New rules relating to reports filed with Canadian securities regulators in connection with private placements are expected to come into force on June 30, 2016. The new rules eliminate the fragmented reporting requirements across the country by introducing a single form of report for all Canadian jurisdictions. However, the additional information requested under the new form of report may increase the compliance burden for issuers and underwriters.
Gowling WLG Focus
Currently, issuers and underwriters who rely on certain prospectus exemptions to distribute securities need to file different reports in different jurisdictions: Form 45‑106F6 in British Columbia and Form 45‑106F1 in all other Canadian jurisdictions. Under the new rules, reports for most private placements will be filed under an amended Form 45-106F1 in all jurisdictions.
While the harmonized report is intended to reduce the compliance burden for issuers and underwriters, as discussed below, additional information is required under the new form of report, which may in fact increase the compliance burden, at least initially. However, Canadian securities regulators have indicated that they need this additional information for purposes of regulatory oversight of the exempt market and for policy development purposes.
Additional Information to Be Disclosed
Compared to the current report forms, issuers will need to disclose additional information, including:
- additional details about the issuer, including the number of employees of the issuer or, for investment funds, the net asset value of the fund (in each case, expressed as a range);
- for certain issuers, the identities and residential addresses of the directors, executive officers, promoters and control persons;
- additional details about the securities being distributed and, for certain jurisdictions, a list of all offering materials filed with or delivered to the securities regulators in connection with the distribution;
- specific details about the exemptions relied on (including, in the case of accredited investors, the specific category of accredited investor applicable to each purchaser); and
- information about persons being compensated in connection with the distribution and the compensation being paid.
Electronic Filing of the New Form 45‑106F1
Under rules currently in effect, reports in British Columbia and Ontario must (with limited exceptions) be filed electronically – in British Columbia, using BCSC eServices and, in Ontario, through the OSC’s Electronic Filing Portal. In the other Canadian jurisdictions, new rules are expected to come into force on May 24, 2016, which will require reports of exempt distributions to be filed electronically through the System for Electronic Document Analysis and Retrieval (SEDAR).
Issuers may need to take steps in advance of the effective date to prepare for the new rules.