Currently, post-trade reports have to be filed by issuers or underwriters with Canadian securities regulators following certain exempt distributions made in reliance on prospectus exemptions such as the accredited investor exemption. Effective June 30, the Canadian Securities Administrators (CSA) are significantly increasing the information that must be reported in a new pan-Canadian post-trade report to be filed after a private placement is made in Canada.

The new report of exempt distribution (New Report) applies both to investment fund issuers and non-investment fund issuers[1].

New Report is more onerous

The New Report will require filers to provide substantially more information than under the Current Reports. Certain of the additional information required may be seen by some exempt market participants as an onerous compliance burden given the short 10-day post-trade filing window for non-investment fund issuers and the imposition of late filing fees in Ontario and Alberta.

In particular, U.S. and other foreign issuers that make private placements into Canada may require advice from Canadian counsel in order to determine who is an “insider”, “executive officer”, “promoter” or “registrant” under Canadian law, as those concepts may not be recognized under their local law or have different meanings under local law. They may also require filing assistance.

Since the post-trade report was first used in 1979, the report of exempt distribution has been used primarily to allow regulators to monitor compliance on a distribution by distribution basis with statutory “hold periods”. The New Report appears to reflect a decision by the CSA to better understand the functioning of the private placement market and support policy development.

New information requirements under the New Report include the following:

  • additional details about the issuer including its size and primary business activity
  • identities of the directors, executive officers and promoters of certain issuers
  • identities of control persons of certain issuers (in a non-public schedule to the New Report)
  • additional details about the securities distributed and, for certain jurisdictions, details about the documents provided in connection with the distribution
  • specific details about the prospectus exemptions relied on, both on an aggregate and per investor basis
  • details about compensation paid to registrants, connected persons, insiders and employees of the issuer or the investment fund manager involved in the distribution.

The New Report also requires investment fund issuers to disclose the size of the fund, the general type of the fund and net proceeds to the fund for the period for which the report is filed.

An issuer is not required to complete specified sections of the New Report, if the information is available through the issuer's continuous disclosure filings, the issuer's profile on the System for Electronic Document Analysis and Retrieval (SEDAR), or a registrant firm’s profile on the National Registration Database (NRD). For example, issuers that have a SEDAR profile do not need to provide on the New Report their head office address, date of formation, financial year-end, jurisdictions where reporting, stock exchange listings, or size of assets.

Effective May 24, 2016, reports of exempt distribution must be filed on SEDAR for distributions in Canadian jurisdictions other than Ontario and British Columbia. As a result, non-reporting issuers may also be required to create a SEDAR profile. However, most foreign issuers will not be required to make such filings on SEDAR unless they have voluntarily taken steps to do so. On April 21, 2016, the CSA published new guidance to assist issuers required to make exempt market offering and disclosure filings on SEDAR using the Current Reports and the New Report.

New filing deadline for annual investment fund filers

Currently, investment fund issuers using specified prospectus exemptions are permitted to file post trade reports annually[2], within 30 days after their fiscal year end (Annual Fund Filers). Beginning on June 30, Annual Fund Filers will be required to file the New Report within 30 days after the end of the calendar year, not their fiscal year. Annual Fund Filers will have to report by January 30, 2017 previously un-reported distributions that occurred before January 1, 2017. For all other issuers, the filing deadline for the New Report remains the same as for the Current Reports (i.e. within 10 days of the distribution).

How the New Report must be filed

The New Report must be filed electronically in each CSA jurisdiction where the distribution occurred, as follows:

  • in Ontario, though the OSC’s Electronic Filing Portal
  • in British Columbia, through the BCSC’s eServices
  • in all other CSA jurisdictions, via SEDAR (except for certain foreign issuers).

Transition to New Report

Annual Fund Filers must file the New Report for any distributions that occur on or after January 1, 2017. For distributions that occur before January 1, 2017, Annual Fund Filers may file either the Current Reports or the New Report.

All other issuers must use the New Report for distributions that occur on or after June 30, 2016. If multiple distributions are completed within a 10-day period beginning before and ending after June 30, 2016, such issuers may file either the Current Reports or the New Report.

The New Report requires all issuers to provide the following additional information:

  • Most recent previous legal name (if issuer's name has changed in last 12 months)
  • Website of issuer (if issuer has one) and underwriter (if underwriter has one and is not a registrant)
  • Legal entity identifier (if issuer has one)
  • Firm NRD number for underwriter
  • CUSIP numbers of securities distributed (if applicable)
  • Details about the distribution (number of purchasers and total amount raised) by jurisdiction and prospectus exemption relied on
  • List of all offering materials required to be filed with or delivered to the securities regulatory authority or regulator for distributions in Saskatchewan, Ontario, Québec, New Brunswick or Nova Scotia[3]
  • NRD number of registrant compensated (if applicable)
  • Whether the person compensated facilitated the distribution through a funding portal or internet-based portal
  • Description of terms of any deferred compensation
  • Relationship of the person compensated to the issuer or investment fund manager.

The New Report requires all issuers to provide the following additional information in anon-public schedule[4] to the New Report:

  • Email address of purchaser (if provided by purchaser)
  • Specific prospectus exemption relied on to distribute securities to each purchaser, including, if relying on the “accredited investor” exemption, specifying the type or category of accredited investor corresponding to the paragraph number in the definition of “accredited investor”
  • Identifying whether purchaser is a registrant or insider
  • Name of person compensated for the distribution for each purchaser

Unless the distribution is made to a trust company, trust corporation, or registered adviser purchasing the securities on behalf of a fully managed account, the New Form requires information to be provided about the beneficial owner of the securities.

The New Report requires non-investment fund issuers to provide the following additional information:

  • Stage of operations for issuers in mining industry (exploration, development, production)
  • Areas of asset holdings for issuers involved in investment activities (mortgages, real estate, commercial, business debt, consumer debt, private companies)
  • Number of employees (within a range)
  • SEDAR profile number (if issuer has one)
  • If issuer does not have a SEDAR profile number:
    • Date of formation
    • Financial year-end
    • Jurisdictions of Canada where reporting
    • CUSIP number (if issuer has one)
    • Name of exchanges where publicly listed
    • Size of assets (within a range)

Certain other issuers must also provide in the New Report the names, titles and locations of directors, executives officers and promoters (and if a promoter is not an individual, this information is also required for the directors and executive officers of the promoter) as well as the following information in a non-public schedule to the New Report:

  • Business email address and telephone number of the issuer's CEO
  • Residential addresses of directors, executives officers, promoters and control persons that are individuals (if a promoter or control person is not an individual, this information is required for the directors and executive officers of the promoter and control person)
  • If the control person is not an individual:
    • Organization or company name
    • Province or country of business location.

This additional director, officer and control person information is not required to be provided by the following issuers:

  • investment fund issuers;
  • reporting issuers and their wholly owned subsidiaries;
  • certain foreign public issuers and their wholly owned subsidiaries; and
  • issuers distributing eligible foreign securities only to permitted clients

The New Report requires investment fund issuers to provide the following additional information:

  • NRD number of investment fund manager
  • Website of investment fund manager (if investment fund manager does not have a firm NRD number and has a website)
  • Type of investment fund (money market, equity, fixed income, balanced, alternative strategies, other)
  • Date of formation
  • Financial year-end
  • Jurisdictions of Canada where reporting
  • CUSIP number (if issuer has one)
  • Name of exchanges where publicly listed
  • Net asset value (within a range) and date of calculation
  • Net proceeds by jurisdiction

Certification Requirements

The New Report may only be certified by an officer or director of the issuer or underwriter. The certification may not be delegated to an agent or other individual preparing the report on behalf of the issuer or underwriter.