The Canadian Securities Administrators (CSA), with exception to the British Columbia Securities Commission, published for comment proposed amendments to Form 45-106F1 Report of Exemption Distribution (“Form 45-106F1”).
As we know, Form 45-106F1 is a filing requirement for issuers and underwriters who distribute securities pursuant to one or more prospectus exemptions. Although Form 45-106F1 was only recently amended in June 2016, the CSA has proposed more fine tuning to provide comfort to issuers and underwriters and relieve some headache surrounding the filing of Form 45-106F1. In the CSA’s view, the proposed amendments, although beneficial to all filers, are intended to address concerns that institutional investors are excluded from offerings by foreign dealers as a result of the information and certification requirements prescribed in Form 45-106F1 applicable to these dealers.
Generally, the proposed amendments to Form 45-106F1 relate to (i) certification requirements and (ii) information requirements.
First, the proposed amendment to the certification requirements would permit agents to certify on behalf of issuers and underwriters in order to reflect the practical reality that law firms usually file Form 45-106F1 on behalf of their clients. Further, the certification language proposed now includes a due diligence qualifier that allows the filer or their agent to certify based on their knowledge, having exercised reasonable diligence, the information provided is true, and to the extent required, complete. In addition, Form 45-106F1 now clarifies that the person certifying is doing so on behalf of the issuer using a corporate-style signature block and not certifying on an individual level.
Second, the proposed amendments relate to information requirements. Specifically, the CSA proposes that in filing Form 45-106F1, filers will no longer need to include all the exchanges where shares of the issuer trade, but rather list only the primary exchange where the shares trade. Further, the filer is not required to do analysis regarding all the categories that may apply to an issuer when relying on the exemption under Item 9 for disclosure of information of directors, executive officers and promoters of the issuer. The proposed amendments indicate that it is sufficient to select only one category that applies to the issuer under Item 9 of the form.
Finally, the proposed amendments also alleviate the need to select the applicable paragraph number in Schedule 1 under the definition of “accredited investor” when distributing securities to non-individual permitted clients.
In sum, the proposed amendments regarding both the certification and information requirements will likely ease the burden in completing Form 45-106F1 and the due diligence language may also provide some comfort to persons certifying the form.