Finding Contracts on Securities Disclosure Databases Susan Maples, Legal Fellow, Revenue Watch Institute & Columbia Law School

1. Finding Contracts on Securities Disclosures Databases PWYP International Montreal November 18, 2009 Revenue Watch Institute & Columbia Law School

3. 1) Confidentiality clauses are not a barrier to contract transparency. In a survey of over 150 oil and mining contracts from around the world, we found that confidentiality clauses do allow contract transparency.

4. 2) Contracts are available , but generally for a high price. Thus, industry will have access but citizens likely will not. There are several pay-for-access databases and contracts are available on securities disclosure databases.

6. It is a transferable certificate of ownership of investment products. Stocks are the most common example, but there are also bonds, options, and other more exotic products.

7. Why securities disclosure databases?

9. Securities Disclosure Basics “Mandatory Disclosures” …but that does not mean it’s uniform 2 Main Reasons: Disclosures are “self-reporting” disclosures “Materiality”  Different from company to company and transaction to transaction

10. Contract Disclosure: The “Bad News” Contract disclosure is highlyirregular and not common on the Canadian and American stock exchanges Disclosed contracts are very hard to find. Expect to spend hours going through opaque legal documents presented in a non-user friendly manner.

13. Companies argue that there is ‘commercially sensitive information’ in contracts. However, when companies have to disclose contracts pursuant to securities regulations and they can redact this kind of information on their own, they do not redact anything.

15. TSX: When Will Contracts Be Disclosed? They will also be disclosed in these situations: 1) If a director, officer or promoter is a party to the contract or an ‘insider contract’ 2) Any continuing contract to sell the majority of the company’s products or services or to purchase the majority of the company’s requirements for goods or services 3) Any franchise, license or other agreement to use a patent, formula, trade secret, process or trade name 4) Any financing or credit agreement, with terms that have a direct correlation with anticipated cash distribution 5) Any contract upon which the company’s business is substantiallydependent

16. TSX: Which Contract Disclosure Rules Could Be Most Helpful? Generally, the most helpful rules for finding contracts will be the last category, contracts that a company is substantially dependent upon. A caveat: “substantially dependent” is generally understood to mean a contract that 50% or more of the company’s business is dependent upon, though more conservative companies are interpreting it as 25%

17. SEC: When are contracts disclosed? Again, not very often The TSX rules and SEC rules are very similar when it comes to contract disclosure: Must be disclosed if it is a transaction that is outside the ordinary course of business Or, if it is a contract on which the business is substantially dependent

18. Exploring the TSX and SEC 1) Go to the company website 2) Look for the stock exchanges that the company is listed on 3) Go to the relevant disclosure database TSX = www.sedar.com SEC = http://www.sec.gov/edgar.shtml 4) Start the great hunt for the needle in the haystack

20. The fact of full contract disclosure on securities databases is very important for contract transparency. Companies can and do disclose contracts and they do not redact anything from them.