The CSA have proposed amendments to National Instrument 45-106 Prospectus Exemptions (NI 45-106) that would create a new single harmonized report of exempt distribution (the Proposed Report) for issuers and dealers (filers) across Canada. The CSA indicate that the new amendments aim to reduce the compliance burden for filers by having a harmonized report of exempt distribution.
The Proposed Report streamlines the process for reporting exempt distributions, which will be a welcome change for issuers and underwriters. However, the information required under the Proposed Report may lead to a greater compliance burden and therefore may be less well received by some issuers and underwriters. Currently, there is one form of report of exempt distribution for British Columbia (Form 45-106F6 British Columbia Report of Exempt Distribution (the Current BC Report)), and one form of report of exempt distribution for the rest of Canada (Form 45-106F1 Report of Exempt Distribution (collectively, the Current Reports)).
Last year, the CSA proposed for comment a new form of report of exempt distribution (the February 2014 Proposal) and certain jurisdictions (Ontario, Alberta, Saskatchewan and New Brunswick) separately proposed for comment two new forms of reports of exempt distribution (one for investment funds, and one for non-investment funds) (the March 2014 Proposals). The CSA indicate that the comments received on those proposals have informed this latest proposal. Notably, a number of the information requirements included in the March 2014 Proposals are not required in the Proposed Report, including:
- certain information that can be gathered through an issuer’s continuous disclosure filings, SEDAR, or from a registered firm’s profile on the National Registration Database; and
- age range of purchasers, name of the parent of the issuer, and business email addresses of the underwriter’s CEO.
The quarterly filing requirement for investment funds in the March 2014 Proposals has (thankfully) been replaced with a new filing deadline of within 30 days after the calendar year end (i.e., by January 30) for certain investment funds.
The proposed amendments also contemplate carve-outs from certain information requirements for investment fund issuers, reporting issuers and foreign issuers (and their wholly owned subsidiaries) and issuers distributing eligible foreign securities only to permitted clients.
The Proposed Report would require issuers and underwriters to disclose some additional information, including the following:
Click here to view table.
The Proposed Report also provides detailed instructions for the filer when completing the report. For example, the Proposed Report provides that issuers and underwriters are required to collect information from a registered advisor, trust company or trust corporation purchasing securities on behalf of a fully managed account under subsections 2.3(2) and (4) [Accredited Investor] of NI 45-106 regarding each beneficial owner of the fully managed account (the address, telephone number, email address, number of securities purchased, total purchase price, whether the beneficial securityholder is an insider of the issuer or a registrant, etc.) and include this information in their report.
For more information on the proposed amendments, see the CSA Notice and Request for Comment – Proposed Amendments to NI 45-106 Prospectus Exemptions relating to Reports of Exempt Distribution.
The CSA are accepting comments on the proposed amendments until October 13, 2015.