Important amendments to NI 45-106 Prospectus and Registration Exemptions are set to come into force tomorrow, May 5, 2015.
Notably, the amendments will require issuers relying on the accredited investor prospectus exemption to obtain a signed risk acknowledgment form when selling securities to individual accredited investors. Such risk acknowledgement forms must be retained for a period of 8 years from the distribution. Individual accredited investors who are permitted clients (i.e. who have net financial assets with an aggregate realizable value in excess of $5 million) are exempt from the requirement to complete and execute a risk acknowledgement form. Amendments to 45-106CP Companion Policy also underscore CSA staff’s views that issuers and selling security holders may need to undertake enhanced due diligence to ascertain the status of a given purchaser and that, depending on the circumstances, relying on a signed risk acknowledgment form or representation in a subscription agreement may no longer be sufficient. These amendments will likely come into force in unison with other Ontario-specific amendments which will, among other things, move certain accredited investor categories from NI 45-106 to equivalent provisions in s. 73.3 of the Securities Act (Ontario).
The amendments also make important changes to the minimum amount investment prospectus exemption, which will no longer be available to individual investors. The short-term debt prospectus exemption will also be amended and a new short-term securitized product prospectus exemption will be introduced. Finally, the family, friends and business associates prospectus exemption will be introduced in Ontario to counteract the removal of the Ontario founder, control person and family prospectus exemption.
While these represent important changes to the exempt financing regime in Ontario, we remind readers that, as we have discussed in detail in prior posts, a number of other proposals are still being considered including the Ontario crowd-funding prospectus exemption and the rights offering prospectus exemption as well as changes to Form 45-106F1 Report of Exempt Distribution.