Canada: Amendments To The Prospectus Rules

Last Updated: August 16 2011
Article by Daye Kaba

On July 15, 2011, the Canadian Securities Administrators (CSA) published a Notice and Request for Comment in respect of proposed amendments to National Instrument (NI) 41-101 General Prospectus Requirements, NI 44-101 Short Form Prospectus Distributions, NI 44-102 Shelf Distributions, together with the companion policies in respect of the foregoing instruments, and NI 81-101 Mutual Fund Prospectus Disclosure (Prospectus Rules). There is a 90-day period in which comments are being sought by the CSA.

This would be the first amendment to the Prospectus Rules since their implementation on March 17, 2008. The proposed changes are not intended to be an overhaul of the current Prospectus Rules, but are instead intended to clarify certain provisions, address significant gaps, enhance effectiveness, and codify prospectus relief that has been granted in the past.

A complete text of the proposed changes is available on the Ontario Securities Commission website.

Following are key proposed amendments applicable to all issuers.

  • No Minimum Offering Amount: a requirement for additional disclosure where an issuer does not propose to provide a minimum offering amount. The CSA nevertheless reserves the right in certain circumstances to impose a minimum offering amount on an issuer.
  • Personal Information Forms (PIFs): acceptance of TSXV/TSX PIFs in the place of the CSA form of PIF introduced in 2008, provided that a certificate and consent is appended to such PIFs and the information contained therein continues to be correct. However, except in certain circumstances, PIFs would be required at the time of each prospectus filing.
  • Contractual Rights of Rescission: a requirement that issuers provide contractual rights of rescission in respect of underlying securities where the conversion, exchange or exercise of the security could occur within a short period of time (generally within 180 days) of the purchase of the security under the prospectus. The CSA is in particular referring to subscription receipts and similar types of securities, and is taking the view that investors should be afforded the same remedies in respect of the underlying security, considering that they are making an investment decision in respect of the underlying security.
  • Significant Acquisitions that are also acquisitions of a primary business or predecessor entity: clarification that a non-reporting issuer or a shell reporting issuer that has carried out a significant acquisition that constitutes the acquisition of a primary business or a predecessor entity of the issuer is required to disclose financial statements under Item 32 of NI 41-101F1 as opposed to Item 35 of NI 41-101F1.
  • Exemption of Incorporation by Reference of Reports/Opinions Produced in Information Circular: codification of relief granted to issuers allowing them to exclude from their prospectuses reports or opinions of experts (in particular, fairness opinions or tax opinions) that are incorporated by reference into the prospectus indirectly through the incorporation by reference of a special meeting information circular.
  • Prior Sales and Trading Volume: streamlining of disclosure regarding prior sales and trading price and volume in NI 41-101F1 such that it applies only to the class or series of securities that is being distributed under the prospectus, and clarify that if an issuer is distributing a series of debt, it must provide prior sales and trading price and volume disclosure in respect of that series of debt.
  • Non-Issuer's Submission to the Jurisdiction and Appointment of Agent for Service: expansion of the existing requirement to all foreign directors of the issuer, as they are liable for misrepresentations contained in the prospectus. Perhaps more controversial is the CSA's intention to extend the requirement to file a non-issuer's submission to the jurisdiction and appointment of an agent for service to all foreign experts including qualified persons and auditors. The CSA is particularly keen to receive feedback in respect of this proposal.
  • Successor Issuer: clarification of the definition of "successor issuer" such that in circumstances where the successor acquired a business from a predecessor that represented less than all of the predecessor's business, substantially all of the business must have been divested by the predecessor to the successor in order for the issuer to be considered a successor issuer. This is intended to ensure that an issuer will be considered a successor issuer only if the historical financial statements of its predecessor are an accurate proxy for the successor issuer's financial statements.
  • Primary Business Oil & Gas Exemption to Provide Operating Statements: extension of an exemption to allow oil & gas issuers carrying out acquisitions to rely on operating statements instead of financial statements when providing financial disclosure about the acquisition. In addition, the CSA proposes to exempt oil & gas issuers from having to provide audited operating statements the third year back if a recent independent reserves evaluation has been prepared. This proposal would result in consequential amendments under NI 51-102 Continuous Disclosure Obligations, and NI 52-107 Acceptable Accounting Principles and Auditing Standards.
  • Notice of Intention Exemption: relief to a successor issuer new to the short form prospectus regime from having to wait 10 business days to file its preliminary prospectus if its predecessor previously filed the notice of intention. The successor issuer would still have to file a notice of intention concurrently or prior to filing the preliminary prospectus.
  • Time to File the Final Prospectus: clarification that if a prospectus is amended, the 90-day period will recommence from the date of the receipt of the amended prospectus, but the final prospectus may be filed not later than 180 days after the date of the receipt of the preliminary prospectus.

Following are key proposed amendments applicable to investment funds:

  • Non-Canadian Investment Funds: an extension of the application of existing requirements for foreign investment funds to managers of foreign investment funds and other non-Canadian entities.
  • Leverage Disclosure for Investment Funds: an enhancement of the disclosure requirement relating to the use of leverage as an investment strategy in the prospectus summary and body of a prospectus.
  • Investment Fund Trading Expense Ratio: a requirement that the disclosure of an investment fund's trading expense ratio for the past 5 years.
  • Organization and Management Details of the Investment Fund: a requirement for additional disclosure on current or past bankruptcies of and cease trade orders against any issuer, and on ownership interests in the investment funds and its fund manager for directors and executive officers of the investment fund. The CSA also proposes new disclosure relating to principal distributors of investments funds and a requirement to sign a prospectus certificate.
  • Principal Security Holder: an amendment to the disclosure of principal securityholders of investment funds to limit the disclosure to circumstances where this information is or should be known by the investment fund or its manager. This amendment is intended to affect exchange traded funds in continuous distributions.
  • Mutual Fund PIF Reform: a reform of the PIF delivery requirements in NI 81-101 to correspond to the proposed NI 41-101 reforms relating to PIFs as discussed above.
  • Documents Incorporated by Reference in a Mutual Fund Prospectus: a requirement for the incorporation by reference of the audited balance sheet filed with the mutual fund's simplified prospectus where a mutual fund has not yet filed interim or annual financial statements. In addition, the CSA proposes to require the incorporation by reference of a mutual fund's interim financial statements and interim management report of fund performance where the mutual fund has not yet filed its annual comparative financial statements and annual management report of fund performance.
  • Principal Distributor Certificate for Mutual Funds: an amendment to the principal distributor certificate required by Form 81-101F2 Contents of Annual Information Form to require a principal distributor of a mutual fund to provide the same certificate as the mutual fund and the manager of the mutual fund.

As noted above, the comment period expires on October 14, 2011.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions