TORONTO (Reuters) - Canadian regulators have backed away from a proposal to lower the early-warning threshold at which investors must make public the size of their stake in a company, a move that could have made hostile takeovers more difficult.
Canadian Securities Administrators, an umbrella group representing the country’s 13 provincial and territorial regulators, said on Friday its members have opted not to cut the threshold to 5 percent of shares outstanding from 10 percent, after mulling concerns about unintended consequences.
The group finished gathering comments on the proposal more than a year ago.
The change would have brought Canada in line with the United States, where investors must disclose stakes of 5 percent or more, and given takeover targets more time to head off bids.
But the regulators said some of those who commented had argued that the Canadian market is unique because there are so many small issuers in which a relatively small investment could have tripped the threshold. They also considered the administrative burden that would have come with the new rules.
Several other changes proposed at the same time are still set to go ahead, including requiring investors to disclose 2 percent decreases in ownership.
McCarthy Tetrault partner Ian Michael said the news was a bit of a surprise, given how much time had passed since the draft rules were released, but he said that speaks to the complexity of the issue.
“If it’s easier to trip, then you will have a lot of administrative burden,” he said. “But the balancing act is, if this is a significant enough position, then why shouldn’t the market know?”
The regulators said they had also decided not to count equity-equivalent derivatives toward the threshold.
The draft rules were announced in March 2013, and the comment period closed in July 2013.
Editing by Jeffrey Hodgson; and Peter Galloway