On February 12, 2010, the Alberta Securities Commission published Blanket Order 31-505 Registration Exemption for Trades in Connection with Certain Prospectus-Exempt Distributions, 2010 ABASC 52 (the “Order”). The Order provides limited blanket relief from the requirement to register as an Exempt Market Dealer under National Instrument 31-103 Registration Requirements and Exemptions (“NI 31-103”) for a trade in a security in connection with a prospectus exempt distribution under the following prospectus exemptions in National Instrument 45-106 Prospectus and Registration Exemptions (“NI 45-106”):
- Section 2.3 – Accredited Investor Exemption;
- Section 2.5 – Family, Friends and Business Associated Exemption;
- Section 2.9 – Offering Memorandum Exemption; and
- Section 2.10 – $150,000 Minimum Investment Amount Exemption.
In order to rely on the Order, the following conditions must be met:
- The person or company is not registered or required to be registered under the securities legislation of any province, territory or foreign jurisdiction (i.e. as an Investment Fund Manager, Mutual Fund Dealer, etc.
- Prior to the trade, the person or company does not advise, recommend or otherwise represent to the subscriber that the security being traded is suitable for the subscriber, with regard to the subscriber’s investment needs and objectives, financial circumstances or risk tolerance;
- At or before the time at which the subscriber enters into an agreement to purchase the security, the person or company obtains a signed Risk Acknowledgement Form in the form prescribed in the Order;
- The person or company has not provided financial services to the subscriber other than in connection with the prospectus exempt distribution;
- The person or company does not hold or have access to the subscriber’s assets; and
- The person or company electronically files an information report in the form prescribed in the Order on or before the 10th day after the prospectus exempt distribution.
The securities regulatory authorities in each of British Columbia, Saskatchewan and Manitoba issued similar limited blanket relief orders (for example, see British Columbia Securities Commission BC Instrument 32-513 Registration exemption for trades in connection with certain prospectus-exempt distributions).
What impact does the above Order and the similar orders applicable in British Columbia, Saskatchewan and Manitoba (collectively, the “Registration Exemption Orders”) have on persons or companies raising money via one of the above noted prospectus exemptions in NI 45-106?
The Registration Exemption Orders mean that dealers selling securities in the exempt market under one of the above NI 45-106 exemptions to subscribers resident solely in the provinces of British Columbia, Alberta, Saskatchewan and Manitoba may be able to rely on the applicable Registration Exemption Order as long as the above noted criteria are met.
If the dealer intends to rely on the Registration Exemption Orders, it is imperative that the individuals acting as unregistered dealing representatives (i.e. the individuals selling the securities) not provide suitability advice to the subscribers in regards to any securities. If a subscriber requires advice, they must be referred to an individual registered with a securities regulatory authority.
For further information on whether or not you are required to register either your firm or its individuals under NI 31-103 or whether or not you can rely on the Order or similar order of the Provinces of British Columbia, Saskatchewan or Manitoba, please contact any member of our team.