On June 25, 2015, the Canadian Securities Administrators (CSA) announced rule amendments, slated to come into force September 8, 2015, which are intended to eliminate certain disclosure requirements that give rise to the need to prepare a Canadian “wrapper” for foreign securities offered by way of prospectus exemption in Canada as part of a global offering.  The CSA’s intention is to codify and expand the discretionary relief previously granted in 2013 to several investment dealers in respect of Canadian wrappers.

In general, the amendments provide relief from the standard disclosure requirements relating to (i) underwriter conflicts of interest, and (ii) the availability of statutory rights of action.  The amendments also provide relief from the prohibition on making certain listing representations in offering documents.

The exemptions are available only where (i) the offering is made to “permitted clients”, and (ii) the offering is in respect of “eligible foreign securities”, which includes securities issued by a foreign issuer that is incorporated, formed or created under the laws of a foreign jurisdiction, is not a reporting issuer anywhere in Canada, has its head office outside of Canada, and has a majority of its executive officers and directors resident outside of Canada, or securities issued or guaranteed by a foreign jurisdiction’s government.

In general, for non-government issuers, the conditions to rely on the underwriter conflict of interest exemption include:

• a concurrent distribution of the security to investors in the United States;
• delivery to the Canadian investors of an offering document containing the same disclosure as provided to investors in the United States; and
• compliance with applicable U.S. federal securities law and, if applicable, the disclosure requirements of FINRA Rule 5121.

There are still notice requirements under these CSA amendments, however, the notice requirement is now greatly simplified and there is no requirement to obtain a signed acknowledgement.

Under the amendments, notice must be provided to Canadian investors which refers to the reliance on the exemption from the underwriter conflicts disclosure requirements, and the requirement to disclose statutory rights will be deemed to be satisfied if a prescribed disclosure statement is provided. Such notice may be provided in three ways:

• the offering document may include a notice to Canadian investors;
• a dealer can provide the notice to its clients at the same time as the offering document but in a separate document; or
• a dealer can provide a one-time notice to each Canadian investor covering all future Canadian securities offerings, which notice must state that the dealer intends to rely on the exemption for any distribution in the future of eligible foreign securities to the permitted client.

Although these rule amendments will help alleviate the need for Canadian wrappers it is important to remember that private placement post-trade reports must still be filed with the Canadian regulators.