On April 7, 2016, the Canadian Securities Administrators (CSA) published amendments (Amendments) to the reporting requirements in National Instrument 45-106 Prospectus Exemptions (NI 45-106).  The amendments were previously published for public comment on August 13, 2015.  Concurrently, the CSA published CSA Staff Notice 45-308 (Revised) Guidance for Preparing and Filing Reports of Exempt Distribution under 45-106 (CSA Notice 45-308) which provides helpful information for industry participants in navigating through the Amendments which come into force on June 30, 2016.

Background

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.

As described below, the amendments replace Form 45-106F1 and Form 45-106F6 with a single, new Form 45-106F1 (New 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.  Also 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 being filed only 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.

Currently, Form 45-106F1 filings in all other Canadian jurisdictions simply require the executed Form 45-106F1 to be mailed to the securities commission.  On May 24, 2016 the CSA will require the filing of Form 45-106F1 through SEDAR, subject to an exemption for foreign issuers outlined below.

Amendment Details

Investment Fund Filing Deadline

The amendments have changed the annual reporting deadline for investment funds to January 30 for the reporting of all distributions in the previous calendar year made using the exemptions in sections 2.3, 2.10 and 2.19 of NI 45-106.  Currently, investment funds have until 30 days after the end of the investments fund’s financial year.  The CSA have provided a transition period to allow investment fund issuers that file annually to file the current Form 45-106F1 or the New Form 45-106F1 for distributions that occur before January 1, 2017.

Format of Reporting Form

The amendments provide that all distributions on or after June 30, 2016 are to be reported using New Form 45-106F1 in all provinces and territories of Canada.  The New Form 45-106F1 replaces the current Form 45-106F1 and the current Form 45-106F6.  There are also two schedules to New Form 45-106F1, both of which are to be completed in Excel format.

Filing Systems

The New Form 45-106F1 will be filed with the BCSC through BCSC eServices, with the OSC through the OSC Portal and with all other jurisdictions through SEDAR (certain foreign issuers may still make paper filings, as provided below).  The New Form 45-106F1 can be drafted within the OSC Portal or within BCSC eServices and the filed version from the OSC Portal or BCSC eServices, along with the Excel versions of the two proposed schedules can be submitted to the other jurisdictions.

Exemption from Filing on SEDAR

Under National Instrument 13-101 System for Electronic Document Analysis and Retrieval (SEDAR), a foreign issuer that falls within the definition of “foreign issuer (SEDAR)” is not required to use SEDAR and may continue to file paper copies in all jurisdictions other than Ontario and B.C. (both of which require the use of their electronic filing systems).  A foreign issuer can voluntarily elect to use SEDAR by filing a SEDAR Form 5 Notice of Election by Foreign Issuer(SEDAR).

Details Required in the New Form 45-106F1

The following is the list provided by the CSA in Annex 2 of CSA Notice 45-308:
Continue Reading Canadian Securities Administrators Implement Harmonized Report of Exempt Distribution

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).

Background

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.

Proposed Changes

Continue Reading Canadian Securities Administrators Propose Harmonized Exempt Distribution Reporting Rules

Les Autorités canadiennes en valeurs mobilières (les ACVM) ont récemment publié les modifications définitives qu’elles entendent apporter au Règlement 45-106 sur les dispenses de prospectus et d’inscription (qui sera d’ailleurs renommé le Règlement sur les dispenses de prospectus) (le Règlement 45-106). Ces modifications concernent les dispenses de prospectus fondées sur l’investissement d’une somme minimale ainsi que sur la notion d’investisseur qualifié. Sous réserve de l’obtention des approbations ministérielles requises, les modifications entreront en vigueur le 5 mai 2015.

Modifications importantes

Pour le gestionnaire de fonds d’investissement ou le courtier, les modifications importantes sont les suivantes :

  • la dispense fondée sur l’investissement d’une somme minimale ne sera plus disponible pour les personnes physiques;
  • la définition d’investisseur qualifié sera modifiée afin de :
    • permettre aux comptes gérés sous mandat discrétionnaire ontariens d’acquérir des titres de fonds d’investissement sous le régime de la dispense pour placement auprès d’investisseurs qualifiés, tel que permis dans les autres territoires membres des ACVM;
    • ajouter les fiducies créées par des investisseurs qualifiés pour les membres de leur famille à titre d’investisseur qualifié;
    • ajouter l’exigence de remettre une déclaration de reconnaissance de risque rédigée en langage clair (l’Annexe 45-106A9) aux investisseurs qualifiés qui sont des personnes physiques.

De plus, en modifiant l’Instruction générale au Règlement 45-106 sur les dispenses de prospectus et d’inscription (l’IG 45-106), les ACVM fournissent des indications additionnelles sur les pratiques servant à vérifier si les souscripteurs respectent les conditions de certaines dispenses de l’obligation de prospectus.

Dispense fondée sur l’investissement d’une somme minimale

Le seuil de 150 000 $ de la dispense de prospectus pour investissement d’une somme minimale n’est pas modifié. Par ailleurs, cette dispense ne sera plus disponible pour les personnes physiques puisque les ACVM sont d’avis que ce seuil n’est pas un bon indicateur des connaissances des investisseurs individuels ou de leur capacité à assumer les pertes financières.
Continue Reading Modifications récentes au Règlement 45-106 : Ce que l’industrie des fonds d’investissement doit savoir

The Canadian Securities Administrators (CSA) recently published final amendments to National Instrument 45-106 Prospectus and Registration Exemptions (to be renamed Prospectus Exemptions) (NI 45-106) relating to the accredited investor and minimum amount investment prospectus exemptions. Subject to Ministerial approval, the amendments will come into force on May 5, 2015.

Key Changes

From a fund manager/dealer’s perspective, the key changes are as follows:

  • The minimum amount exemption (MA Exemption) is no longer available to individuals;
  • The accredited investor exemption (AI Exemption) is amended to :
    • in Ontario, allow fully managed accounts to purchase investment fund securities as an accredited investor, as is already permitted in other Canadian jurisdictions;
    • add trusts established by accredited investors for their family members as a category of accredited investor;
    • add a requirement to obtain a new “plain language” risk acknowledgement form (Form 45‑106F9) from “individual” accredited investors;

In addition, the CSA provides additional guidance relating to practices for verifying if purchasers meet the conditions for relying on a prospectus exemption in amendments to Companion Policy 45‑106CP Prospectus and Registration Exemptions (to be renamed Prospectus Exemptions) (CP 45‑106).

MA Exemption

The $150,000 threshold of the MA Exemption has not been changed. However, the MA Exemption will no longer be available to individual investors, as the CSA does not believe the threshold to be a proxy for sophistication or the ability to withstand financial loss for individual investors.
Continue Reading Recent amendments to NI 45-106 : What the Fund Management Industry Needs to Know

On November 27, 2014, the Canadian Securities Administrators (CSA) published for comment proposed amendments to various National Instruments which, if adopted, would overhaul how rights offerings under the rights offering prospectus exemption are conducted. The amendments would also have minor revisions to the requirements of rights offerings conducted by way of prospectus.  The CSA indicate that the amendments are meant to make the rights offering exemption more accessible by streamlining the process.

A rights offering is a financing where the issuer grants to its current securityholders one right per security held. The right or a certain number of rights would then be exercisable prior to the expiry date to purchase an additional security of the issuer at a certain subscription price. The issuer can issue these rights under a prospectus or by using a prospectus exemption.

The proposed amendments include amendments to National Instrument 41-101 General Prospectus Requirements (NI 41-101), National Instrument 44-101 Short Form Prospectus Distributions, National Instrument 45-102 Resale Restrictions, Companion Policy 45-106CP to NI 45-106 and Companion Policy 41-101CP to National Instrument 44-101.

Summary of Amendments

Currently, National Instrument 45-106 Prospectus and Registration Exemptions (NI 45-106) provides a specific prospectus exemption (Current Exemption) for rights offerings which comply with National Instrument 45-101 Rights Offerings (NI 45-101). However, the CSA note that the Current Exemption is not commonly utilized because rights offerings complying with the Current Exemption are time consuming and costly. Under the proposed amendments, NI 45-101 would be repealed and the Current Exemption would be replaced by a new exemption in NI 45-106 (New Exemption) that would substantially change the requirements for a prospectus exempt rights offering.

Below is a summary of the major changes under the New Exemption:

  • Availability: Only reporting issuers, other than certain investment funds, would be able to utilize the New Exemption. In addition, the Current Exemption would be repealed, meaning there would no longer be an ability for non-reporting issuers to undertake a rights offering under a specific rights offering prospectus exemption.
    Continue Reading A New National Rights Offering Exemption

On September 25, 2014, OSC Staff Notice 33-745 Annual Summary Report for Dealers, Advisers and Investment Fund Managerwas published (Report).  The Report is an overview of the main initiatives undertaken by the OSC’s Compliance and Registrant Regulation Branch within the last year and those initiatives underway, with a focus on those