Canadian securities regulators are proposing to amend certain disclosure rules applicable to private placements. The proposed amendments continue an initiative to eliminate the need to prepare a “wrapper” when foreign issuers offer securities in Canada to permitted clients (e.g., institutional investors) under a prospectus exemption. This initiative was discussed in a previous edition of MarketCaps. The comment period on the proposed amendments to National Instrument 33-105 Underwriting Conflicts ends on February 26, 2014.

The proposed amendments would eliminate one of the disclosure requirements that necessitate a “wrapper” when foreign securities are offered in Canada. Currently, National Instrument 33-105 requires that detailed disclosure on the relationships and conflicts of interest that exist between underwriters and issuers or selling securityholders be included in a document provided in connection with an offering of securities. Market participants have suggested that, in the context of U.S. and other global offerings, the time and expense associated with ensuring compliance with these disclosure requirements discourages some foreign issuers and underwriters from making foreign offerings available to permitted clients in Canada.

The proposed amendments would eliminate the need for such disclosure with respect to an offering of “designated foreign securities”, specifically:

  • securities offered by an issuer that:
    • is incorporated, formed or created under the laws of a foreign jurisdiction,
    • is not a reporting issuer in a jurisdiction of Canada,
    • has its head office outside of Canada, and
    • has a majority of its executive officers and directors outside of Canada,


  • securities issued or guaranteed by the government of a foreign jurisdiction.

The amendments only apply to offerings:

  • conducted primarily outside of Canada,
  • to Canadian permitted clients (e.g., institutional investors),
  • of non-investment funds and non-redeemable investment funds (i.e., they do not apply to offerings of mutual funds), and
  • for which a prospectus has not been filed with any Canadian securities regulator.

The proposed amendments are subject to certain conditions, including:

  • an offering document must be provided to purchasers that complies with United States disclosure requirements with respect to conflicts of interest between issuers and underwriters (limited relief is provided in the case of foreign government offerings that do not include comparable U.S. disclosure); and
  • the registrant involved in the offering must deliver a notice (either a one-time notice that covers all distributions or a notice for each distribution) to the permitted client, prior to or contemporaneously with the distribution, that describes the terms and conditions of the disclosure exemptions being relied on.

Other amendments related to the initiative to eliminate the need for a “wrapper” are proposed for OSC Rule 45-501 Ontario Prospectus and Registration Exemptions (discussed in the previous edition of MarketCaps noted above) published on April 25, 2013 and are set out in proposed Multilateral Instrument 45-107 Listing Representation and Statutory Rights of Action Disclosure Exemptions. MI 45-107 was also published on November 28, 2013 and provides the same relief as the proposed OSC amendments published in April. British Columbia is not participating in MI 45-107 because it previously issued a blanket order to address the matters covered in that instrument that are relevant to B.C. offerings.