Access Denied: Primary Market Liability Regime Not Available To Secondary Market Security Holders

In its recent decision in Rooney v. ArcelorMittal S.A. (Rooney), the Court of Appeal for Ontario (Court) held that primary market investors have the option of suing both the offeror and its directors and signatories for misrepresentations in a circular pursuant to section 131(1) (within Part XXIII) of the Ontario Securities Act (Act). However, secondary market investors must bring their claims under the secondary market liability regime in Part XXIII.1 of the Act, which includes more onerous requirements expressly created for secondary market claims.

BACKGROUND

Rooney is a class action brought by security holders of Baffinland Iron Mines Corporation (Baffinland) against Baffinland and others involved in a hostile take-over bid for Baffinland. The plaintiffs allege that the take-over bid circulars prepared by the defendants omitted material information and made material misrepresentations about Baffinland's business and affairs. The representative plaintiffs