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 ROYAL BANK OF CANADA AND THE TORONTO-DOMINION BANK
ORDER (Section 6.1 of National Instrument 62-104)
UPON the application (the "Application") of Royal Bank of Canada (the "Issuer") and The Toronto-Dominion Bank ("TD", 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 10,000,000 (the "Program Maximum") of its common shares (the "Common Shares") from TD 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, 9 to 20, inclusive, 22 to 28, inclusive, 32, 34, 36 to 38, inclusive, 40 and 41;
AND UPON TD and TD Securities Inc. ("TD Securities" and together with TD, the "TD Entities") having represented to the Commission the matters set out in paragraphs 5 to 10, inclusive, 18, 21 to 23 inclusive, 27, 29 to 33 inclusive, 35, 39, 41 and 42 as they relate to the TD Entities;
1. The Issuer is a Schedule I bank governed by the Bank Act (Canada).
2. The Issuer's corporate headquarters are located at Royal Bank Plaza, 200 Bay Street, Toronto, Ontario, Canada and its head office is located at 1 Place Ville-Marie, Montreal, Quebec, Canada.
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 TSX, the New York Stock Exchange ("NYSE") and the SIX Swiss Exchange under the symbols "RY","RY:US" and "RY", respectively. 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 without nominal or par value and an unlimited number of first preferred shares and second preferred shares without nominal or par value, issuable in series which classes may be issued for a maximum consideration of $20 billion and $5 billion, respectively. As at February 27, 2017, the Issuer had the following shares outstanding:
Number of shares
Common Shares outstanding
First preferred shares outstanding
Non-cumulative Series W
Non-cumulative Series AA
Non-cumulative Series AB
Non-cumulative Series AC
Non-cumulative Series AD
Non-cumulative Series AE
Non-cumulative Series AF
Non-cumulative Series AG
Non-cumulative Series AJ
Non-cumulative Series AK
Non-cumulative Series AL
Non-cumulative Series AZ
Non-cumulative Series BB
Non-cumulative Series BD
Non-cumulative Series BF
Non-cumulative Series BH
Non-cumulative Series BI
Non-cumulative Series BJ
Non-cumulative Series BK
Non-cumulative Series BM
Non-cumulative Series C-1
Non-cumulative Series C-2
5. TD is a Schedule I bank governed by the Bank Act (Canada). The head office of TD is located in Toronto, Canada.
6. TD Securities Inc. is registered as an investment dealer under the securities legislation of British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Québec, 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). TD Securities 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 TD Securities is located in Toronto, Ontario.
7. Each proposed purchase will be executed and settled in the Province of Ontario.
8. TD does not own, directly or indirectly, more than 5% of the issued and outstanding Common Shares.
9. TD is the beneficial owner of at least 10,000,000 Common Shares, none of which were acquired by, or on behalf of, TD in anticipation or contemplation of resale to the Issuer (such Common Shares over which TD has beneficial ownership, the "Inventory Shares"). All of the Inventory Shares are held by TD in the Province of Ontario. No Common Shares were purchased by, or on behalf of, TD on or after January 21, 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 TD to the Issuer.
10. TD is at arm's length to the Issuer and is not an "insider" of the Issuer, or 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"). TD 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 "Notice"), which was accepted by the TSX effective March 9, 2017, the Issuer was permitted to make a normal course issuer bid (the "NCIB") to purchase up to 30,000,000 Common Shares, representing approximately 2% of the Issuer's then outstanding Common Shares. The Notice specifies that purchases made under the NCIB are to be conducted through the facilities of the TSX, the NYSE and other designated exchanges and Canadian alternative trading systems, if eligible, or by 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 the TSX, a securities regulatory authority or applicable securities laws and regulations, including under automatic purchase plans and by 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 the NYSE and other permitted published markets (collectively with the NYSE, 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 RBC Dominion Securities Inc. as its designated broker in respect of the NCIB (the "Responsible Broker").
15. The Issuer has not established an automatic share repurchase plan in connection with the NCIB.
16. During the course of the NCIB, Common Shares may be purchased by trustees or administrators that are not independent of the Issuer (a "Plan Trustee") in the open market to satisfy net requirements of certain employee plans ("Plan Trustee Purchases"). The maximum number of Common Shares that the Issuer is permitted to repurchase under the NCIB, being 30,000,000, will be reduced by the number of Plan Trustee Purchases other than Exempted Plan Trustee Purchases (as defined below).
17. Pursuant to relief granted by the TSX, 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 TD, and for TD 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 March 7, 2017 consisted of 1,471,294,105 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. 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 5,000,000 Common Shares from The Bank of Nova Scotia ("BNS") pursuant to a share repurchase program (the "BNS Program"). The BNS Program will begin on the Trading Day (as defined below) following completion or termination of the Program and will terminate on the earlier of April 27, 2017 and the date on which the Issuer will have purchased 5,000,000 Common Shares from BNS under the BNS Program.
21. Pursuant to the terms of the Program Agreement (as defined below), TD Securities has been retained by TD to 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.
22. 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 TD Securities prior to the commencement of the Program and a copy of which will be delivered by the Filers to the Commission promptly thereafter.
23. The Program will begin on or after March 14, 2017 and will terminate on the earlier of April 13, 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 TD 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 contemplated thereunder or to the Issuer or the TD Entities.
24. At least two clear Trading Days (as defined below) prior to the commencement of the Program, the Issuer will issue a press release that has been pre-cleared by the TSX that describes the material features of the Program and discloses the Issuer's intention to participate in the Program during the NCIB (the "Press Release").
25. The Program Maximum will be less than 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 TSX: (a) will be advised of the Issuer's intention to enter into the Program; (b) will be provided with a copy of the Program Agreement; and (c) will have pre-cleared the Program.
27. During the Program Term, TD Securities will purchase Common Shares on the applicable Trading Day (as defined below) in accordance with instructions received by TD Securities from the Issuer prior to the opening of trading on such day, which instructions will be the same instructions that the Issuer would give to the Responsible Broker, as its designated broker in respect of the NCIB if the Issuer was conducting the NCIB in reliance on the Exemptions.
28. The Issuer will not give purchase instructions in respect of the Program to TD Securities at any time that the Issuer is aware of Undisclosed Information (as defined below).
29. All Common Shares acquired for the purposes of the Program by TD Securities 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 TD Securities 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 TD Securities 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 TD Securities on any Canadian Markets pursuant to a pre-arranged trade.
30. The aggregate number of Common Shares acquired by TD Securities 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.
31. On every Trading Day, TD Securities 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 received by TD Securities from the Issuer prior to the opening of trading on such day;
(b) the Program Maximum less the aggregate number of Common Shares previously purchased by TD Securities under the Program;
(c) on a Trading Day where trading ceases on the TSX or some other event that would impair TD Securities' ability to acquire Common Shares on Canadian Markets occurs (a "Market Disruption Event"), the number of Common Shares acquired by TD Securities 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: (a) 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 (b) 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.
32. TD will deliver to the Issuer that number of Inventory Shares equal to the number of Common Shares purchased by TD Securities on a Trading Day under the Program on the Trading Day immediately thereafter, and the Issuer will pay TD 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.
33. TD will not sell any Inventory Shares to the Issuer under the Program unless TD Securities has purchased the equivalent number of Common Shares on Canadian Markets. The number of Common Shares that are purchased by TD Securities on Canadian Markets on a Trading Day will be equal to the Number of Common Shares for such Trading Day. TD Securities will provide the Issuer with a daily written report of TD Securities' purchases, which report will indicate, inter alia, the aggregate number of Common Shares acquired, the Canadian Market on which such Common Shares were acquired, and the Modified Maximum Daily Limit.
34. During the Program Term, the Issuer will: (a) not purchase 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.
35. All purchases of Common Shares under the Program will be made by TD Securities and neither of the TD Entities will engage in any hedging activity in connection with the conduct of the Program.
36. 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) file a notice on the System for Electronic Document Analysis and Retrieval ("SEDAR") disclosing the number of Common Shares acquired under the Program and the aggregate dollar amount paid for such Common Shares.
37. The Issuer is of the view that: (a) it will be able to purchase Common Shares from TD 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.
38. The entering into of the Program Agreement, the purchase of Common Shares by TD Securities in connection with the Program, and the sale of Inventory Shares by TD 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.
39. The sale of Inventory Shares to the Issuer by TD will not be a "distribution" (as defined in the Act).
40. The Issuer will be able to acquire the Inventory Shares from TD without the Issuer being subject to the dealer registration requirements of the Act.
41. At the time that the Issuer and the TD Entities enter into the Program Agreement, neither the Issuer, nor any member of the Equity Derivatives group of TD, nor any personnel of either of the TD 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").
42. Each of the TD 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 TD pursuant to the Program, provided that:
(a) at least two clear trading days prior to the commencement of the Program, the Issuer issues the Press Release;
(b) all purchases of Common Shares under the Program are made on Canadian Markets by TD Securities, and are:
(i) made in accordance with the NCIB Rules applicable to the NCIB, as modified by paragraph 29 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 TD Entities on a continual basis for the purposes of ensuring compliance with the terms of this Order, NCIB Rules, and applicable securities law;
(c) during the Program Term: (i) the Issuer does not purchase 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 are undertaken by any Plan Trustee (other than Exempted Plan Trustee Purchases);
(d) the number of Inventory Shares transferred by TD 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 TD Securities on Canadian Markets in respect of the Trading Day;
(e) no hedging activity is engaged in by the TD Entities in connection with the conduct of the Program;
(f) at the time that the Program Agreement is entered into by the Filers and TD Securities:
(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 Equity Derivatives group of TD, or any personnel of either of the TD 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 TD Securities at any time that the Issuer is aware of Undisclosed Information;
(h) the TD Entities maintain records of all purchases of Common Shares that are made by TD Securities 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) file a notice on SEDAR disclosing the number of Common Shares acquired under the Program and the aggregate dollar amount paid for such Common Shares.
DATED at Toronto, Ontario this 9th day of March, 2017.