Further to our bulletin of October 2017, the Ontario Securities Commission has finalized OSC Rule 72-503 Distributions outside Canada (the “Rule”) and its accompanying companion policy. If the Minister of Finance approves the Rule (or does not take any further action by March 5, 2018), the Rule and companion policy will come into effect on March 31, 2018.

The Rule, once in force, will provide clarification to issuers and dealers involved in cross border activities. The companion policy provides guidance with respect to when a distribution of securities can be said to occur outside of Canada, and thus no prospectus or exemption from the prospectus requirement would be needed. If a distribution of securities does occur in Ontario (or the analysis is not made), the Rule itself provides various prospectus exemptions. For example, a prospectus exemption will be available to non-reporting issuers for a distribution by the issuer to a person outside Canada, if that issuer has materially complied with the disclosure requirements of the securities law requirements of the foreign jurisdiction (or if the distribution is exempt from such requirements).

Registration, of course, generally is required if registrable activities are provided to Ontario investors or are otherwise conducted in Ontario. Under the Rule, registration exemptions are provided for foreign dealers and Ontario issuers (subject to a number of conditions) in connection with their activities in Ontario for distributions made to investors outside of Canada in the specified jurisdictions. One rationale behind the new Rule is that investors would generally expect to rely on the protections of the securities law of the foreign jurisdiction in which the investor is located. The Rule provides some much needed updates and clarity for these distributions of securities.