Reliance on many of the exemptions in National Instrument 45-106 Prospectus Exemptions (NI 45-106) requires issuers (or their underwriters) to file a Report of Exempt Distribution on Form 45-106F1 (Report) and pay fees in each Canadian jurisdiction where a distribution to residents occurred. Information about purchasers must be included in the Report and, for most purposes, “purchaser” means the beneficial owner of the securities.

Since 2016, however, NI 45-106 has deemed that in connection with a distribution made in reliance upon the accredited investor (AI) exemption, a trust corporation, trust company or registered adviser (collectively, the Adviser) purchasing securities on behalf of a fully managed account is considered to be purchasing the securities as principal. As a result, in all jurisdictions the Report only requires issuers (or their underwriters) to provide information about the Adviser, not the beneficial owners of the securities. To our knowledge, market participants have understood these provisions to mean that the Report needs to be filed and fees paid only in the jurisdiction of the Adviser.

Earlier this month, however, the Canadian Securities Administrators (CSA) published Staff Notice 43-325 (Notice) indicating that the regulators are, in effect, taking two (and a half) different approaches to where Reports need to be filed and fees paid:

  1. Group 1 – Manitoba and Québec: If the exempt distribution has a connection to either province (such as beneficial owners of fully managed accounts), issuers and registrants should consider carefully whether a Report must be filed and fees paid in those provinces. The fees payable for filing a Report in Québec may be significant, since they are calculated based on the gross value of the securities distributed in that province.
  2. Group 2 – Almost Everybody Else: The regulators in all the other provinces and territories (except Saskatchewan) have indicated that the Report needs to be filed and fees paid based on the location of the Adviser.

(1/2)    Saskatchewan: The regulator in Saskatchewan has granted blanket, exemptive relief so that the outcome (at least for now) is the same as Group 2.