On August 13, 2015, the Canadian Securities Administrators (CSA) published proposed amendments to the reporting requirements in National Instrument 45-106 Prospectus Exemptions (NI 45-106).
Current Reporting Forms
The reporting forms required to report an exempt distribution presently consist of two forms, being Form 45-106F6 British Columbia Report of Exempt Distribution (Form 45-106F6) which is used for distributions in British Columbia and Form 45-106F1 Report of Exempt Distribution (Form 45-106F1) which is used for distributions in all other Canadian jurisdictions. Issuers who meet an exemption under BC Instrument 45-533 may file a Form 45-106F1 in British Columbia instead of filing a Form 45-106F6.
In March 2014, the provinces of Alberta, Saskatchewan, Ontario and New Brunswick published proposed amendments to NI 45-106 that would result in the creation of two additional reporting forms which would be Form 45-106F10 Report of Exempt Distribution for Investment Fund Issuers and Form 45-106F11 Report of Exempt Distribution For Issuers Other Than Investment Funds (March 2014 Proposed Forms).
As described below, the CSA proposes to replace Form 45-106F1, Form 45-106F6 and the March 2014 Proposed Forms with a single, revised Form 45-106F1.
Current Filing Systems
Form 45-106F1 or Form 45-106F6, as applicable, are filed with the British Columbia Securities Commission (BCSC) through the BCSC eServices website and issuers are required to have a profile created on the BCSC eServices system before a filing can be completed. Issuers who have a System for Electronic Document Analysis and Retrieval (SEDAR) profile automatically have a profile existing in BCSC eServices. Issuers who do not have a SEDAR profile are required to submit a profile form to the BCSC to create their profile on BCSC eServices at least 24 hours before they can submit the reporting form. BCSC eServices requires the filer to enter a few pieces of information from the Form 45-106F1/F6 into certain fields on the eServices submission page before attaching the reporting documents and completing the submission. The Form 45-106F1 or Form 45-106F6 is typically populated in Word format, and then converted into PDF format before being uploaded to BCSC eServices. In addition, the schedules to Form 45-106F1 and Form 45-106F6 are removed and filed as separate PDF documents.
Form 45-106F1 filings with the Ontario Securities Commission (OSC) are filed through the OSC’s Electronic Filing Portal (OSC Portal). Unlike the BCSC eServices system, the OSC Portal does not require a profile to be created by an issuer in order to make a filing. However, unlike the BCSC eServices system, where only a few pieces of information need to be entered into the submission page, the submission on the OSC Portal requires the filer to enter every piece of information in the entire Form 45-106F1 onto the submission page. In addition, Schedule I to Form 45-106F1 must be completed in Excel format and uploaded to the submission page. The Form 45-106F1 is typically originally populated in Word format, the Schedule I information is populated a second time in Excel format, and the filer populates the Form 45-106F1 in its entirety again electronically on the OSC Portal. If the Form 45-106F1 is only being filed in Ontario, a filer may draft the Form 45-106F1 in the OSC Portal and the Excel version of Schedule I and forgo the creation of the Word version.
Form 45-106F1 filings in all other Canadian jurisdictions simply require the executed Form 45-106F1 to be mailed to the securities commission. A recent proposal by the CSA would allow the filing of Form 45-106F1 reports through SEDAR.
The time and costs to issuers to complete the reporting for an exempt distribution have been increasing as a result of the introduction of BCSC eServices and OSC Portal filing systems requiring the creation of different forms, completion of different formats of the schedules, and population of the electronic submission pages. The CSA have received this feedback from the industry in response letters to various proposed amendments to NI 45-106 and are therefore proposing the current amendments, in part, to harmonize the reporting forms into one.
In addition, the proposed amendments include the requirement to provide additional information to the CSA to assist them in regulatory oversight of the exempt market and to provide information for future policies.
Investment Fund Filing Deadline
The proposed amendments would change the annual reporting deadline for investment funds to January 30 for the reporting of all distributions in the previous calendar year. Currently, investment funds have until 30 days after the end of the investments fund’s financial year.
Format of Reporting Form
The proposed amendments contemplate all distributions to be reported using the proposed version of Form 45-106F1 (Proposed Form 45-106F1) in all provinces and territories of Canada. This would replace the current Form 45-106F1, the current Form 45-106F6 and the March 2014 Proposed Forms. There are two proposed schedules to Form 45-106F1, both of which would be completed in Excel format.
The amendments do not propose changes to the current filing systems. The Proposed Form 45-106F1 would be filed with the BCSC through BCSC eServices, with the OSC through the OSC Portal and with all other jurisdictions by mail or, as currently proposed, through SEDAR. The proposed amendments would allow the filer to draft the Form 45-106F1 in the OSC Portal and submit the filed version from the OSC Portal, along with the Excel versions of the two proposed schedules to the other jurisdictions (through BCSC eServices, mail or SEDAR, as applicable).
New Details Required in the Proposed Form 45-106F1
The following is a brief summary of information that has not previously been part of the reporting forms submitted to the CSA but is included in the proposed amendments (some of the information below is captured in the existing Form 45-106F6 but not in the existing Form 45-106F1):
- The firm National Registration Database (NRD) number of the underwriter, investment fund manager and registrant being compensated.
- The website of the issuer.
- The SEDAR profile number of the issuer, or if the issuer does not have a SEDAR profile, the following information:
- Date of formation;
- Financial year-end;
- Jurisdictions where the issuer is a reporting issuer;
- Stock exchange listings; and
- Size of assets of the issuer.
- The Global Legal Entity Identifier System’s legal identifier of the issuer.
- The CUSIP number of the security.
- The North American Industry Classification System’s six digit industry category code of the issuer.
- If the issuer is a mining company, the stage of operations of the issuer.
- The number of employees of the issuer (not the specific number, but a range).
- For non-investment fund issuers:
- the name, title and full residential address of all directors, executive officers, control persons and promoters of the issuer. This would include all directors and executive officers of the control person and promoter if they are companies; and
- the number and total amount paid for voting securities of the issuer beneficially owned or directly or indirectly controlled by the directors, executive officers, control persons and promoters of the issuer.
- For investment fund issuers:
- The type of investment fund;
- The net asset value (NAV);
- Date of formation;
- Financial year-end;
- Jurisdictions where a reporting issuer;
- Stock exchange listings; and
- Breakdown of net proceeds by jurisdiction.
- Inclusion of the applicable 3-letter code for the type of securities being distributed (the list of 3-letter codes is provided in the proposed amendments).
- List of offering materials if the distribution was in Saskatchewan, Ontario, Quebec, New Brunswick or Nova Scotia.
- Identification of insiders and registrants being compensated for the distribution.
- E-mail address and phone number of the Chief Executive Officer of the issuer.
- E-mail address of each purchaser.
- Currency in which the distribution was made.
- Increased specifics on the exemption relied upon (for example, what category of accredited investor the purchaser met).
- Identification of any insider or registrant purchasers.
- Identification of which entity or person received compensation for the purchase by each purchaser.
Additional Guidance on Determining the Jurisdictions of Distribution
The Proposed Form 45-106F1 includes the instructional information below to provide guidance in determining in which jurisdictions a distribution has occurred. The Proposed Form 45-106F1 should be filed in all jurisdictions in which a distribution has occurred. In addition, guidance is provided to help the issuer determine whether or not foreign purchaser information should be included in the report. The following is the extract of this guidance from the Proposed Form 45-106F1:
“In each jurisdiction of Canada, a distribution includes a distribution made to a purchaser resident in that jurisdiction. A distribution may also occur in a jurisdiction of Canada where the distribution is made from that jurisdiction to purchasers resident in another jurisdiction of Canada or a foreign jurisdiction. Generally, in British Columbia, Alberta, Saskatchewan, Manitoba, Québec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, Yukon, the Northwest Territories and Nunavut, a distribution is considered to occur in the jurisdiction if the issuer of the securities is located in, or has a significant connection to, that jurisdiction. For example, a distribution by an issuer whose head office is in Alberta made to a purchaser resident in Saskatchewan may be a distribution in both Alberta and Saskatchewan, requiring the issuer to file Form 45-106F1 Report of Exempt Distribution with both the Alberta Securities Commission and the Financial and Consumer Affairs Authority of Saskatchewan. A distribution by an issuer in Ontario may or may not be a distribution in Ontario that gives rise to the requirement to file a report. Whether a distribution occurs in Ontario will depend on whether, in light of relevant connecting factors including the likelihood that the securities will come to rest in Ontario, there is a sufficient connection between the distribution and the province. If an issuer or underwriter is uncertain as to whether a distribution has occurred, the issuer or underwriter should file the report. Generally, if the issuer is located outside of Canada, only include information about purchasers resident in Canada in the report.”
Comments on the proposed amendments are due by October 13, 2015.