BC INSTRUMENT 51-512 CERTAIN PRIVATE PLACEMENTS
By an instrument effective March 23, 2015, the British Columbia Securities Commission (BCSC) removed barriers to participation by institutional investors in private placements by foreign issuers by addressing two requirements that are unique to Canada.
The BCSC instrument grants an exemption from:
- Multilateral Instrument 51-105 Issuers Quoted in the U.S. Over-the-Counter Markets (MI 51-105), which may cause certain issuers having a class of securities quoted on a U.S. over-the-counter market to become subject to Canadian ongoing disclosure requirements
- An exemption from the requirement to provide underwriter conflicts disclosure under National Instrument 33-105 Underwriting Conflicts (NI 33-105), both on the front page and in the body of an offering document.
The BCSC instrument is modelled on Blanket Order 45-514 Re Certain Private Placements, granted by the Alberta Securities Commission (ASC) on November 20, 2014. See our November 2014 Blakes Bulletin: Alberta Increases Access to Private Placements for Institutional Investors for more details on the content and scope of the ASC’s blanket order, including background information relating to wrapper exemption discretionary orders previously granted by the Canadian securities regulators, issues with proposed amendments to NI 33-105 as identified by market participants, and an outline of the limitations arising from the exemptions previously granted by the ASC and BCSC from MI 51-105.
The only conditions are that (1) the securities be distributed under an exemption from the prospectus filing requirement and (2) the distribution (and promotional activities in the case of MI 51-105) in British Columbia be restricted to “permitted clients,” a narrower category than “accredited investor.” The relief applies to both foreign issuers and Canadian issuers, reporting issuers and non-reporting issuers, and offerings that are made primarily in Canada as well as offerings made primarily outside Canada. The exemptive relief is available to all dealers entitled to distribute securities to permitted clients in British Columbia without a requirement to provide those permitted clients with a notice or to receive back from them an acknowledgment. In contrast to the ASC’s blanket order, which is scheduled to expire on November 20, 2017, the BCSC instrument applies on a permanent basis.
The instrument does not deal with listing representations, which the BCSC previously addressed in Blanket Permission Under Section 50(1)(c) of the Securities Act. It also does not deal with statutory rights of action because, unlike Ontario and certain other provinces, B.C. securities legislation does not have statutory rights of rescission or damages for misrepresentation in an offering memorandum.
The BCSC issued the instrument on the basis that MI 51-105 and NI 33-105 impose unnecessary and unintended constraints on private placements to B.C. institutional investors. As a result of MI 51-105, many offerings have been made available to institutional investors in Ontario, Quebec and, most recently, Alberta, but not elsewhere in Canada.
The MI 51-105 exemption in both the ASC blanket order and the BCSC instrument corresponds to an exemption previously granted by Quebec’s Autorité des marchés financiers (AMF). The BCSC instrument mirrors the language contained in the ASC blanket order in expanding the MI 51-105 permitted client exemptive relief granted by the AMF to also apply to the underwriter conflicts disclosure requirements of NI 33-105.
The MI 51-105 exemption is available for both promotional activities carried on in or from British Columbia and the distribution of a security to a B.C. permitted client. It replaces the exemptive relief previously granted by the BCSC in Blanket Order 51-511 Re Relief from Multilateral Instrument 51-105 Issuers Quoted in the U.S. Over-the-Counter Markets, while retaining the earlier blanket order’s exemptive relief for both issuers that have securities listed on an exchange designated in the order and issuers whose only listed or quoted securities are non-convertible debt securities.
The B.C. instrument eliminates any impediment to a typical offering of foreign securities being extended to institutional investors in British Columbia, just as the Alberta blanket order did for institutional investors in Alberta. With two provincial regulators having taken the step of granting broad relief from NI 33-105, the question remains whether the other provincial securities regulators—particularly the Ontario Securities Commission, the AMF and The Manitoba Securities Commission—will follow suit.