Two years ago, Canadian regulators took significant steps to reduce the need for international issuers to supplement the disclosure in their offering documents with a “Canadian wrapper”. The Ontario Securities Commission (“OSC”) created a temporary process whereby individual broker-dealers could apply to be exempt from the wrapper requirements; provided the foreign issuer and the transaction met certain requirements. On June 25, 2015, the Canadian Securities Administrators announced that rule amendments will codify the changes that were adopted by the OSC in 2013 (the “2015 Amendments”).1 The 2015 Amendments are similar to changes first adopted two years ago, but further clarify and streamline the offering process for non-Canadian issuers. The 2015 Amendments have been adopted across Canada and will come into force on September 8, 2015.
Under the new regulations, offerings of “eligible foreign securities” without a wrapper will be allowed provided that the security must be offered primarily in a foreign jurisdiction and either be a security (i) issued by an issuer that is (a) incorporated under the laws of a foreign jurisdiction, (b) not a reporting company in Canada and (c) has its head office outside of Canada with the majority of its officers and directors not being residents of Canada; or (ii) issued or guaranteed by the government of a foreign jurisdiction.
Consistent with the changes adopted in 2013, foreign securities sold using the exemption may only be sold to “permitted clients”. 2 In addition, the US offering document delivered to Canadian purchasers must comply with US conflicts of interest disclosure, including applicable FINRA rules. In the adopting release for the 2015 Amendments, however, the OSC clarified that the exemption would apply to both registered and unregistered US offerings so long as the same conflicts of interest disclosure that is provided to US investors is also provided to Canadian investors. Therefore, it is our understanding that the wrapper exemption will apply for qualifying 144A offerings.3
Notably, the 2015 Amendments broaden the number of broker-dealers who may use the wrapper exemption. Unlike the 2013 process in which each broker-dealer had to apply to use the exemption, the 2015 Amendments make the wrapper exemption available to all registered dealers and international dealers.