Responding to concerns raised by non-Canadian international market participants, the Canadian Securities Administrators (the CSA) have granted relief for certain foreign issuers from the requirement to report whether a purchaser under an exempt distribution in Canada is a “registrant” and/or an “insider” of the issuer (the Foreign Issuer Relief) in Schedule 1 to the new Form 45-106F1 – Report of Exempt Distribution(the New Form) that came into effect June 30, 2016.
As previously discussed, the New Form requires issuers and underwriters, as applicable, to complete a confidential schedule disclosing, among other things, whether or not each purchaser in Canada is a “registrant” and/or an “insider” of the issuer. Since publication of the New Report, non-Canadian international market participants have expressed concerns about the compliance challenges associated with determining such information within the meaning of the terms as defined in Canadian securities laws, given the different standards and meanings applied to such terms in other foreign jurisdictions and in light of the New Form’s certification requirements.
Similar to the exemptions provided in Item 9 of the New Form pertaining to directors, executive officers and promoters of the issuer, the Foreign Issuer Relief is being granted where:
- the issuer is a “foreign public issuer”,
- the issuer is a wholly owned subsidiary of a “foreign public issuer”, or
- the issuer is distributing “eligible foreign securities” into Canada solely to “permitted clients” (the class of investor with whom a foreign dealer relying on the “international dealer exemption” is permitted to trade primarily in foreign securities).
A “foreign public issuer” is defined under the Foreign Issuer Relief to mean any of the following:
- an issuer that has a class of securities registered under section 12 of the Securities and Exchange Act of 1934, as amended (the 1934 Act),
- an issuer that is required to file reports under section 15(d) of the 1934 Act, or
- an issuer that is required to provide disclosure relating to the issuer and the trading in its securities to the public, to security holders of the issuer or to a regulatory authority and that disclosure is publicly available in a “designated foreign jurisdiction” (defined to include Australia, France, Germany, Hong Kong, Italy, Japan, Mexico, the Netherlands, New Zealand, Singapore, South Africa, Spain, Sweden, Switzerland or the United Kingdom of Great Britain and Northern Ireland).
“Eligible foreign securities” are defined under the Foreign Issuer Relief to mean:
- a security is issued by an issuer:
- that is incorporated, formed or created under the laws of a foreign jurisdiction,
- that is not a reporting issuer in a jurisdiction of Canada,
- that has its head office outside of Canada, and
- that has a majority of the executive officers and a majority of the directors ordinarily resident outside of Canada, or
- a security issued or guaranteed by the government of a foreign jurisdiction.
All CSA members, other than the Ontario Securities Commission (the OSC) have issued blanket orders effective June 30, 2016 implementing the Foreign Issuer Relief. The OSC has approved an amendment instrument providing for the same relief, which has been delivered to the Ontario Minister of Finance for approval.
For further information, please see CSA Staff Notice 45-320 Exemptions for Certain Foreign Issuers from the Requirement to Identify Purchasers as Registrants or Insiders in Reports of Exempt Distribution which includes a list of the relevant blanket orders at Appendix A.