Relief granted to permit distribution of Canadian Depositary Receipts
The Canadian Securities Administrators has granted exemptive relief to the Canadian Imperial Bank of Commerce (the Filer) to facilitate the distribution of Canadian Depositary Receipts (CDRs). CDRs trade over a Canadian marketplace and track the performance of large, highly liquid public companies in the United States (each a U.S. Company).
Investors can purchase CDRs in their Canadian dollar brokerage accounts, with the U.S. dollar exposure of a share of a U.S. Company (a U.S. Share) hedged back to the Canadian dollar. CDRs are in continuous distribution and are subscribed for, and redeemed by, authorized participants in a similar way to exchange-traded funds.
Under the exemptive relief, CDRs are qualified for distribution by a base shelf prospectus and a prospectus supplement that is filed for each series of CDRs, with each series representing one U.S. Company. The costs associated with an investment in CDRs are disclosed in the Filer’s base shelf prospectus.
The Filer, as depositary, will hold the deposited U.S. Shares on behalf of investors. The terms of the deposit are governed by a deposit agreement, which is publicly available on the System for Electronic Document Analysis and Retrieval (SEDAR). After a U.S. Share is deposited, the Filer issues a depositary receipt representing an investor’s beneficial ownership in the pool of U.S. Shares. The receipt then trades over a Canadian marketplace in Canadian dollars.
The decision grants exemptive relief to the Filer from:
- the requirement to deliver to the purchaser of a CDR or its agent the latest prospectus or prospectus supplement (similar to exemptions provided to at-the-market distributions);
- certain prospectus form requirements relating to the statements regarding the delivery to purchasers of the prospectus or prospectus supplements and relating to the statement regarding purchasers’ statutory rights of withdrawal and remedies of rescission or damages;
- the requirement to distribute securities under a prospectus at a fixed price to permit the CDRs to be issued at the current market price;
- the requirement to file a pricing supplement in order to distribute securities under a base shelf prospectus by way of a continuous distribution; and
- other technical relief to facilitate the proposed CDR structure.
The exemptive relief is subject to a number of conditions, including that:
- CDRs not be used by U.S. Companies to raise capital; and
- the Filer maintain a website that discloses certain specified information relating to the CDRs.
Under the exemptive relief, a U.S. Company must be incorporated in the United States, be listed on the S&P 500 Index and have a market capitalization in excess of US$20 billion. The U.S. Shares must be listed on the NASDAQ or New York Stock Exchange, and the average daily trading volume of the U.S. Shares in the month before the date of the first prospectus supplement for that CDR must exceed US$100 million.
Nick Hawkins, Legal Counsel, Investment Funds and Structured Products Branch
Viraf Nania, Senior Accountant, Investment Funds and Structured Products Branch