Headnote
National Policy 11-203 Process For Exemptive Relief Applications in Multiple Jurisdictions -relief from registration and prospectus requirements in connection with the use of electronic roadshow materials – 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 – decision subject to conditions.
Applicable Legislative Provisions
Securities Act,R.S.O. 1990, c.S.5, as am., ss. 25, 53.
National Policy 47-201 – Trading Securities Using the Internet and Other Electronic Means, s. 2.7
October 8, 2009
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 DRAGONWAVE 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 a decision exempting the posting of certain roadshow materials on the website of one or more commercial services, such as www.retailroadshow.com and/or www.netroadshow.com during the "waiting period" from the prospectus requirement and, except with respect to British Columbia where registration relief is not required, the registration requirement under the Legislation (collectively, 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
Defined terms contained in National Instrument 14-101 – Definitions and MI 11-102 have the same meaning in this decision unless they are defined in this decision.
Representations
This decision is based on the following facts and representations made by the Filer:
The Filer was incorporated under the Canada Business Corporations Act on February 24, 2000.
The principal office of the Filer is located at 411 Legget Drive, suite 600, Ottawa, Ontario, Canada, K2K 3C9.
The Filer is a reporting issuer in each of British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Quebec, New Brunswick, Nova Scotia, Prince Edward Island and Newfoundland. The Filer is not in default of any of its obligations as a reporting issuer under the applicable securities laws in each of these jurisdictions.
The authorized share capital of the Filer consists of an unlimited number of common shares of which 28,633,943 common shares are currently issued and outstanding.
On September 24, 2009, the Filer filed a preliminary short form base PREP prospectus (the Preliminary Prospectus) in connection with its offering of a new issue of common shares (the Treasury Shares) and a secondary offering by certain selling shareholders of the Filer (the Secondary Shares and together with the Treasury Shares the Offered Shares) (collectively, the Offering) with the securities regulatory authority in each of the provinces (other than Quebec) of Canada (collectively, the Canadian Jurisdictions) and contemporaneously filed a registration statement on Form F-10 (the Form F-10) under the Securities Act of 1933 of the United States of America, as amended (the 1933 Act) with the United States Securities and Exchange Commission (the SEC) relating to the Offering. A receipt was issued for the Preliminary Prospectus on September 24, 2009 pursuant to National Instrument 11-202 Process for Prospectus Reviews in Multiple Jurisdictions (the Preliminary Receipt).
The Filer intends to post certain roadshow materials on the website of one or more commercial services, such as www.retailroadshow.com and/or www.netroadshow.com.
The Filer's outstanding common shares are currently listed on the Toronto Stock Exchange (the TSX). The Filer has applied to list the Treasury Shares on the TSX.
In connection with the Offering, the Offered Shares would continue to be listed on the TSX and the Filer's outstanding common shares including the Offered Shares would also become listed on the NASDAQ Global Market.
During the interval between the date of the Preliminary Receipt and the date of issuance of a receipt for a final short form 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 U.S. Securities Exchange Act of 1934, as amended until the time the Form F-10 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...". The staff of the SEC have taken the position that the requirement to be "available without restriction" means that there cannot be any restrictions on access or viewing imposed, both with respect to persons in and outside of the United States.
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; however, 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 or www.netroadshow.com, without any restriction thereon, such as password protection.
The securities laws of the Canadian 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 Canadian 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 subsequent amendments thereto, or the final short form base PREP prospectus or any amendment thereto, or the supplemented short form 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, any amendments to the Preliminary Prospectus and the Final Prospectus will state that purchasers of the Offered Shares in the Canadian 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 and/or www.netroadshow.com.
At least one underwriter that signed the Preliminary Prospectus was, and in respect of any subsequently amended preliminary prospectus and the Final Prospectus will be, registered in each of the Canadian Jurisdictions.
Canadian purchasers will only be able to purchase the Offered Shares through an underwriter that is registered in the respective Canadian Jurisdiction of residence of the Canadian purchaser.
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 and/or www.netroadshow.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.
The decision of the principal regulator under the Legislation is that the Exemption Sought is granted provided that:
- Any amendments to the Preliminary Prospectus and the Final Prospectus state that purchasers of the Offered Shares in each of the Canadian 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 and/or www.netroadshow.com under the heading "Dragonwave Inc." in accordance with U.S. securities law during the period prior to obtaining a final receipt for the final short form base PREP prospectus relating to this offering (the Final Prospectus) from the securities regulatory authorities in each of the Provinces of Canada, except the Province of Quebec (the Canadian Jurisdictions). In order to give purchasers in each of the Canadian 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 authorities in each of the Canadian Jurisdictions. Pursuant to the terms of that exemptive relief, we and each of the Canadian underwriters signing the certificate contained in the Final 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 the light of the circumstances in which is was made (a misrepresentation) a purchaser resident in any of the Canadian Jurisdictions who purchases common shares pursuant to the Final 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 misrepresentations 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 Canadian Jurisdictions, as if such misrepresentation was contained in the Final Prospectus."
"David L. Knight" "Paulette L. Kennedy"
_____________________________
David L. Knight Paulette L. Kennedy
Commissioner Commissioner
Ontario Securities Commission Ontario Securities Commission