The Canadian Securities Administrators have published proposed amendments to National Instrument 45-106 Prospectus Exemptions (45-106) and National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations (NI 31-103) which would:

  • Remove the prospectus and registration exemptions for the distribution of syndicated mortgages, where available;
  • Introduce additional requirements to the offering memorandum exemption that apply when used to distribute syndicated mortgages; and
  • Amend the private issuer exemption so that it is not available for the distribution of syndicated mortgages.

It is the CSA’s view that the offering of syndicated mortgages raises investor protection concerns, especially when sold to retail investors, because, among other things they may be:

  • Sold on the basis of projected values of a completed development;
  • Used to raise seed financing; and/or
  • Subordinated to future financings.

While prospectus exemptions are currently available in all Canadian jurisdictions for securities that are mortgages sold by a licensed mortgage broker, in certain jurisdictions – Alberta, British Columbia, Manitoba, New Brunswick, Quebec and Saskatchewan – these exemptions are not available for syndicated mortgages. The proposed amendments are aimed at introducing additional investor protections and increasing harmonization across Canada.

The CSA is accepting written comments on the proposed amendments until June 6, 2018. For further information, please see CSA Notice and Request for Comment Proposed Amendments to National Instrument 45-106 Prospectus Exemptions and National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations relating to Syndicated Mortgages and Proposed Changes to Companion Policy 45-106CP Prospectus Exemptions (March 8, 2018).