Changes to Exempt Market Reporting Announced

May 30, 2016 | Kevin J. Sorochan

The Canadian Securities Administrators (“CSA”) have announced that effective June 30, 2016, all issuers that distribute securities under certain prospectus exemptions will be required to use a new form of report of exempt distribution (the “New Form”). The New Form will require additional disclosure about the issuer and its insiders, securities distributed, prospectus exemptions relied on and persons compensated for the distribution. The New Form is harmonized for use in all provinces and territories in Canada and replaces the current reports in Form 45-106F1 (used in all provinces and territories other than British Columbia) and Form 45-106F6 (used in British Columbia).    

What has changed in the New Form?

The New Form contains numerous new information requirements, including the following notable items:

  • Issuers are now required to provide their SEDAR profile number, CUSIP number, website information (if applicable), primary industry classification code and confirmation of number of employees.
  • Issuers without a SEDAR profile will be required to provide certain additional information, including information regarding their date of formation, financial year-end, stock exchange listings and asset size.
  • Investment funds will be required to report their fund type, net asset value, date of formation, financial year-end and stock exchange listings.
  • Additional information regarding the distribution of securities to be provided includes a requirement to include the currency in which the distribution was made, a description of the type of securities distributed (by specific code type) and a summary of the distribution (number of purchasers and dollar amounts) for each jurisdiction where a purchaser resides. For issuers located outside of Canada, the New Form only requires that the issuer include information regarding distributions to purchasers resident in a jurisdiction of Canada.
  • In Saskatchewan, Ontario, Quebec and New Brunswick, issuers will need to list and provide details about offering materials used.
  • Issuers must provide details about whether persons being compensated are registrants or an insider of the issuer. This is a new requirement in jurisdictions other than British Columbia.
  • For issuers that are not investment funds or are not reporting issuers, information regarding the name, title and residence of directors, executive officers and promoters of the issuer must be provided.
  • Additional confidential information about purchasers under a distribution must be provided by issuers, including the email address of the purchaser (if available), the specific section, subsection and paragraph of the exemption relied upon for the distribution, as well as an identification of any purchasers that are registrants or insiders of an issuer. These requirements may require issuers to gather information regarding purchasers that they did not previously obtain.
  • Issuers must now provide additional confidential information about their directors, executive officers, promoters and control persons, including residential addresses, as well as the CEO’s contact information. Non-individual promoters or control persons must provide the equivalent information for each director or officer of the promoter or control person.

Why the change to the New Form?

The CSA, in announcing the implementation of the New Form, has emphasized that the New Form will reduce the compliance burden for issuers by having a harmonized report which replaces the two existing forms. This may certainly be the case for issuers that currently distribute securities in British Columbia and another jurisdiction in Canada, however for issuers that are not accustomed to filing Form 45-106F6, the new information required by the New Form will impose an additional administrative burden.  It should be noted that the New Form incorporates much of the information which is in the currently mandated Form 45-106F6 used in British Columbia but not elsewhere.

The CSA has also stressed that the additional information to be provided under the New Form will allow securities regulators to more effectively facilitate regulatory oversight and improve analysis for policy development purposes.

How will the New Form be filed?

Unfortunately, the harmonization of the New Form has not brought about a harmonized filing system. Beginning on June 30, 2016, issuers must, as applicable, file the New Form: (i) in all CSA jurisdictions other than British Columbia and Ontario, on SEDAR (subject to certain exemptions for foreign issuers); (ii) in Ontario, on the Ontario Securities Commission’s Electronic Filing Portal; and (iii) in British Columbia, on the British Columbia Securities Commission’s eServices website. While this may be seen as an improvement to the existing requirement to file electronically in British Columbia and Ontario and to paper file in other CSA jurisdictions, it remains disappointing that a harmonized filing system has not been developed. In addition, it should be noted that the payment of fees related to the filing of the New Form has also not been harmonized. Filing fees continue to be payable by issuers on a CSA jurisdiction-by-jurisdiction basis.


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