CSA Proposed Amendments to Increase Canadian Investors’ Access to Exempt Market Offerings by Foreign Issuers
Background
On June 29, 2017, the Canadian Securities Administrators (CSA) released proposed amendments to National Instrument 45-102 Resale of Securities (NI 45-102) and corresponding amendments to Companion Policy 45-102CP to National Instrument 45-102 Resale of Securities for a 90-day comment period. The proposed amendments relate primarily to section 2.14 of NI 45-102 which sets out a prospectus exemption permitting the resale of securities by an investor where the issuer of those securities is not a reporting issuer in any Canadian jurisdiction.
Currently, section 2.14 permits the resale of securities on a prospectus exempt basis only if the issuer was a non-reporting issuer at the time of the distribution or at the time of the resale; residents of Canada, at the distribution date, did not own more than 10% of the outstanding securities of the class or series and did not represent more than 10% of the total number of security holders (10% Ownership Ceiling); and the resale is made on an exchange or market outside of Canada or to a person or company outside of Canada.
The purpose of the existing section 2.14 exemption is to permit the resale of securities over foreign markets or to persons outside of Canada if the issuer has minimal connection to Canada and it is unlikely that a market for these securities would be developed in Canada. The 10% Ownership Ceiling was initially intended to define when an issuer has minimal connection to Canada. The proposed amendments to section 2.14 remove the 10% Ownership Ceiling for Canadian residents.