Securities Law & Instruments

Headnote

Subsection 74(1) . Application for exemption from prospectus requirement in connection with trades of shares by a control person . Filer filed a Notice of Intention to Distribute Securities (Form 45-102F1) under Section 2.8 of National Instrument 45-102 Resale of Securities (NI 45-102) in order to allow it to sell its common shares in accordance with Canadian securities laws applicable to control distributions . Application for exemption of the 7 day waiting period in section 2.8 of NI 45-102 in connection with the filing of a subsequent Form 45-102F1 that relates to the same securities and does not include new material information . Filer proposes a two business day waiting period for any subsequent Form 45-102F1 filings made by the Filer, provided that the aggregate number of common shares proposed to be sold by the Filer, as disclosed in the Initial Form 45-102F1 is not increased . Filer is subject to volume limits on the TSX and NYSE . Relief granted subject to conditions, including condition that the Filer will disclose in any subsequent Form 45-102F1 filed on SEDAR the number of Common Shares sold by the Filer since the filing of the prior Form 45-102F1.

Applicable Legislative Provisions

Securities Act, R.S.O. 1990, c. S.5, as am., ss. 53, 74(1).

National Instrument 45-102 Resale of Securities, s. 2.8

October 8, 2013

IN THE MATTER OF
THE SECURITIES LEGISLATION OF
ONTARIO
(THE "JURISDICTION")

AND

IN THE MATTER OF
THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS
IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF
PERSHING SQUARE CAPITAL MANAGEMENT, L.P.
(THE "FILER")

DECISION

Background

The principal regulator in the Jurisdiction has received an application from the Filer for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) for an exemption from the prospectus requirement under the Legislation respecting certain proposed sales in connection with the Filer's planned disposition of common shares (Common Shares) of Canadian Pacific Railway Limited (CP) (the Exemption Sought) on conditions substantially the same as the exemption from the prospectus requirement provided by section 2.8 of National Instrument 45-102 Resale of Securities (NI 45-102) with the exception that a signed Form 45-102F1 Notice of Intention to Distribute Securities under Section 2.8 of NI 45-102 (Form 45-102F1) be filed on SEDAR at least two business days before the first trade of the securities that is part of the distribution rather than seven days as provided in section 2.8(3)(b) of NI 45-102.

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

(a) the Ontario Securities Commission is the principal regulator for the application; and

(b) the Filer has provided notice that section 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in British Columbia, Alberta, Saskatchewan, Manitoba, Quebec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland & Labrador, Yukon, the Northwest Territories and Nunavut.

Interpretation

Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.

Representations

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

1. The Filer is a registered investment adviser under the U.S. Investment Advisers Act of 1940, as amended, and is the investment adviser to each of Pershing Square, L.P., Pershing Square II, L.P., Pershing Square International, Ltd. and Pershing Square Holdings, Ltd. (collectively, the Pershing Square Funds).

2. As of September 23, 2013, the Filer, through the Pershing Square Funds, beneficially owned or controlled an aggregate of 23,351,192 Common Shares representing approximately 13.3% of the outstanding Common Shares publicly reported by CP as of July 24, 2013.

3. CP is a corporation incorporated by Letters Patent in 1881 pursuant to an Act of the Parliament of Canada. CP's registered and head office is located at Suite 500, 401 -- 9th Avenue S.W., Calgary, Alberta, T2P 4Z4, Canada.

4. CP is a reporting issuer or has equivalent status in each of the provinces and territories of Canada.

5. The Common Shares are listed and trade on both the Toronto Stock Exchange (TSX) and New York Stock Exchange (NYSE).

6. At CP's 2012 annual general meeting of shareholders, seven nominees proposed by the Filer were elected to the board of directors of CP. Subsequent to that meeting, CP hired a new Chief Executive Officer who had previously been proposed by the Filer to replace CP's prior Chief Executive Officer. The seven nominees originally proposed by the Filer for election at the 2012 shareholder meeting and the current Chief Executive Officer currently constitute a majority of CP's board of directors.

7. On June 3, 2013, the Filer announced its intention to sell up to 7,000,000 Common Shares over a six to 12 month period (the Distribution Program) beginning on or after June 10, 2013.

8. In its announcement, the Filer noted its intention that the Distribution Program be carried out through unsolicited brokers' transactions on the NYSE and TSX and that the transactions be limited to amounts that will not exceed 10% of the combined NYSE and TSX volume for Common Shares on any day of trading.

9. The Filer may be considered a control person of CP, as that term is defined in the Legislation, and as a result any sale of Common Shares by the Filer could constitute a control distribution as defined in NI 45-102. As a result, the Filer wishes to conduct the Distribution Program in accordance with the exemption from the prospectus requirements provided by Section 2.8 of NI 45-102F1.

10. The Filer filed a Form 45-102F1 under Section 2.8 of NI 45-102 on June 3, 2013 (the Initial Form 45-102F1) in order to allow it to sell its Common Shares in accordance with Canadian securities laws applicable to control distributions.

11. The Filer filed a second Form 45-102F1 on July 24, 2013. The Filer did not file this form earlier upon the expiry of the Initial Form 45-102F1 because at that time the Filer was subject to a trading blackout under CP's disclosure and insider trading policy. The Filer filed a third Form 45-102F1 on August 27, 2013.

12. As a result of the number of Common Shares that the Filer proposes to sell and the volume limitations that it intends to adhere to, the Filer expects to file successive Form 45-102F1 forms in respect of the Distribution Program.

13. Pursuant to Section 2.8(5) of NI 45-102, each successive form cannot be filed until the expiration of the prior form, such that a new seven day waiting period would apply each time a Form 45-102F1 is filed. As a result, if the Filer were to file successive Form 45-102F1 forms, in effect it would only be able to conduct the Distribution Program during successive 23 day windows, separated by seven day waiting periods. This reduction in the number of trading days has a material detrimental impact on the Filer's ability to implement the Distribution Program, particularly in light of the aforementioned volume limits.

14. In addition, Form 45-102F1 requires the Filer to certify that it has no knowledge of a material fact or material change with respect to the issuer of the securities that has not been generally disclosed. This has the effect of further constraining the Filer's ability to file a Form 45-102F1, and thus start the seven day waiting period, when the Filer possesses knowledge of a material fact or material change at the time that the prior Form 45-102F1 expires (for example, during quarterly earnings blackouts), with the effect that the requirement may (depending on the timing) artificially extend a given blackout period by up to seven days. This requirement, combined with the prohibition in section 2.8(5) of NI 45-102 on making an earlier filing, results in further constraints on the Distribution Program.

15. The requirement under section 2.8(3)( b) of NI 45-102 to wait seven days following the filing of a Form 45-102F1 before selling Common Shares has prevented the Filer from selling Common Shares in the market during periods when market conditions have been favourable for selling shares and has thus prejudiced the Filer's ability to receive the best possible prices for Common Shares sold under the Distribution Program.

16. The Filer has proposed a two business day waiting period apply for any subsequent Form 45-102F1 filings made by the Filer in connection with the Distribution Program, provided that the aggregate number of Common Shares proposed to be sold by the Filer as disclosed in the Initial Form 45-102F1 is not increased.

17. In the circumstances, reducing the waiting period to two business days will continue to afford the market sufficient time to absorb the information provided in the Filer's subsequent Form 45-102F1 filings where those filings do not increase the aggregate number of shares subject to the Distribution Program.

18. Reducing the waiting period to two business days is in the public interest as it will afford the Filer more time to conduct an orderly disposition of Common Shares without seven day interruptions in its ability to sell Common Shares.

19. Sales pursuant to the Distribution Program that are made pursuant to Section 2.8 of NI 45-102 will also comply with the requirements of Rule 144 under the U.S. Securities Act of 1933, as amended, which imposes volume limitations on sales by affiliates, requiring that sales by the Filer during any three month period shall not exceed the greater of 1% of the outstanding Common Shares or 1% of the average reported weekly trading volume of the Common Shares on the NYSE during the four weeks preceding the filing of a notice of sale on Form 144. There is no waiting period after the filing of a Form 144.

20. As of the date hereof, the Filer has sold 808,696 Common Shares pursuant to Section 2.8 of NI 45-102.

21. The Filer is not in default of securities legislation in any jurisdiction.

Decision

The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to make the decision.

The decision of the principal regulator under the Legislation is that the Exemption Sought is granted, provided that:

(a) at the time of each sale of Common Shares under the Distribution Program the following conditions are satisfied:

(i) CP is and has been a reporting issuer in a jurisdiction of Canada for the four months immediately preceding the trade;

(ii) the Filer has held such Common Shares for at least four months;

(iii) no unusual effort is made to prepare the market or to create a demand for the Common Shares subject to the trade;

(iv) no extraordinary commission or consideration is paid to a person or company in respect of the trade; and

(v) the Filer has no reasonable grounds to believe that CP is in default of securities legislation.

(b) the aggregate number of Common Shares proposed to be sold by the Filer, as disclosed in the Initial Form 45-102F1, is not increased;

(c) the Filer complies with the representation in paragraph 8;

(d) the Filer completes and signs a Form 45-102F1 no earlier than one business day before the Form 45-102F1 is filed;

(e) the Filer files a completed and signed Form 45-102F1 on SEDAR at least two business days before the first trade of the securities that is part of the distribution;

(f) the Filer discloses in any Form 45-102F1 filed on SEDAR pursuant to condition (e) above the number of Common Shares sold by the Filer since the filing of the prior Form 45-102F1;

(g) the Filer files, within three days after the completion of any trade, an insider report prepared in accordance with either Form 55-102F2 or Form 55-102F6 under National Instrument 55-102 System for Electronic Disclosure by Insiders (SEDI);

(h) each Form 45-102F1 filed under the condition (e) expires on the earlier of

(i) thirty days after the date the Form 45-102F1 was filed; and

(ii) the date the Filer files the last of the insider reports reflecting the sale of all securities referred to in the Initial Form 45-102F1; and

(i) the Filer does not file a new Form 45-102F1 in respect of the Common Shares until the Form 45-102F1 previously filed by the Filer has expired.

"James Turner"
Vice-Chair
Ontario Securities Commission
 
"Wes M. Scott"
Commissioner
Ontario Securities Commission