On October 30, 2019, the International Limited Partner Association (ILPA) published its model limited partnership agreement (LPA) template for private equity. The model LPA is available online by clicking here and constitutes a Delaware-law based “whole of fund” waterfall LPA that can be used to structure investments into traditional private equity buyout funds. It is

Effective September 30, 2019, the British Columbia Securities Commission (BCSC) adopted amendments which now require investment fund issuers to file annual reports of exempt distributions online through the BCSC eServices system, as opposed to submitting the annual reports in paper format as was previously required.

In anticipation of the next upcoming filing deadline

The Competition Bureau announced the 2019 transaction-size pre-merger notification threshold under the Competition Act increased to C$96 million from C$92 million, effective February 2, 2019. Innovation, Science and Economic Development Canada also announced new foreign investment review thresholds under the Investment Canada Act, effective January 1, 2019.

For more information about the new thresholds under

On October 4, 2018, the Canadian securities administrators published the final version of the amendments that will create a new regime for liquid alternative mutual funds (alt funds).

The regime will come into effect on January 3, 2019 and could provide retail investors with greater access to alternative investment strategies, including leveraged and market neutral portfolios.

Leverage

Key to the regime is the ability of alt funds to use leverage. The leverage limit is effectively set at 4X the alt fund’s net asset value (NAV) and can be achieved through a combination of derivatives (alt funds are not required to hold cover for their derivatives), short selling (alt funds do not need to set aside cash cover for their short sales, and can reinvest their short sale proceeds in additional long positions) and borrowing. There will be a cap set at 50% of NAV for the aggregate amount of exposure through short sales and borrowing, with a further cap of 10% per issuer sold short (other than government securities). These caps are somewhat arbitrary within the overall 4X leverage limit, but are based on the investment restrictions the securities regulators saw in the closed-end fund space. Accordingly, 130/30 funds and other levered funds can be launched as alt funds, but the 50% cap on short sales means that a market neutral fund using a pairs trading strategy will need exemptive relief.

Interestingly, the final amendments include a new feature allowing alt funds to enter into derivatives with counterparties who do not have a designated rating.


Continue Reading

On May 24, 2018, the Canadian Securities Administrators (CSA) released CSA Staff Notice 81-329 Reducing Regulatory Burden for Investment Fund Issuers, which outlines the CSA’s plan to implement four near-term initiatives to lessen the regulatory burden on investment fund issuers. Specifically, CSA staff will undertake to: (i) remove redundant information in disclosure

Exchange-traded fund (ETF) managers are reminded that, as of September 1, 2017, they will be required to file an “ETF Facts” document in conjunction with the filing of any ETF prospectus.

Similar to “Fund Facts” for conventional mutual funds, “ETF Facts” are summary disclosure documents for ETFs.  Amendments to National Instrument 41-101 General

Last month, provincial securities regulators approved Policy No. 8 (Policy) of The Mutual Fund Dealers Association of Canada (MFDA).  The Policy establishes proficiency standards for mutual fund dealing representatives (Representatives) who wish to sell exchange-traded fund (ETFs).

Although Representatives are legally permitted to sell certain types of

On April 25, 2017, the Canadian Securities Administrators (CSA) published a consultation paper to obtain stakeholders’ views on introducing enhanced oversight requirements for foreign audit firms. Specifically, the paper discusses a proposal by the Canadian Public Accountability Board (CPAB) to amend National Instrument 52-108 Auditor Oversight (NI 52-108) to require foreign audit firms to register with CPAB as a Participating Audit Firm (PAF) should they be auditing a reporting issuers’ financial statements.

Foreign auditors, also referred to as “component auditors”, are often engaged when a reporting issuer’s operations are in a jurisdiction different from that of the issuer’s head office. In such instances, the issuer or its primary auditor may decide to engage a component auditor to conduct an audit on financials related to foreign operations.


Continue Reading

office-1209640_1280On January 10, 2017, the Canadian Securities Administrators (CSA) issued for comment CSA Consultation Paper 81-408 – Consultation on the Option of Discontinuing Embedded Commissions (the Consultation Paper) for a 150-day comment period. The Consultation Paper presents for discussion, the CSA’s position regarding the effects of sales of investment fund securities or structured notes through commissions, including sales and trailing commissions, paid by investment fund managers (embedded commissions), and proposes that the use of embedded commissions be discontinued in favour of direct pay arrangements.

Proposed Changes

The Consultation Paper currently anticipates that the new regulatory framework would aim to

discontinue any payment of money to dealers in connection with an investor’s purchase or continued ownership of a security described above that is made directly or indirectly by a person other than the investor.

This would, at a minimum, include ongoing trailing commissions or service fees as well as upfront sales commissions for purchases made under a deferred sales commission (DSC) option.


Continue Reading

pexels-photo-60226

Economic Environment

The volume of securities purchased by foreign investors in Canada has been steadily increasing in recent years.  While equity securities account for the majority of the increase, debt securities still comprise most of the foreign investment in Canada.[1]  Of these debt securities, corporate bonds attracted the largest increase in investment in 2016 compared to 2015.[2]  The continued significance for Canadian issuers (Issuers) of foreign markets for raising capital emphasizes the importance of understanding the nature of cross-border debt securities offerings (Offerings) and, in particular, uncertainties in their technicalities which, if not properly traversed, can lead to increased costs for Issuers.

Overview of Offerings

Bonds can be offered by Issuers pursuant to a public offering under a prospectus or can be placed privately by way of a private placement, in which case Issuers may choose to prepare and distribute an offering memorandum to potential investors.  The method employed will vary depending on the Issuer’s target market and the extent to which the Issuer is known to participants in the capital markets.  Bonds, regardless of the type of Offering, are typically issued under the terms and conditions of a trust indenture which is entered into between the Issuer and an indenture trustee (Trustee).  The Trustee protects the interests of the Bondholders by enforcing the terms and conditions provided in the trust indenture.


Continue Reading