On May 22, 2009 the Ontario Securities Commission (OSC) published a request for comments on a second set of proposed amendments to NI 45-106 Prospectus and Registration Exemptions, OSC Rule 45-501 Ontario Prospectus and Registration Exemptions and NI 45-102 Resale of Securities(collectively, the “Prospectus and Registration Rules”). This second set of amendments has been proposed in connection with proposed amendments to the Securities Act (Ontario) (OSA) under Bill 162 An Act respecting the budget measure and other matters (specifically Schedule 26 relating to the OSA). The second set of amendments is required in order to remove or modify certain provisions of the Prospectus and Registration Rules that are proposed to be superseded by specific provisions of the OSA under Bill 162.

The amendments to the OSA proposed under Schedule 26 to Bill 162 amend statutory provisions in the following areas:

  • registration requirements for dealers, advisers and others,
  • exemptions from the registration requirements,
  • exemptions from the prospectus requirement, and
  • resale of securities previously distributed under an exemption from the prospectus requirement.

Proposed amendments to the Prospectus and Registration Rules were originally published for comment on February 29, 2008 in connection with proposals to reform and harmonize registration requirements across the country under Proposed NI 31-103 Registration Requirements(Registration Reform). As a consequence of Registration Reform, NI 45-106 was proposed to be repealed and replaced (largely to reflect to new approach to registration being required on a business-based trigger as opposed to a trade-based trigger) and OSC Rule 45-501 and NI 45-102 were proposed to be amended to, among other things, reflect corresponding changes.

Under Bill 162, the Government of Ontario has taken the approach of retaining or including certain prospectus and registration exemptions in the OSA, thereby requiring corresponding amendments to the Prospectus and Registration Rules as previously proposed.

The prospectus and registration exemptions that the Government of Ontario intends to retain or include in the OSA relate to:

  • securities subject to other provincial or federal regulatory regimes such as mortgages, securities evidencing indebtedness secured by or under a security agreement provided under personal property security legislation, and financial intermediaries and Schedule III banks,
  • securities that Ontario Ministry of Finance staff have advised are subject to securities regulatory considerations as well as broader public policy considerations such as specified debt, including government debt, and
  • securities that the staff of the Ministry of Finance have advised relate to key government policy priorities such as school board debt, tax incentive securities and venture capital raising.

Specifically, the proposed amendments to the OSA under Bill 162 would supersede the following exemptions contained in NI 45-106, as previously proposed to be amended: specified debt (proposed sections 2.34 and 3.34), mortgages (proposed sections 2.36 and 3.36), securities evidencing indebtedness secured by or under a security agreement provided under personal property security legislation (proposed sections 2.37 and 3.37), and evidences of deposit issued by a Schedule III bank or an association governed by the Cooperative Credit Associations Act (Canada) (proposed sections 2.41 and 3.41). References to resale provisions in section 72 of the OSA found in Appendix C to proposed NI 45-102 would be modified to reflect proposed amendments to section 72 and a new section 73.7 found in sections 11 and 13 of Schedule 26 to Bill 162. Certain provisions of OSC Rule 45-501 would be modified or deleted in favour of the application of corresponding provisions in the OSA.

If the proposed amendments to the OSA under Bill 162 are passed, implementation is expected to take place in two stages; the first, reflecting transitional provisions corresponding to the implementation of Registration Reform; and the second, at a later time intended to replace the prospectus exemptions enacted in stage one. If the second stage of amendments to the OSA are enacted, the OSC intends to publish new versions of NI 45-106 and OSC Rule 45-501 for comment. These stage two amendments are found at subsection 12(2) of Schedule 26 to Bill 162 and related regulation-making powers are found at subsection 20(17) of that Schedule.

These proposals have been published for a 30-day comment period expiring on June 22, 2009.