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Timbercreek Financial Corp. and National Bank Financial Inc.
Headnote
National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Application for exemptive relief to permit issuer and underwriter, acting as agent for the issuer, to enter into an equity distribution agreement to make "at the market" (ATM) distributions of common shares over the facilities of the TSX or other Canadian marketplace -- 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.
December 12, 2017
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 TIMBERCREEK FINANCIAL CORP. (THE ISSUER) AND NATIONAL BANK FINANCIAL INC. (the Agent and, together with the Issuer, the Filers)
DECISION
Background
The securities regulatory authority in the Jurisdiction (the Decision Maker) has received an application (the Application) from the Filers for a decision under the securities legislation of the Jurisdiction (the Legislation) for the following relief (the Exemption Sought):
(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 Issuer, the Agent or any 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 National Instrument 44-102 Shelf Distributions (NI 44-102)) of common shares (Common Shares) of the Issuer pursuant to an equity distribution agreement (the Equity Distribution Agreement) to be entered into by the Issuer and the Agent (an ATM Distribution); and
(b) that the requirements to include the statements specified in items 2 and 3 of section 5.5 of NI 44-102 in a base shelf prospectus, and the requirements to include in a prospectus supplement each of the following:
(i) a forward-looking issuer certificate in the form specified in section 2.1 of Appendix A to NI 44-102;
(ii) a forward-looking underwriter certificate in the form specified in section 2.2 of Appendix A to NI 44-102; and
(iii) a statement respecting purchasers' statutory rights of withdrawal and remedies for rescission or damages in substantially the form prescribed by Item 20 of Form 44-101F1 Short Form Prospectus,
(collectively, the Prospectus Form Requirements) do not apply to a prospectus of the Issuer (including the applicable prospectus supplement(s)) to be filed in respect of an ATM Distribution provided that the alternative form of certificate and disclosure regarding a purchaser's statutory rights described below are included in the prospectus supplement.
The Decision Maker has also received a request from the Filers for a decision 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 the Filers advise the Decision Maker 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 Relief).
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 Filers have 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, Québec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, Northwest Territories, Nunavut and Yukon Territory.
Interpretation
Terms defined in MI 11-102, National Instrument 14-101 Definitions, or NI 44-102 have the same meaning if used in this decision unless otherwise defined herein.
Representations
This decision is based on the following facts represented by the Filers:
The Issuer
1. The Issuer is a corporation amalgamated under the Business Corporations Act (Ontario). The Issuer is a mortgage investment corporation with its head office located in Toronto, Ontario.
2. The Issuer is a reporting issuer in each of the provinces and territories of Canada and is not in default of securities legislation in any jurisdiction of Canada.
3. The Common Shares are listed on the Toronto Stock Exchange (the TSX).
The Agent
4. The Agent is registered as an investment dealer under the securities legislation of each of the provinces and territories of Canada, is a member of the Investment Industry Regulatory Organization of Canada, and is a participating organization of the TSX, with its head office in Montréal, Québec. The Agent is not in default of securities legislation in any jurisdiction of Canada.
Proposed ATM Distribution
5. Subject to mutual agreement on terms and conditions, the Filers propose to enter into the Equity Distribution Agreement for the purpose of ATM Distributions involving the periodic sale of Common Shares by the Issuer through the Agent, as agent, under the shelf prospectus procedures prescribed by Part 9 of NI 44-102.
6. Prior to making any ATM Distributions, the Issuer will have filed in each of the provinces and territories of Canada: (i) a shelf prospectus providing for the distribution from time to time of Common Shares and such other securities as the Issuer deems appropriate (the Shelf Prospectus); and (ii) a prospectus supplement describing the terms of the ATM Distributions, including the terms of the Equity Distribution Agreement, and otherwise supplementing the disclosure in the Shelf Prospectus (the Prospectus Supplement, and together with the Shelf Prospectus as supplemented or amended and including any documents incorporated by reference therein (which shall include any Designated News Release as defined below), the Prospectus).
7. Upon entering into the Equity Distribution Agreement, the Issuer will immediately:
(a) issue and file a news release pursuant to section 3.2 of NI 44-102 announcing the Equity Distribution Agreement, indicating that the Shelf Prospectus and the Prospectus Supplement have been filed on SEDAR and disclosing where and how copies may be obtained . The news release will serve as the news release contemplated by section 3.2 of NI 44-102 for an expected distribution of equity securities under an unallocated shelf; and
(b) file the Equity Distribution Agreement on SEDAR.
8. The Equity Distribution Agreement will limit the number of Common Shares that the Issuer may issue and sell pursuant to any ATM Distribution thereunder to an amount not to exceed 10% of the aggregate market value of the outstanding Common Shares calculated in accordance with section 9.2 of NI 44-102.
9. The Issuer will conduct ATM Distributions through the Agent, as agent, directly, or through a Selling Agent through the facilities of the TSX or other "marketplace" (as defined in National Instrument 21-101 Marketplace Operation) in Canada (Marketplace).
10. The Agent will act as the sole underwriter on behalf of the Issuer in connection with each ATM Distribution, and will be the only person or company 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.
11. The Agent will effect each ATM Distribution on a Marketplace, either itself or through a Selling Agent. If 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 Canadian securities legislation against the Agent, as agent of an ATM Distribution through the TSX or any other Marketplace, will not be affected by a decision to effect the sale directly or through a Selling Agent.
12. 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 the Common Shares traded on Marketplaces in Canada on that day.
13. 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 Prospectus contains full, true and plain disclosure of all material facts relating to the Issuer and 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.
14. After the date of the Prospectus Supplement and before the termination of any ATM Distribution, if the Issuer disseminates a news release disclosing information that, in the Issuer's determination, constitutes a "material fact" (as such term is defined in the Legislation), the Issuer will identify such news release as a "designated news release" for purposes of the Prospectus. This designation will be made on the face page of the version of such news release filed 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 Shelf Prospectus. A Designated News Release will not be used to update disclosure in the Prospectus by the Issuer in the event of a "material change" (as such term is defined in the Legislation).
15. 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 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, in the case of a material fact, it has filed a Designated News Release; or (ii) circumstances have changed such that the sales would no longer constitute a material fact or material change.
16. 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 the outstanding Common Shares that the number of Common Shares proposed to be sold pursuant to the Sell Notice represents; (iii) sales under earlier Sell Notices; (iv) trading volume and volatility of the Common Shares; (v) recent developments in the business, affairs or capital of the Issuer; and (vi) prevailing market conditions generally.
17. In addition, the Agent will monitor closely the market's reaction to trades made 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. It is in the interest of both the Issuer and the Agent to minimize the market impact of sales under an ATM Distribution.
Disclosure of Common Shares Sold in ATM Distribution
18. Within seven calendar days after the end of each calendar month during which the Issuer conducts an ATM Distribution, the Issuer will disclose in a report filed on SEDAR the number and average selling price of the Common Shares distributed through a Canadian Marketplace under the ATM Distribution, and the commission and gross and net proceeds for such sales; furthermore, 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, commissions and net proceeds, in its annual and interim financial statements and management discussion and analysis filed on SEDAR.
Prospectus Delivery Requirement
19. 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.
20. Delivery of a prospectus is not practicable in the circumstances of an ATM Distribution, as neither the Agent nor a Selling Agent effecting the trade will know the identity of the purchasers.
21. The Prospectus (together with all documents incorporated by reference therein) will be filed and readily available to all purchasers electronically via SEDAR. As stated in paragraph 7 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.
22. The liability of an issuer or an underwriter (or others) for a misrepresentation in a prospectus pursuant to 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, without regard to whether the purchaser relied on the misrepresentation or in fact received a copy of the prospectus.
Withdrawal Right and Right of Action for Non-Delivery
23. 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).
24. Pursuant to the Legislation, a purchaser of a security to whom a prospectus was required to be sent or delivered in compliance with the Prospectus Delivery Requirements, but was not so sent or delivered, has a right of action for rescission or damages against the dealer who did not comply with the Prospectus Delivery Requirements (the Right of Action for Non-Delivery).
25. 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
26. To reflect the fact that an ATM Distribution is a continuous distribution, the Prospectus Supplement will include the following issuer certificate in substitution for the certificate prescribed by the Prospectus Form Requirements:
"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 and territories of Canada."
27. To reflect the fact that an ATM Distribution is a continuous distribution, the Prospectus Supplement will include the following underwriter certificate in substitution for the certificate prescribed by the Prospectus Form Requirements:
"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 and territories of Canada."
28. A different statement of purchasers' 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, in substitution for the language prescribed by the Prospectus Form Requirements:
"Securities legislation in certain of the provinces and territories 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 such purchaser and any amendment relating to Common Shares purchased by such purchaser will not be delivered as permitted under a decision dated •, 2017 and granted pursuant to National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions.
Securities legislation in certain of the provinces and territories 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."
29. The Prospectus Supplement will disclose that, in respect of ATM Distributions under the Prospectus Supplement, the statement in paragraph 28 above supersedes and replaces the statement of purchasers' rights contained in the Shelf Prospectus.
30. The statements required by items 2 and 3 of section 5.5 of NI 44-102 to be included in the Shelf Prospectus will be qualified by adding the following: ", except in cases where an exemption from such delivery requirements has been obtained".
Decision
The Decision Maker is satisfied that the 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:
(a) the Issuer complies with the disclosure requirements set out in paragraphs 18, 26, 27, 28, 29 and 30; and
(b) the Issuer and the Agent respectively comply with the representations made in paragraphs 7, 8, 9, 10, 11, 12, 13, 14, 15, 16 and 17.
This decision will terminate 25 months after the issuance of the receipt for the Shelf Prospectus.
The further decision of the Decision Maker is that the Confidentiality Relief is granted.
As to the Exemption Sought from the Prospectus Delivery Requirement and the Confidentiality Relief:
"Mark J. Sandler"CommissionerOntario Securities Commission"Peter Currie"CommissionerOntario Securities Commission
As to the Exemption Sought from the Prospectus Delivery Requirement, the Prospectus Form Requirements and the Confidentiality Relief:
"Winnie Sanjoto"Manager, Corporate FinanceOntario Securities Commission
DATED at Toronto, this 12th day of December, 2017.