Headnote
National Policy 11-203 Process For Exemptive Relief Applications in Multiple Jurisdictions – previous decision provided relief from registration and prospectus requirements in connection with the use of electronic roadshow materials – previous relief limited Filer to posting electronic roadshow materials on certain website – Filer wishing to post roadshow materials on a different website - cross-border offering of securities – compliance with U.S. offering rules leads to non-compliance with Canadian regime – relief required as use of electronic roadshow materials constitutes a distribution requiring compliance with prospectus and registration requirements – relief granted from sections 25 and 53 of the Securities Act (Ontario) in connection with a cross-border offering – previous decision revoked and relief granted, subject to conditions.
Applicable Legislative Provisions
Securities Act, R.S.O. 1990, c. S.5, as am., ss. 25, 53, 144.
National Policy 47-201 – Trading Securities Using the Internet and Other Electronic Means, s. 2.7
IN THE MATTER OF
THE SECURITIES LEGISLATION OF
ONTARIO
(the Jurisdiction)
AND
IN THE MATTER OF
THE PROCESS FOR EXEMPTIVE RELIEF
APPLICATIONS IN MULTIPLE JURISDICTIONS
AND
IN THE MATTER OF
LOCAL MATTERS, INC.
(the Filer)
DECISION
Background
The principal regulator in the Jurisdiction has received an application from the Filer for a decision under the securities legislation of the Jurisdiction of the principal regulator (the “Legislation”) for:
Revocation Relief
- a revocation of the decision (the “Original Decision”) In the Matter of Local Matters, Inc. dated May 30, 2008 (the “Revocation Relief”); and
Exemption Sought
- a decision exempting the posting of certain roadshow materials on the website of one or more commercial services such as www.retailroadshow.com during the “waiting period” from the prospectus requirement and, except with respect to British Columbia where relief is not required, the registration requirement under the Legislation (the “Exemption Sought”)
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):
(a) the Ontario Securities Commission is the principal regulator for this application, and
(b) the Filer has provided notice that section 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in British Columbia, Alberta, Saskatchewan, Manitoba, New Brunswick, Prince Edward Island, Nova Scotia and Newfoundland and Labrador.
Interpretation
Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.
Representations
This decision is based on the following facts represented by the Filer:
The Filer was incorporated under the General Corporation Law of the State of Delaware on October 30, 2003.
The principal office of the Filer is located at 1221 Auraria Parkway, Denver, Colorado 80204.
On March 22, 2006, the Filer filed a registration statement on Form S-1 (the “Form S-1”) under the 1933 Act with the SEC relating to the initial public offering (the “Offering”) of its common shares (the “Offered Shares”). The Filer has also filed Amendment No. 1, Amendment No. 2, Amendment No. 3, Amendment No. 4, Amendment No. 5 and Amendment No. 6 to the Form S-1 with the SEC on May 12, 2006, June 27, 2006, August 3, 2006, November 11, 2007, March 24, 2008 and April 29, 2008, respectively.
On May 27, 2008, the Filer filed Amendment No. 7 to the Form S-1 with the SEC and filed a preliminary base PREP prospectus (the “Preliminary Prospectus”) relating to the Offering with the securities regulatory authority of each of the provinces (other than Québec) of Canada (the “Jurisdictions”).
The Filer commenced marketing of the Offering in the Jurisdictions after the Preliminary Prospectus was filed and a receipt was issued therefor pursuant to National Policy 11-202 Process for Prospectus Reviews in Multiple Jurisdictions (the “Preliminary Receipt”).
During the interval between the date of the Preliminary Receipt and the date of issuance of an receipt of the principal regulator for a final base PREP prospectus (such period being known as the “waiting period”), the Filer intends to utilize electronic roadshow materials (the “Website Materials”) as part of the marketing efforts for the Offering, as is now typical for an initial public offering in the United States.
Because the Filer will not be required to file reports with the SEC pursuant to section 13 or section 15(d) of the 1934 Act until the time the Form S-1 has become effective pursuant to the 1933 Act, Rule 433(d)(8)(ii) under the 1933 Act which came into effect in December 2005, requires the Filer to either file the Website Materials with the SEC or make them “available without restriction by means of graphic communication to any person…”.
Compliance with applicable U.S. securities laws thus requires either making the Website Materials available in a manner that affords unrestricted access to the public, or filing the Website Materials on the SEC’s EDGAR system, which will have the same effect of affording unrestricted access. This is inconsistent with Canadian securities laws. In particular, the prospectus requirement and activities that are permissible during the waiting period which, when applied together, require that access to the Website Materials be controlled by the Filer or the underwriters by such means as password protection and otherwise, as suggested by National Policy 47-201 – Trading Securities Using the Internet and Other Electronic Means.
The Filer wishes to comply with applicable U.S. securities laws by posting the Website Materials on the website of one or more commercial services, such as www.retailroadshow.com, without any restriction thereon, such as password protection.
The securities laws of the Jurisdictions do not, absent the Exemption Sought, allow the Filer to post the Website Materials during the waiting period in a manner that would allow the Website Materials to be accessible to all prospective investors in the Jurisdictions without restriction.
The Website Materials will contain a statement that information conveyed through the Website Materials does not contain all of the information in the Preliminary Prospectus or any amendment thereto, or the final base PREP prospectus or any amendment thereto, or the supplemented PREP prospectus or any amendment thereto (the “Final Prospectus”) and that prospective purchasers should review all of those prospectuses, in addition to the Website Materials, for complete information regarding the Offered Shares.
The Website Materials will also contain a hyperlink to the prospectuses referred to in the foregoing paragraph, as at and after such time as a particular prospectus is filed.
The Website Materials, the Preliminary Prospectus, any further amendments thereto, and the Final Prospectus will state that purchasers of the Offered Shares in the Jurisdictions will have a contractual right of action against the Filer and the underwriters in connection with the information contained in the Website Materials posted on the website of one or more commercial services, such as www.retailroadshow.com.
At least one underwriter signing the Preliminary Prospectus, any subsequently amended preliminary prospectus, and the Final Prospectus will be registered in each of the Jurisdictions.
Canadian purchasers will only be able to purchase the Offered Shares through an underwriter that is registered in the Jurisdiction of residence of the Canadian purchaser.
The Filer wishes to revoke the Original Decision and replace it with the Exemption Sought to permit the posting of the Website Materials on the website of a commercial service other than www.retailroadshow.com.
The Filer acknowledges that the Exemption Sought relates only to the posting of the Website Materials on the website of one or more commercial services, such as www.retailroadshow.com.
Decision
The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to make the decision.
Revocation Relief
The decision of the principal regulator under the Legislation is that the Revocation Relief is granted.
Exemption Sought
The further decision of the principal regulator under the Legislation is that the Exemption Sought is granted provided that:
- the Preliminary Prospectus and any further amendments thereto, the final base PREP prospectus and any amendment thereto, and the Final Prospectus state that purchasers of the Offered Shares in each of the Jurisdictions have a contractual right of action against the Filer and the Canadian underwriters, substantially in the following form:
“We may make available certain materials describing the offering (the “Website Materials”) on the website of one or more commercial services such as www.retailroadshow.com under the heading “Local Matters, Inc. (IPO)” in accordance with U.S. securities law during the period prior to obtaining a final receipt for the final base PREP prospectus relating to this offering (the “Prospectus”) from the Canadian securities regulatory authorities, other than the Autorité des marchés financiers. In order to give purchasers in each of the provinces (other than Québec) of Canada (the “Jurisdictions”) the same unrestricted access to the Website Materials as provided to U.S. purchasers, we have applied for and obtained exemptive relief from the securities regulatory authority in each of the Jurisdictions. Pursuant to the terms of that exemptive relief, we and each of the Canadian underwriters signing the certificate contained in the Prospectus have agreed that, in the event that the Website Materials contained any untrue statement of a material fact or omitted to state a material fact required to be stated or necessary in order to make any statement therein not misleading in light of the circumstances in which it was made (a “misrepresentation”) a purchaser resident in any of the Jurisdictions who purchases shares of our common stock pursuant to the Prospectus during the period of distribution shall have, without regard to whether the purchaser relied on the misrepresentation, rights against us and each Canadian underwriter with respect to such misrepresentation as are equivalent to the rights under section 130 of the Securities Act (Ontario) or the comparable provision of the securities legislation of each of the other Jurisdictions, as if such misrepresentation was contained in the Prospectus.”
“Kevin J. Kelly” “Lawrence E. Ritchie”
Ontario Securities Commission Ontario Securities Commission