Regulators restrain a ‘public interest’ push on poison pills

Ed Waitzer - Publications

Regulators restrain a 'public interest' push on poison pills

Sean Vanderpol & Ed Waitzer:  With the proposed new approach to ‘poison pills,’ it may be time to reflect more broadly on the trend to extend ‘public interest’ relief as a right to private applications / Financial Post / Published March 8, 2016

Canadian securities regulators are about to demonstrate commendable restraint in the exercise of their “public interest” jurisdiction to pre-empt the work of unconflicted boards of directors responding to unsolicited takeovers. The new proposal would allow boards facing hostile bids up to 105 days before regulators intervene with measures that might curtail a board’s discretion, namely cease-trading “poison pill” defences. This is a marked departure from the current “standard” — which is somewhat unevenly applied — of securities regulators often being prepared to cease-trade poison pills after 45-70 days and suggests a regulatory rethinking of when the “public interest” should be invoked.

The CSA’s proposed regime should allow most conscientious boards to fulfill their duties under corporate law when responding to hostile bids. It may also encourage private parties to challenge the behaviour of conflicted (or otherwise deleterious) boards through the courts, which are better equipped at an institutional level than are securities regulators to deal with such corporate law issues.

The logic underlying this policy reform suggests a broader reconsideration of whether private parties should have the right to invoke the power conferred on securities regulators to make a wide range of punitive and remedial orders if, in the regulator’s opinion, it is in the “public interest” to do so.

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