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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.


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At the end of May 2016, the TSX published for comment proposed amendments to the TSX Company Manual (Company Manual) 1) introducing website disclosure requirements for TSX-listed issuers; and 2) amending disclosure requirements regarding securities-based compensation arrangements (Arrangement) including the introduction of Form 15 – Disclosure of Security-Based Compensation Arrangements.

Website disclosure

The TSX

In October 2013, the Canadian Securities Administrators proposed amendments to the auditor oversight rules with the aim of strengthening public confidence in the integrity of financial reporting by reporting issuers. The final version was announced in a recent notice and substantially mirrors the October 2013 version.  Subject to ministerial approvals, National Instrument 52-108 Auditor Oversight

On November 28, 2013, the Canadian Securities Administrators (CSA) in all jurisdictions except Ontario and British Columbia published for comment a proposed Multilateral Instrument 45-107 Listing Representation and Statutory Rights of Action Disclosure Exemptions (Proposed MI 45-107).

Proposed MI 45-107 is not being proposed in Ontario and British Columbia as existing or proposed local instruments address or are expected to address the issues discussed below.

Background

Proposed MI 45-107 provides exemptions from certain requirements of the securities legislation of the participating jurisdictions that apply in the context of prospectus exempt financings, conducted primarily in a foreign jurisdiction by foreign issuers and by investment dealers or international dealers acting as underwriters, and which are also offered to certain institutional and other sophisticated investors in Canada.

The purpose of Proposed MI 45-107 is as follows:

(1) to provide an exemption from the statutory prohibition against making a representation about the intention to list securities on an exchange or market in the context of international financings; and

(2) to provide an exemption from the requirement that applies in Saskatchewan, Nova Scotia and New Brunswick, that an offering document used in connection with a prospectus exempt distribution include a prescribed statement with respect to certain statutory rights of action.

Proposed MI 45-107 will codify discretionary exemptive relief that the CSA has been granting in the context of U.S. and international offerings of securities to Canadian institutional and other sophisticated investors and consequently will alleviate the need for these discretionary exemption applications.

The Proposed MI 45-107
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The Canadian Securities Administrators (CSA) published proposed amendments to National Instrument 33-105 Underwriting Conflicts (NI 33-105) last week which will remove in certain instances the need for foreign issuers to provide a Canadian wrapper when distributing foreign securities on an exempt basis to Canadian permitted clients.   The comment period on the