July 23, 2016
Ontario Securities Commission Issues Request for Comment on Proposed Changes for Distributions Outside of Canada
On June 30th, 2016, the Ontario Securities Commission (OSC) issued proposed OSC Rule 72-503 – Distributions Outside of Canada and Proposed Companion Policy 72-503CP, Distributions Outside of Canada (“Proposed Rule”).
The Proposed Rule replaces Interpretation Note 1 (the Interpretation Note), issued in 1983. The purpose of the Proposed Rule is to provide certainty to participants in cross-border transactions by providing prospectus and dealer registration exemptions, in connection with a distribution of securities to investors outside of Canada. The Proposed Rule only provides prospectus and dealer registration exemptions and is not otherwise determinative of whether Ontario securities law would otherwise apply to a distribution outside of Canada or to activities related to the distribution.
Generally, the Proposed 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 Proposed 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.
Issuers will be required to file the Proposed Form electronically in Ontario, pursuant to OSC Rule 11-501 Electronic Delivery of Documents to the Ontario Securities Commission.
Proposed OSC Rule 72-503 is available for download from Ontario Securities Commission’s 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.