National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions – reporting insider granted relief from the requirement in subsection 107(2) of the Securities Act (Ontario) to file an insider report within five days of each disposition of securities occurring pursuant to an automatic securities disposition plan, provided that the insider files an insider report in respect of all dispositions under the automatic securities disposition plan on an annual basis.
Applicable Legislative Provisions
Securities Act, R.S.O. 1990, c. S.5, ss. 107(2), 121(2)(a)(ii).
National Instrument 55-104 Insider Reporting Requirements and Exemptions, s. 3.3.
August 11, 2017
IN THE MATTER OF
THE SECURITIES LEGISLATION OF
IN THE MATTER OF
THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS
IN MULTIPLE JURISDICTIONS
IN THE MATTER OF
GENWORTH FINANCIAL, INC.
GENWORTH MI CANADA INC.
(THE “COMPANY”, AND TOGETHER WITH THE INSIDER, THE “FILERS”)
The principal regulator in the Jurisdiction (the “Decision Maker”) has received an application from the Filers for a decision under the securities legislation of the Jurisdiction of the principal regulator (the “Legislation”) for an exemption, subject to certain conditions, from the requirements under subsection 107(2) of the Securities Act (Ontario) (the “Act”), in connection with the disposition of common shares of the Company (the “Shares”) beneficially owned by the Insider pursuant to an automatic securities disposition plan, for the following entities:
(a) the Insider; and
(b) the Insider Subsidiary Entities (as defined below) (the exemptions for (a) and (b) above are collectively referred to in this decision as the “Exemption Sought”).
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):
(a) the Ontario Securities Commission is the principal regulator for this application, and
(b) the Filers have provided notice that subsection 4.7(1) of Multilateral Instrument 11-102 Passport System (“MI 11-102”) is intended to be relied upon in British Columbia, Alberta, Manitoba, Saskatchewan, Québec, Nova Scotia, New Brunswick, Newfoundland and Labrador, Prince Edward Island, the Northwest Territories, Nunavut and the Yukon (the “Non-Principal Jurisdictions”).
Under subsection 4.7(1) of MI 11-102, the decision of the Decision Maker will exempt the Insider and the Insider Subsidiary Entities from the equivalent requirements in section 3.3 of National Instrument 55-104 Insider Reporting Requirements and Exemptions (“NI 55-104”) that apply in the Non-Principal Jurisdictions.
Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.
This decision is based on the following facts represented by the Filers:
1. The Company is a corporation existing under the Canada Business Corporations Act and is a reporting issuer in each of the provinces and territories of Canada (collectively, the “Reporting Jurisdictions”). The Company is not in default of any requirements under applicable securities legislation or the rules and regulations made pursuant thereto in the Reporting Jurisdictions.
2. The registered and head office of the Company is located at 2060 Winston Park Drive, Suite 300, Oakville, Ontario, L6H 5R7.
3. The authorized share capital of the Company consists of an unlimited number of Shares, an unlimited number of preferred shares (the “Preferred Shares”) and one special share (the “Special Share”). As of June 30, 2017, the Company had 91,947,700 Shares, no Preferred Shares and one Special Share issued and outstanding.
4. The Shares are listed on the Toronto Stock Exchange (the “TSX”) under the symbol “MIC”.
5. As of June 30, 2017, the Insider was the beneficial owner of an aggregate of 52,562,042 Shares (the “Insider Shares”), representing approximately 57.17% of the issued and outstanding Shares, and one Special Share. The Insider Shares are held directly by Genworth Financial International Holdings, LLC (“GFIH”), Genworth Mortgage Insurance Corporation (“GMIC”, and together with GFIH, the “Participating Entities”) and Genworth Mortgage Insurance Corporation of North Carolina (“GMIC-NC”), each of which is an indirect wholly-owned subsidiary of the Insider. The Special Share is held directly by Genworth Financial International Holdings, LLC. None of the Insider Shares that are subject to the ASDP (as defined below) and held by the Participating Entities are subject to any encumbrances, liens, security interests or other restrictions to transfer. The Participating Entities, together with GMIC-NC, and such other subsidiaries that may directly or indirectly beneficially own Insider Shares from time to time and participate in the ADSP (as defined below) are referred to in this decision as the “Insider Subsidiary Entities”. Neither the Insider nor any of the Insider Subsidiary Entities are in default of any applicable securities legislation or the rules and regulations made pursuant thereto in the Reporting Jurisdictions.
6. The Company announced on May 2, 2017 that it is engaging in a normal course issuer bid (the “NCIB”) for up to 4,597,385 Shares, representing 5% of the Company’s issued and outstanding Shares as of the date specified in the Notice of Intention to Make a Normal Course Issuer Bid that was submitted to, and accepted by, the TSX.
7. Purchases under the NCIB were authorized to commence on May 5, 2017 and will conclude on the earlier of the date on which the maximum number of Shares, being 4,597,385 Shares, have been acquired and May 4, 2018. As at August 7, 2017, the Company has not purchased any Shares under the NCIB. All purchases under the NCIB will be pursuant to, and in accordance with, the terms of the ASPP and ASDP (as each such term is defined below).
8. The Insider wishes to maintain its aggregate proportionate percentage ownership in the Company at approximately 57% of the issued and outstanding Shares (such percentage ownership interest, the “Insider Ownership Percentage”).
9. The Company has determined that it is in the best interests of the Company for the NCIB to include a proportionate participation feature to enable the Insider to participate in the NCIB and maintain its aggregate proportionate percentage ownership in the Company at the Insider Ownership Percentage.
10. In connection with the NCIB, the TSX has granted the Company an exemption (the “TSX Exemption”) which will allow the Company to purchase, during the TSX’s Special Trading Session through a broker retained for such purpose, on any trading day that the Company makes a purchase from other holders of Shares pursuant to the NCIB, such number of Insider Shares from the Insider Subsidiary Entities that would result in the Insider maintaining its aggregate proportionate percentage ownership in the Company at the Insider Ownership Percentage.
11. The NCIB, including the proportionate participation feature, is being conducted through the facilities of the TSX or through other permitted means (including through other published markets) in accordance with the bylaws, rules, regulations and policies of the TSX.
12. The NCIB is being implemented through a broker that is independent of the Company (the “Broker”) who is responsible for making purchases of Shares on behalf of the Company pursuant to an automatic share purchase plan (the “ASPP”). Pursuant to the ASPP, the Company instructed the Broker to buy Shares in accordance with a prearranged set of trading parameters and other instructions (the “ASPP Parameters”), all as set out in a written plan document (the “ASPP Agreement”) that has been submitted to, and accepted by, the TSX and that has been entered into between the Company and the Broker at the time that the ASPP was established.
13. At the time that the ASPP Agreement was entered into by the Company and the Broker, the Company was not in possession of any material undisclosed information in relation to the Company that would otherwise be required to be disclosed by law.
14. Pursuant to the ASPP Agreement, the Broker shall determine, in its sole discretion, the timing of the purchases of Shares, the number of Shares to be purchased, the price payable for the Shares and the manner in which purchases of Shares are to occur for the duration of the ASPP, so long as such purchases are within, and in accordance with, the ASPP Parameters. The ASPP Agreement specifies that, other than the ASPP Parameters, the Broker will not take any instructions from, nor consult with, the Company or its affiliates regarding any purchases under the ASPP.
15. The ASPP operates automatically and is conducted solely through the Broker. No material discretionary authority remains with the Company and the Company has no influence or control over any of the purchases of Shares. The ASPP enables the Company to buy Shares regardless of whether a “blackout period” established and applicable to the Company may then be in effect and regardless of whether the Company is in possession of material undisclosed information at the time of a particular purchase.
16. The ASPP Agreement provides that the TSX Exemption will immediately terminate if, on a trading day where the Company makes a purchase from other holders of Shares pursuant to the NCIB, the Insider Subsidiary Entities do not sell the specified number of Insider Shares to the Company in order for the Insider to maintain its aggregate proportionate percentage ownership in the Company at the Insider Ownership Percentage. Any decision by the Insider Subsidiary Entities not to sell Insider Shares to the Company pursuant to the ASDP would be considered an amendment to the ASDP and subject to paragraph 24 below.
17. Accordingly, in order for the Insider to ensure that it is able to maintain its aggregate proportionate percentage ownership in the Company at the Insider Ownership Percentage, the Insider caused certain Insider Subsidiary Entities to enter into an automatic share disposition plan (the “ASDP”) so that such entities are reciprocally permitted to dispose of Insider Shares at such times when the Company is purchasing Shares under the ASPP, including when a “blackout period” established and applicable to the Company may be in effect and when the Insider and the relevant Insider Subsidiary Entities may be in possession of material undisclosed information about the Company. Absent an automatic disposition process, as an insider of the Company, the Insider and the Insider Subsidiary Entities would have a limited number of opportunities to dispose of the Insider Shares due to insider trading restrictions under applicable securities laws and the Company's insider trading policies, and the Insider and the Insider Subsidiary Entities might be unable to sell Insider Shares to the Company at all times when the ASPP is operative and purchasing. Purchases of Insider Shares pursuant to the ASDP will only occur if the Company purchases Shares under the NCIB pursuant to the ASPP, and only for the purpose of allowing the Insider to maintain its aggregate proportionate percentage ownership in the Company at the Insider Ownership Percentage.
18. The ASDP is administered by the Broker, who is also independent of the Insider and the Insider Subsidiary Entities, in accordance with a pre-arranged set of trading parameters and other instructions (the “ASDP Parameters”) set out in a written plan document (the “ASDP Agreement”) that has been entered into between the Participating Entities (as the Insider Subsidiary Entities currently participating in the NCIB), the Broker, and the Company at the time that the ASDP was established. The ASDP is in compliance with applicable securities legislation and guidance, including, inter alia, subsection 175(2) of Regulation 1015 under the Act, OSC Staff Notice 55-701 Automatic Securities Disposition Plans and Automatic Securities Purchase Plans and similar rules and regulations regarding automatic dispositions of securities under Canadian securities laws, and the form of ASDP Agreement has been submitted to, and accepted by, the TSX.
19. At the time that the ASDP Agreement was entered into, neither the Insider nor any of the Participating Entities was in possession of any material undisclosed information about the Company and each of them represented that it was entering into the ASDP in good faith and not as part of a plan or scheme to evade prohibitions against trading with material undisclosed information contained in applicable Canadian securities laws.
20. At the time that the ASDP Agreement was entered into, the Insider provided the Broker with a certificate from the Company confirming that the Company is aware of the ASDP and certifying that, to the best of the Company's knowledge, each of the Insider and the Participating Entities is not in possession of material undisclosed information about the Company.
21. Pursuant to the ASDP Agreement, the Broker shall determine, in its sole discretion, the timing of the sales of Insider Shares, the number of Insider Shares to be sold, the price at which the Insider Shares will be sold, and the manner in which sales of Insider Shares are to occur for the duration of the ASDP, so long as such sales are within, and in accordance with, the ASDP Parameters. The ASDP Agreement specifies that, other than the ASDP Parameters, the Broker will not take any instructions from, nor consult with, the Insider or the Participating Entities regarding any sales under the ASDP.
22. The ASDP operates automatically and is conducted solely through the Broker. No material discretionary authority remains with the Insider or the Participating Entities and none of them have any influence or control over any of the sales of Insider Shares under the ASDP.
23. The ASDP Agreement specifies that the Broker will not consult with the Insider or the Participating Entities regarding any sales under the ASDP. The ASDP Agreement also specifies that the Insider and the Participating Entities will not disclose any information concerning the Company or the Shares to the Broker that might influence the execution of the ASDP.
24. The ASDP Agreement specifies that any amendment to, or modification of, the ASDP Agreement (including the termination thereof, other than in accordance with the termination provisions listed in paragraph 25) will require the written agreement of each of the parties thereto, which includes the Company, and will be conducted in compliance with, inter alia, statutes and regulations applicable to the trading of securities in the Reporting Jurisdictions, including applicable rules, policy statements and blanket rulings and orders promulgated by Canadian securities regulatory authorities. The ASDP Agreement specifies that at the time of any amendment to, or modification of, the ASDP Agreement, each party will represent that it is not in possession of material undisclosed information with respect to the Company. In the event of any amendment to, or modification of, the ASDP Agreement:
(a) a SEDI filing in respect of such amendment or modification will be completed by, or on behalf of, the Insider and such filing will include a statement that the Insider is not in possession of any undisclosed material information in respect of the Company, and
(b) a press release in respect of such amendment or modification will be issued by, or on behalf of, the Insider and/or the Company if such amendment or modification amounts to material information in respect of the Insider or the Company, which press release will include a statement that neither the Insider nor the Company is in possession of any undisclosed material information in respect of the Company.
25. The ASDP shall terminate upon the first to occur of the following:
(a) the termination of the NCIB;
(b) the termination of the ASPP in accordance with its terms;
(c) the termination of the TSX Exemption; and
(d) the commencement of any voluntary or involuntary proceedings seeking:
(i) the liquidation, reorganization or other relief under any bankruptcy, insolvency or similar law of the Insider or any of the Participating Entities; or
(ii) the appointment of a trustee, receiver or other similar official in respect of the Insider or any of the Participating Entities,
(e) or the taking of any corporate action by any of the Insider or the Participating Entities to authorize any of the foregoing.
26. Upon entering into the ASDP Agreement, the Insider filed an insider report in accordance with subsection 107(2) of the Act.
27. Subject to TSX approval, the ASDP Agreement may be amended to include additional Insider Subsidiary Entities as “Participating Entities” and those additional entities will be subject to the same obligations as the original Participating Entities.
28. For greater certainty, the Exemption Sought applies to the Insider Subsidiary Entities to the extent the exemption from the insider reporting requirements in section 9.5 of NI 55-104 is not available for use.
The Decision Maker is satisfied that decision meets the test set out in the Legislation for the Decision Maker to make the decision.
The decision of the Decision Maker under the Legislation is that the Exemption Sought is granted provided that the Insider shall file an insider report (as such term is defined in NI 55-104) disclosing, on a transaction-by-transaction basis or in acceptable summary form (as such term is defined in NI 55-104), all dispositions of Insider Shares under the ASDP that have not been previously disclosed by or on behalf of the Insider during a calendar year, on or before March 31 of the next calendar year.
Ontario Securities Commission
Ontario Securities Commission