On November 28, 2017, the Ontario Securities Commission (OSC) adopted its final rule regarding distributions outside Canada, OSC Rule 72-503 – Distributions Outside Canada (The Final Rule), including Form 72-503F Report of Distributions Outside Canada (The Final Form), and Companion Policy 72-503 Distributions Outside Canada (The Final Companion Policy). A consequential amendment to OSC Rule11-501 Electronic Delivery of Documents To The Ontario Securities Commission (The Final Consequential Amendment) has also been adopted (Taken together, The Final Rule).

The Final Rule provides explicit exemptions that preserve current cross-border practices, and responds to the challenges issuers and intermediaries face in determining whether a prospectus must be filed or an exemption from the prospectus requirement must be relied on, and the effect of related dealer registration requirements, in connection with a distribution of securities to investors outside of Canada.

The Final Rule replaces Interpretation Note 1 Distributions of Securities Outside of Ontario, and is intended to bring greater certainty to cross-border activities in Ontario. The Final Rule has been delivered to the Minister of Finance for approval, and is expected to come into force on March 31, 2018.

Background:

Generally, the Final Rule provides exemptions from the prospectus requirement in respect of a distribution of securities to a person or company outside of Canada in the following circumstances:

  • if the distribution is under a public offering document in the US or a designated foreign jurisdiction;
  • if a concurrent distribution is qualified under a final prospectus in Ontario;
  • if the issuer is and has been a reporting issuer in a jurisdiction of Canada for the four months immediately preceding the distribution, and;
  • all other distributions, but subject to restrictions on resale to a person or company in a jurisdiction of Canada.

The Final Rule also provides an exemption from the dealer and underwriter registration requirement in respect of a distribution of securities to a person or company outside of Canada on the following conditions:

  • the head office or principal place of business of the person or company is in the US, a designated foreign jurisdiction or Canada;
  • in the case of a distribution to a purchaser in the US the person or company is appropriately registered with the SEC and FINRA and complies with all applicable regulatory requirements;
  • in the case of a distribution to a purchaser located in a designated foreign jurisdiction, the person or company is registered in a category similar to a dealer in that jurisdiction and complies with all applicable regulatory requirements;
  • subject to a limited exception, the person or company does not carry on business as a dealer or underwriter from an office or place of business in Ontario;
  • other than the issuer or selling security holder, the person or company does not trade securities to, with or on behalf of anyone in Ontario, and;
  • the person or company relying on the exemption is not registered as a dealer in any jurisdiction of Canada.

The notice of adoption of OSC Rule 72-503 -Distributions Outside Canada, including Form 72-503F Report of Distributions Outside Canada and Companion Policy 72-503 Distributions Outside Canada, is  available for download from the Ontario Securities Commission website.

OSC Rule 72-503 -Distributions Outside Canada, including Form 72-503F Report of Distributions Outside Canada and Companion Policy 72-503 Distributions Outside Canada, is available for download from the Ontario Securities Commission website.

For more information, please call Barbara Hendrickson at BAX Securities Law (416) 601 -1004.

This publication is not intended to constitute legal advice. No one should act on it or refrain from acting on it without consulting with a lawyer. BAX does not warrant or guarantee the accuracy or currency or completeness of the publication. No part of this publication may be reproduced without the prior written permission of BAX Securities Law.