The Ontario Securities Commission (OSC) has announced proposed rule amendments designed to remove certain Canadian-specific disclosure requirements for offerings of foreign securities in Ontario to sophisticated investors on a private placement basis.
The intended purpose of the proposed amendments is to eliminate the requirement for a “wrapper” that is normally included with the offering document when foreign securities are offered to sophisticated Ontario investors under a prospectus exemption. Essentially, when a foreign offering document is used to distribute securities in Ontario, it falls under the definition of an “offering memorandum” under the Securities Act (Ontario). Accordingly, certain Ontario-specific disclosure must be added to the offering document before it can be provided to prospective purchasers in Ontario. The offering document may either be amended to include the necessary Ontario-specific language, or more commonly, a supplemental document known as a “wrapper” is attached to the face of the document, and the two combine to form an Ontario offering memorandum for the purposes of offering securities in Ontario.
Many institutional investors and other market participants have expressed concern that the current requirements restrict investor access to foreign investment opportunities, due to, among other reasons, the time and expense associated with retaining counsel and preparing a “wrapper” to meet Ontario disclosure requirements. Market participants have also expressed that such cost and delay may discourage some issuers/dealers from extending foreign offerings into Ontario.
The OSC anticipates that the proposed amendments will facilitate participation by sophisticated Ontario investors in foreign securities offerings and provide them with a wider range of investment opportunities.
The OSC’s announcement was made in conjunction with the publication of a decision on an application made in Ontario (and certain other jurisdictions) by a group of dealers for exemptive relief to address these issues. In order to ensure that dealers outside of the applicant group are not disadvantaged, the OSC decision will have a 60-day period of delayed effectiveness to allow other parties sufficient time to apply for similar relief.
The proposed rule amendments are subject to a 90-day comment period. The document is available on the OSC’s website: http://www.osc.gov.on.ca/.