On June 8, 2018, the Canadian Securities Administrators (CSA ) published a notice indicating that they are making amendments (the Rule Amendments) to National Instrument 45-106 Prospectus Exemptions (NI 45-106) to amend Form 45-106F1 Report of Exempt Distribution (the Report)  and a related change to Companion Policy 45-106CP Prospectus Exemptions (45-106CP). Provided all necessary ministerial approvals are obtained, the Revisions will come into force on October 5, 2018.

Changes to 45-105F1 will include the following amendments and clarifications:

Certification: The instructions will be clarified that if the Report is being certified by an agent on behalf of an issuer or underwriter, the name of the agent should be provided in the box titled “Name of issuer/underwriter/investment fund manager/agent” and the information for the agent’s certifying individual should be used to complete all other boxes.

North American Industry Classification Standard (NAICS) code: Amendments will be made Item 5a) of the Report to explicitly request filers to provide the issuer’s NAICS code that in their reasonable judgment most closely corresponds to the issuer’s primary business activity.

Public listing status: In Item 5g) of the Report, the requirement for non-investment fund issuers to identify the name of the exchange on which the issuer’s securities primarily trade will be amended, to provide that this requirement only applies to equity securities. Filers are not required to provide any exchange information pertaining to an issuer’s debt securities.

Size of assets: Item 5h) to direct filers to select the size of the issuer’s assets based on its most recently available annual financial statements has been amended.

Distribution by co-issuers: In circumstances where two or more issuers distribute a single security, amendments will provide that an issuer or underwriter is not required to file a report for a distribution of securities if a report has been filed by another issuer or underwriter for the distribution of the same security. Item 3 of the Report will be amended to require that, in these instances, the filer identifies the co-issuers of the security.

Purchasers’ secondary given names: Paragraph b)3 of Schedule 1 will be amended to add the words “(if applicable)” to the requirement for purchasers’ secondary given names.

Cryptocurrencies and cryptocurrency-related assets: According to the notice, given the increase in the number of offerings in the exempt market by issuers that invest in cryptoassets:

  • Item 5a) of the Report will be amended to require filers to identify an issuer whose primary business is to invest all or substantially all of its assets in cryptoassets;
  • Item 6b) of the Report will be amended to require filers to identify where the type of investment fund that most accurately identifies an investment fund issuer is a cryptoasset investment fund; and
  • the list of security codes in the general instructions of the Report will be amended to introduce a new security code “DCT” for distributions of securities involving digital coins or tokens. These changes will allow the CSA to more accurately monitor issuers that invest in cryptocurrencies and cryptocurrency-related assets and to identify distributions of securities involving digital coins or tokens.

The complete notice is available for download from the website of the Ontario Securities Commission. http://www.osc.gov.on.ca/en/SecuritiesLaw_ni_20170608_45-106_exempt-distribution.htm

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

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