The Alberta Securities Commission (ASC) and the British Columbia Securities Commission (BCSC) have each issued a local exemption order (ASC Blanket Order 51-513 and BCI 51-511) expanding the list of stock exchanges on which an issuer may have its securities listed or quoted in order to be exempt from Multilateral Instrument 51-105 Issuers Quoted in the U.S. Over-the- Counter Markets (MI 51-105). ASC Blanket Order 51‑513 and BCI 51-511 became effective July 31, 2012, to coincide with the effective date of MI 51‑105 in each province and territory of Canada (with the exception of Ontario which did not adopt MI 51-105).
We expect that similar blanket exemption orders have been or will be issued soon by all other securities commissions in the provinces and territories that adopted MI 51-105.
Under MI 51-105, an issuer is not considered an “OTC reporting issuer” and therefore not subject to Canadian public company reporting and other obligations if it has any class of securities listed or quoted on the TSX, TSX Venture Exchange, Canadian National Stock Exchange, Alpha Exchange, NYSE, NYSE Amex, or NASDAQ.
ASC Blanket Order 51-513 and BCI 51-511 extend this list of stock exchanges to include the NASDAQ OMX; Borsa Italiana, MTA Tier; London Stock Exchange, except AIM; Hong Kong Stock Exchange; Deutsche Börse, except the First Quotation Board and the Entry Standard tier; Xetra, Prime Standard and General Standard tiers; SIX Swiss Exchange; Bourse de Luxembourg, except Euro MTF; Tokyo Stock Exchange, 1st Section and 2nd Section; Shanghai Stock Exchange; The Stock Exchange of Thailand, except The Market for Alternative Investment (mai); National Stock Exchange of India; Bombay Stock Exchange; Osaka Stock Exchange; Korea Stock Exchange; and Singapore Exchange. If an issuer has its primary listing on any of these exchanges, each time it carries on any promotional activities in or from Alberta or British Columbia, or distributes a security to a person resident in Alberta or British Columbia, it will be exempt from MI 51‑105 in those provinces.
The list of designated exchanges in the orders is not as extensive as we had hoped it would be. Notable exceptions are: NYSE Euronext, Australia Securities Exchange, Johannesburg Stock Exchange, Bolsa de Madrid, Bolsa Mexicana and the Irish Stock Exchange. The definition of designated exchange does not include any South American exchanges.
The orders exempt issuers of non-convertible debt securities from MI 51-105 entirely, provided that “the issuer does not have any class of securities other than non-convertible debt listed on an exchange or quoted on a quotation and trading reporting system”. An unlisted issuer offering debt securities into Canada will not be subject to MI 51-105, but if an Australian company wants to offer Maple bonds into Canada, for example, it would not be able to rely on the blanket order exemption if it has common shares listed on the ASX, which also trade in the OTC markets in the United States. Since the ASX is not a “designated exchange”, it cannot rely on Section 5(a) of the order.
Although the blanket orders solve a number of issues raised by MI 51-105, a number of other issues continue to exist, so we recommend foreign issuers and underwriters acting on their behalf in connection with proposed private placements into Canada continue to analyze the impact MI 51-105 may have prior to undertaking any marketing activities in Canada other than Ontario.