Canadian Regulators Propose Lowering Early Warning Threshold To 5% And Expanding Disclosure

The Canadian Securities Administrators today published for comment proposed changes to the early warning reporting requirements that propose to, among other things, decrease the reporting threshold from 10% to 5% and expand the basis for disclosure.

The CSA state in the notice that the amendments are being proposed to address the increasing prevalence of shareholder activism and the ability of 5% shareholders to requisition a shareholders' meeting. While the threshold for reporting further acquisitions would remain at 2%, a 2% decrease in ownership would also become reportable, as would a drop below the new 5% threshold.

Changes are also being proposed to expand the scope of the reporting framework in light of the increased use of derivatives by investors. Noting that, through the use of derivatives, a sophisticated investor may be able to accumulate a substantial economic interest in an issuer without public disclosure, the CSA also propose specific amendments