 

Terms defined in Regulation 14-101 respecting Definitions, CQLR, c. V-1.1, r. 3, Regulation 11-102, Regulation 21-101 respecting Marketplace Operation, CQLR, c. V-1.1, r. 5 (Regulation 21-101), and Regulation 13-101 respecting the System for Electronic Document Analysis and Retrieval (SEDAR), CQLR, c. V-1.1, r. 2, have the same meaning if used in this decision, unless otherwise defined.

 

Representations

 

This decision is based on the following facts represented by the Filers:

 

The Issuer

 

1.             The Issuer is a corporation incorporated under the Canada Business Corporations Act with its head office in Laval, Québec.

 

2.             The Common Shares are listed on the Toronto Stock Exchange (the TSX) and are also listed on the OTCQX International.

 

3.             The Issuer is a reporting issuer in each province of Canada and is not in default of securities legislation in any jurisdiction of Canada.

The Agent

 

4.             The Agent is a corporation incorporated under the laws of Ontario with its head office in Vancouver, British Columbia.

 

5.             The Agent is registered as an investment dealer under the securities legislation of each province of Canada, is a member of the Investment Industry Regulatory Organization of Canada, and is a participating organization of the TSX.

 

6.             The Agent is not in default of securities legislation in any jurisdiction of Canada.

 

Proposed ATM Distribution

 

7.             Subject to mutual agreement on terms and conditions, the Filers propose to enter into the Equity Distribution Agreement providing for ATM Distributions.

 

8.             The Issuer has filed a short form base shelf prospectus dated March 14, 2018 (the Shelf Prospectus). Prior to making an ATM Distribution, the Issuer will have filed a Prospectus Supplement in each province of Canada to qualify the sale of Common Shares under the Equity Distribution Agreement. The Prospectus Supplement will describe the terms of the ATM Distribution, including the terms of the Equity Distribution Agreement, and otherwise supplementing the disclosure in the Shelf Prospectus.

 

9.             If the Equity Distribution Agreement is entered into, the Issuer will immediately:

 

(a)           issue and file a news release pursuant to section 3.2 of Regulation 44-102 announcing the Equity Distribution Agreement and indicating that the Shelf Prospectus and the Prospectus Supplement have been filed on SEDAR and specifying where and how purchasers under an ATM Distribution may obtain copies; and

 

(b)           file the Equity Distribution Agreement on SEDAR.

 

10.          Under the proposed Equity Distribution Agreement, the Issuer will not, during the period that the final receipt for the Shelf Prospectus is effective, distribute by way of one or more ATM Distributions a total market value of Common Shares that exceeds 10% of the aggregate market value of Common Shares, such aggregate market value calculated in accordance with section 9.2 of Regulation 44-102 and as at the last trading day of the month before the month in which the first ATM Distribution is made.

 

11.          The Issuer will conduct ATM Distributions through the Agent (as agent) through a marketplace as defined in Regulation 21-101 in Canada upon which the Common Shares are listed, quoted or otherwise traded (each a Canadian Marketplace).

 

12.          The Agent will act as the sole agent of the Issuer in connection with the sale of Common Shares on any Canadian Marketplace pursuant to the Equity Distribution Agreement, directly by the Agent or through one or more Selling Agents, and will be paid an agency fee or commission by the Issuer in connection with such sales. The Agent will sign an underwriter’s certificate in the Prospectus Supplement filed on SEDAR in the form set out in paragraph 30.

 

13.          The Agent will effect the ATM Distributions on any Canadian Marketplace, either itself or through a Selling Agent. If such sales are effected through a Selling Agent, the Selling Agent will be paid a seller’s commission for effecting the trades on behalf of the Agent. A purchaser’s rights and remedies under applicable securities legislation against the Agent, as agent of an ATM Distribution through a Canadian Marketplace, will not be affected by a decision to effect the sale directly or through a Selling Agent.

 

14.          The Equity Distribution Agreement will provide that, at the time of each sale of Common Shares pursuant to an ATM Distribution, the Issuer will represent to the Agent that the Shelf Prospectus, as supplemented by the Prospectus Supplement, including the documents incorporated by reference in the Shelf Prospectus (which shall include any news release that has been designated and filed as Designated News Release as outlined below) and any subsequent amendment or supplement to the Shelf Prospectus or the Prospectus Supplement (together, the Prospectus), contains full, true and plain disclosure of all material facts relating to the Issuer and the Common Shares being distributed. The Issuer would, therefore, be unable to proceed with sales pursuant to an ATM Distribution when it is in possession of undisclosed information that would constitute a material fact or a material change in respect of the Issuer or the Common Shares.

 

15.          After the date of the Prospectus Supplement and before the termination of the ATM Distribution, in the event that the Issuer disseminates a news release in respect of previously undisclosed information that, in the Issuer's determination, constitutes a “material fact” (as defined in the Legislation), the Issuer will identify such news release as a “designated news release” for the purposes of the Prospectus. This designation will be in writing on the face page of the version of such news release that the Issuer files on SEDAR (any such news release, a Designated News Release). The Prospectus Supplement will provide that any such Designated News Release will be deemed to be incorporated by reference into the Prospectus. A Designated News Release will not be utilized to update disclosure in the Prospectus by the Issuer in the event of a “material change” (as defined in the Legislation).

 

16.          If, after the Issuer delivers a sell notice to the Agent directing the Agent to sell Common Shares on the Issuer’s behalf pursuant to the Equity Distribution Agreement (a Sell Notice), the sale of the Common Shares specified in the Sell Notice, taking into consideration prior sales under all previous ATM Distributions, would constitute a material fact or material change, the Issuer will suspend sales under the Equity Distribution Agreement until either: (i) in the case of a material change, it has filed a material change report or amended the Prospectus, or (ii) circumstances have changed such that the sales would no longer constitute a material fact or material change.

 

17.          In determining whether the sale of the number of Common Shares specified in a Sell Notice would constitute a material fact or material change, the Issuer will take into account relevant factors including, without limitation: (i) the parameters of the Sell Notice, including the number of Common Shares proposed to be sold and any price or timing restrictions that the Issuer may impose with respect to the particular ATM Distribution, (ii) the percentage of outstanding Common Shares represented by the number of Common Shares proposed to be sold pursuant to the Sell Notice, (iii) sales under earlier Sell Notices, (iv) trading volume and volatility of Common Shares, (v) recent developments in the business, affairs or capital of the Issuer, and (vi) prevailing market conditions generally.

 

18.          It is in the interest of the Filers to minimize the market impact of sales under an ATM Distribution. Therefore, the Agent will monitor closely the market’s reaction to trades made on any Canadian Marketplace pursuant to the ATM Distribution in order to evaluate the likely market impact of future trades. The Agent has experience and expertise in managing sell orders to limit downward pressure on trading prices. If the Agent has concerns as to whether a particular sell order placed by the Issuer may have a significant effect on the market price of the Common Shares, the Agent will recommend against effecting the trade at that time.

 

19.          The aggregate number of Common Shares sold on any trading day pursuant to an ATM Distribution will not exceed 25% of the aggregate trading volume of Common Shares traded on Canadian Marketplaces that day.

 

Disclosure of Common Shares Sold

 

20.          The Issuer will disclose the number and average price of Common Shares sold pursuant to an ATM Distribution under the Prospectus, as well as gross proceeds, commission and net proceeds, in its annual and interim financial statements and management discussion and analysis filed on SEDAR.

 

Prospectus Delivery Requirement

 

21.          Pursuant to the Prospectus Delivery Requirement, a dealer effecting a trade of securities offered under a prospectus is required to deliver a copy of the prospectus (including the applicable prospectus supplement(s) in the case of a base shelf prospectus) to the purchaser within prescribed time limits.

 

22.          Delivery of a prospectus is not practicable in the circumstances of an ATM Distribution because neither the Agent nor a Selling Agent effecting the trade will know the identity of the purchasers.

 

23.          The Prospectus (together with all documents incorporated by reference therein) will be filed and readily available electronically via SEDAR to all purchasers under ATM Distributions. As stated in paragraph 9 above, the Issuer will issue a news release that specifies where and how copies of the Shelf Prospectus and the Prospectus Supplement can be obtained.

 

24.          The liability of an issuer or an underwriter (or others) for a misrepresentation in a prospectus under the civil liability provisions of the Legislation will not be affected by the grant of an exemption from the Prospectus Delivery Requirement, because purchasers of securities offered by a prospectus during the period of distribution have a right of action for damages or rescission if there is a misrepresentation in the prospectus at the time of purchase, without regard as to whether or not the purchaser relied on the misrepresentation or in fact received a copy of the prospectus.

 

Withdrawal Right and Right of Action for Non-Delivery

 

25.          Pursuant to the Legislation, an agreement to purchase a security in respect of a distribution to which the prospectus requirement applies is not binding on the purchaser if a dealer receives, not later than midnight on the second day (exclusive of Saturdays, Sundays and holidays) after receipt by the purchaser of the latest prospectus or any amendment to the prospectus, a notice in writing that the purchaser does not intend to be bound by the agreement of purchase (the Withdrawal Right).

26.          Pursuant to the Legislation, a purchaser of a security to whom a prospectus was required, but not in fact, sent or delivered in compliance with the Prospectus Delivery Requirement, has a right of action for rescission or damages against the dealer who did not comply with the Prospectus Delivery Requirement (the Right of Action for Non-Delivery).

 

27.          Neither the Withdrawal Right nor the Right of Action for Non-Delivery is workable in the context of an ATM Distribution because of the impracticability of delivering the Prospectus to a purchaser of Common Shares thereunder.

 

Prospectus Form Requirements

 

28.          To reflect the fact that an ATM Distribution is a continuous distribution, the Prospectus Supplement will include the following issuer certificate:

 

The short form prospectus, together with the documents incorporated in the prospectus by reference, as supplemented by the foregoing, as of the date of a particular distribution of securities offered under the prospectus, will, as of that date, constitute full, true and plain disclosure of all material facts relating to the securities offered by the prospectus and this supplement, as required by the securities legislation of each of the provinces of Canada.

 

29.          Also to reflect the fact that an ATM Distribution is a continuous distribution, the Prospectus Supplement will include the following underwriter certificate:

 

To the best of our knowledge, information and belief, the short form prospectus, together with the documents incorporated in the prospectus by reference, as supplemented by the foregoing, as of the date of a particular distribution of securities under the prospectus, will, as of that date, constitute full, true and plain disclosure of all material facts relating to the securities offered by the prospectus and this supplement as required by the securities legislation of each of the provinces of Canada.

 

30.          A different Statement of Purchaser’s Rights than that required by the Legislation is necessary in order to allow the Prospectus to accurately reflect the relief granted from the Prospectus Delivery Requirement. Accordingly, the Prospectus Supplement will state the following, with the date reference completed:

 

Securities legislation in certain of the provinces of Canada provides purchasers with the right to withdraw from an agreement to purchase securities and with remedies for rescission or, in some jurisdictions, revision of the price, or damages if the prospectus, prospectus supplements relating to securities purchased by a purchaser and any amendment are not delivered to the purchaser, provided that the remedies are exercised by the purchaser within the time limit prescribed by securities legislation. However, purchasers of Common Shares under an at-the-market distribution by the Issuer will not have the right to withdraw from an agreement to purchase the Common Shares and will not have remedies of rescission or, in some jurisdictions, revision of the price, or damages for non-delivery of the prospectus, because the prospectus, prospectus supplements relating to Common Shares purchased by a purchaser and any amendment relating to the Common Shares purchased by such purchaser will not be delivered as permitted under a decision dated ●, 2018 and granted under National Policy 11-203 – Process for Exemptive Relief Applications in Multiple Jurisdictions.

 

Securities legislation in certain of the provinces of Canada also provides purchasers with remedies for rescission or, in some jurisdictions, revision of the price or damages if the prospectus, prospectus supplements relating to securities purchased by a purchaser and any amendment contains a misrepresentation, provided that the remedies are exercised by the purchaser within the time limit prescribed by securities legislation. Any remedies under securities legislation that a purchaser of Common Shares under an at-the-market distribution by the Issuer may have against the Issuer or the Agent for rescission or, in some jurisdictions, revision of the price, or damages if the prospectus, prospectus supplements relating to securities purchased by a purchaser and any amendment contain a misrepresentation remain unaffected by the non-delivery and the decision referred to above.

 

Purchasers should refer to any applicable provisions of securities legislation and the decision referred to above for the particulars of these rights or consult with a legal adviser.

 

31.          The Prospectus Supplement will disclose that, in respect of ATM Distributions under the Prospectus Supplement, the statement prescribed in paragraph 31 above supersedes the Statement of Purchaser’s Rights contained in the Shelf Prospectus.

 

Decision

 

Each of the Principal Regulator, the securities regulatory authority or regulator in Ontario and the Coordinated Exemptive Relief Decision Makers is satisfied that the decision meets the test set out in the Legislation for the relevant regulator or securities regulatory authority to make the decision.

 

The decision of the Dual Exemption Decision Makers under the Legislation is that the Dual Exemption is granted, provided that:

 

(a)           during a 60-day period ending not earlier than 10 days prior to the commencement of an ATM Distribution, the Common Shares have traded, in total, on one or more Canadian Marketplaces, as reported on a consolidated market display: (i) an average of at least 100 times per trading day, and (ii) with an average trading value of at least $1,000,000 per trading day;

 

(b)           the Issuer complies with the disclosure requirements set out in paragraph 20 and paragraphs 28 through 31 above; and

 

(c)           the Filers respectively comply with the representations made in paragraphs 9 through 19 above.

 

This decision will terminate 25 months from March 14, 2018.

 

“Lucie J. Roy”

Senior Director, Corporate Finance

Autorité des marchés financiers

 

The decision of the Coordinated Exemptive Relief Decision Makers under the Legislation is that the Confidentiality Sought is granted.

 

“Benoît Longtin”

Assistant Corporate Secretary

Autorité des marchés financiers