The Canadian Securities Administrators (the “CSA”) have issued CSA Staff Notice 61-303 and Request for Comment – Soliciting Dealer Arrangements (the “Notice”) on the use of soliciting dealer arrangements. “Soliciting dealer arrangements” generally refer to agreements entered into between issuers and investment dealers under which the issuer agrees to pay to the dealers a fee for each security successfully solicited to tender to a bid in the case of a take-over bid, or to vote in favour of a matter requiring securityholder approval. In many cases, the payment of any fee is contingent on “success” and/or only if votes are cast in a particular manner.
The recent use of soliciting dealer arrangements in the context of contested director elections has raised substantial controversy. For example, in a previous blog, we reported on the decision of the Alberta Securities Commission (the “ASC”) in PointNorth Capital Inc. where the ASC was called upon to consider the appropriateness of a soliciting dealer arrangement that had been entered into in the context of a proxy fight. Pursuant to this arrangement, the issuer agreed to pay the soliciting dealers a fee if the issuer’s slate of incumbent directors was elected. The ASC dismissed the application by the dissident shareholders and allowed the soliciting dealer arrangement to remain on the grounds that it was not “clearly abusive” of the capital markets in general.
In light of the issues raised by soliciting dealer arrangements, the staff of the CSA has published the Notice and is requesting comments to better understand these arrangements to aid the CSA in assessing whether additional guidance or rules in respect of these arrangements would be appropriate. To aid its assessment in this regard, the CSA has also posed a series of questions for market participants .
Comments must be submitted to the CSA by June 11, 2018.
Stay informed on M&A developments and subscribe to our blog today.