WORKSHOP ON proposed CMA - PowerPoint Presentation

1. WORKSHOP ON proposed CMA regulationsOFFERS OF SECURITIESregulationJohn CarsonLead Advisor to CMACompliax Consulting Inc.Toronto, CanadaKhalil GhalayiniHead of Financial Control UnitCMA, BeirutJune 2015

2. AgendaPurpose and backgroundPublic offersProspectus requirementsExempt offersExempt offers – filing requirementsOffers of Securities1

3. Purpose of OFFERS OF SECURITIES RegulationEstablish the requirements to make a public offer in Lebanon.Set out types of offers of securities that are exempt from the requirements for a public offer.Establish the requirements to make an exempt offer.Chapter 6 of Law 161 sets the core requirements for public offers. The Regulation sets out additional details.Listing Regulation covers requirements for listing on a securities exchange if the securities will be listed. Offers of Securities2

4. What is offering securities?An offer of securities means:Issuing securities Inviting the public to subscribe for securities Making a securities advertisement for a new issue of securities Making any statement or communication that has the effect of selling, issuing or offering securities May be a public offer or an exempt offerAn offer of securities in Lebanon must comply with the RegulationCovers any type of securities regulated by the AuthorityOffers of Securities3

5. public offersAn offer of securities for subscription by public investors made under the Law and the RegulationAll offers of securities are public offers unless qualify as an exempt offerMust be made through an approved institution licensed for dealing and advising on corporate financeMust file application with CMA including a draft prospectusCMA must approve the offer + the prospectusOfferor must appoint a financial advisor (AI) to review its applicationAdvisor must confirm to CMA that offeror meets the requirements Offers of Securities4

6. PUBLIC OFFER APPLICATION REQUIREMENTSFile application with CMA at least 1 month* before proposed date of offer:Application formDraft prospectusChecklist for prospectus requirementsNotarized copy of any document incorporated by referenceCertificate from legal counsel re issuance of securitiesLetter from financial advisor re review of applicationSigned copy of any expert’s report referred to in prospectusAny other information required by CMADetails in Annex 1CMA has 1 month to review application and give notice of decision.Offers of Securities5

7. prospectusTo contain all information necessary to make an assessment of the issuer, its business, financial position, management + details of the type and terms & conditions of the securitiesMandatory disclaimer that CMA not responsible for contentsSee Annex 2 for minimum contentsCMA may set additional requirements for issuers in specific business or industryProspectus requirements for a CIS / investment fund will be in CIS RegulationCMA must approve prospectus prior to publicationMay defer decision if further analysis neededMay refuse approval if 1) requirements not met, or 2) CMA considers an offer is not in the public interestOffers of Securities6

8. liability for prospectusProspectus is a binding contract between issuer and investorLiability for any false or misleading information, or omissions:OfferorChairman and members of governing body of the offeror Senior management of the offerorA person who accepts, and is stated in the prospectus to accept, responsibility for the prospectus or part of it (experts)Any other person who has authorized the contents of the prospectus or any part of it.4 defenses available, including a “reasonable enquiries” defense Offers of Securities7

9. PROSPECTUS REQUIREMENTSOffers of Securities8ASummary of the Prospectus & OfferBResponsibility for the ProspectusCThe IssuerDThe Offer & the SecuritiesDescription of securitiesTerms and conditions of offerKey information and risk factorsInformation on structured productsEIssuer’s Business, Capital & Financial PositionBusiness activitiesIssued securitiesCapital resourcesFinancial informationAssetsFConstitution & Organizational StructureConstitution and by-lawsCorporate group structureDirectors and management+ Declaration of the Directors

10. other requirementsA Prospectus must be made public at least 2 days before offer startsMust be posted to issuer’s website + made available in printed formSupplementary prospectus is required if a material change or new material information arisesMust include all details of change or new informationFile with new Directors’ DeclarationCMA must approve itSubscribers have right to cancel subscriptions for 1 week after supplementary prospectus is publishedOffers of Securities9

11. exempt offers of securitiesExempt offer – any offer that qualifies for an exemption from the public offer requirementsMust comply with the Regulation including requirements for the type of exempt offerExempt offer of CIS must also meet requirements of CIS RegulationMay be made through an approved institution or, in many cases, by an issuer directlyAlso a person who has acquired securities in an exempt offer may resell them in another exempt offerMarketing of exempt offers to public is prohibitedCan market to professional clients onlyOffers of Securities10

12. exempt offer requirementsIssuer or AI must notify CMA of a proposed exempt offer at least 14 days before the proposed date of offerNotice of an exempt offer > see Annex 4Must file all disclosure documents for the offer + a summary of all key information in the documents > see Annex 5CMA will review all notices of exempt offersMay require changes to disclosure documentsMay exercise same powers as for a public offer, including delaying or prohibiting an offer it considers is not in the public interestIf CMA has no changes or objections then offeror may proceed with offer after 14 days3. Disclosure documents must be provided to all offereesOffers of Securities11

13. list of exempt offersOffers of Securities121Issued by Government of Lebanon2Issued by a foreign government or a supranational authority recognized by the CMA3Offered through an AI to a maximum of 20 subscribers that are professional clients or counterparties. Each subscriber must invest at least $US 100,000 (or equivalent).4Offered by one member of a corporate group only to other members of the group5Offered only to a director, officer, employee or controller of the issuer6Offer of securities already listed on a regulated exchange and offered only to existing security holders. Maximum increase of 20% in issued securities.7Issued in substitution of securities already issued to existing security holders only8Stock bonus, stock dividend or exercise of right of conversion to existing security holders only9Offered in a merger or take-over bid with a disclosure document approved by the CMA

14. Private PlacementsPrivate sale of issue of securities to raise equity or debt financing for a company under exemption # 3 (sale to a maximum of 20 professional investors + minimum subscription of $100,000)File private placement memorandum with notice of exempt offer at least 14 days before date of offermust include all information necessary to asses issuer + the securitiesinclude a summary of key information that must be in memo > see Annex 5 BOffer must be made through an approved institutionCMA will review memorandum and may exercise any powers it has under a public offerOfferor is responsible and liable for contentsMemorandum must be sent to all offereesOffers of Securities13

15. offers of foreign securitiesForeign new issues of securities could be sold in 3 ways:Public offer in Lebanon under this Regulation.Exempt offer in Lebanon that qualifies under this Regulation.Distribution of a CIS / fund under the CIS Regulation.In all cases the sales of securities will be subject to the provisions of the Law and Regulations (notably the Business Conduct Regulation).Sales of foreign securities to Lebanese clients by foreign firms will be subject to the requirements of the Licensing Regulation on soliciting securities business in Lebanon.Offers of Securities14