Capital Markets Report - January 2015

Covering the period December 1-31, 2014

FROM THE REGULATORS

News and Notices

IIROC Releases Guidance Note on Underwriter Due Diligence

By: Michael Brown, Chad Accursi and Greg Hogan

On December 18, 2014, the Investment Industry Regulatory Organization of Canada ("IIROC") issued a guidance note to its dealer members ("Dealer Members") respecting underwriting due diligence in connection with public offerings. A draft of the guidance note had previously been published for comment in March, 2014.

The guidance note is intended to promote more consistent and enhanced underwriting due diligence standards and to assist Dealer Members to more effectively perform their role as gatekeepers to capital markets and to ensure the protection of the investing public. The guidance note sets out a number of key principles and guidance with respect to those principles, including: policies and procedures for underwriting due diligence, due diligence Q&A sessions, reliance on experts and third parties, record-keeping, the role of supervision and more.

A more comprehensive article on this topic was published here on January 19, 2014.

Cooperative Capital Markets Regulatory System: Update on Draft Initial Regulations

By: Justin Dick, Jessica Lee and Kyle Simpson

The Cooperative Capital Markets Regulatory System is an initiative by the governments of British Columbia, New Brunswick, Ontario, Prince Edward Island, and Saskatchewan (collectively, the "Participating Provinces"), along with the government of Canada, to create the Capital Markets Regulatory Authority (the "CMRA"), a national securities regulator.

On December 5, 2014, it was announced that the Participating Provinces have made significant progress toward preparing draft initial regulations ("Draft Initial Regulations") for adoption under the proposed draft uniform provincial capital markets legislation (the "Capital Markets Act").

In an effort to maintain continuity and minimize disruption for market participants, the Draft Initial Regulations will be based on the rules of the Participating Provinces, including the existing national and multilateral instruments. It is intended that any differences will only be those necessary to conform to the Capital Markets Act and to remove variations in requirements among the jurisdictions. The Draft Initial Regulations are not expected to include regulations under the proposed draft uniform federal capital markets legislation (the "Capital Markets Stability Act"). If any regulations under the Capital Markets Stability Act are developed before the CMRA becomes operational, they will be published separately for comment.

The Draft Initial Regulations are expected to be published for comment in early spring 2015.

Regulators Introduce Amendments to Oil and Gas Disclosure

By: Justin Dick, Jessica Lee and Kyle Simpson

On December 4, 2014, the Canadian Securities Administrators introduced amendments to National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities ("NI 51-101") and related forms, aimed at improving and clarifying the disclosure of reporting issuers in the oil and gas industry. The amendments seek to:

promote improved disclosure of resources other than reserves; provide increased flexibility for oil and gas issuers that operate and report in different jurisdictions or recover product types not previously recognized by NI 51-101; and align NI 51-101 with the amended Canadian Oil and Gas Evaluation Handbook (the "COGE Handbook"). While NI 51-101 requires reporting issuers to adhere to the latest requirements established in the COGE Handbook, compliance with the amendments will not be required until July 1, 2015, when they come into effect. The delayed effective date has been implemented to provide sufficient time for the industry to become familiar with the amendments and recent changes to the COGE Handbook, the latter of which includes the publication of guidelines for the estimation and classification of resources other than reserves.

Revised versions of Companion Policy 51-101 Standards of Disclosure for Oil and Gas Activities, CSA Staff Notice 51-324 Revised Glossary to NI 51-101 Standards of Disclosure for Oil and Gas Activities, and CSA Staff Notice 51-327 Revised Guidance on Oil and Gas Disclosure have also been published.

FROM THE COURTS

Contract Law: High Tower Homes Corporation v. Stevens 2014 ONCA 911

By: Greg Hogan

Ontario Court of Appeal states that the ability to imply terms into a contract with an entire agreement clause is limited; prior caselaw on implied terms revisited in lighted of Bhasin; importance of not ignoring "boilerplate."

The short facts of this case were that a vendor of a property mistakenly signed an agreement that permitted the purchaser to acquire a property below market value. The purchaser attempted to waive a condition to the contract by giving written notice to the vendor. Absent this waiver before a specified date, the contract would come to an end and the vendor would not have to sell the property to the purchaser. The section of the contract dealing with notice provided for personal service or notice by hand delivery, fax or email to specified "addresses," none of which were explicitly provided in the contract. The written notice was not made personally and as no other "addresses" were provided in the contract, no other attempts to serve notice of the waiver were found by the motions judge to be effective. The agreement contained an entire agreement clause that stated that there was no "representation, warranty, collateral agreement or condition, which affects this Agreement other than as expressed herein." The motion judge found that the entire agreement clause precluded the implication of an implied term as to notice. As such, the vendor was able to avoid selling the property at a lower price than was anticipated.

On appeal, among the arguments made by the purchaser were that, in order to give business efficacy to the agreement, there ought to be implied into the agreement a term that notice waiving the conditions in favour of the purchaser could be given by fax to the vendor's solicitor and by...