As we discussed in a blog post of August 16, the British
Columbia Securities Commission recently announced that, effective
October 3, 2011, exempt distributions (private placements) in
British Columbia will be subject to expanded post-trade disclosure
requirements. These new rules are expected to have a chilling
effect on private placements into British Columbia, particularly by
foreign public companies and investment funds, and other issuers
that are not "reporting issuers" (public companies) in
While issuers making an exempt distribution in B.C. will
generally be required to file the new Form 45-106F6 (in
addition to filing a Form 45-106F1 in other
Canadian jurisdictions, as applicable), issuers that are not
reporting issuers in any jurisdiction of Canada will have to comply
with more onerous requirements. As we mentioned in our earlier blog
post, however, an exempt distribution report on the new Form and on
Form 45-106F1 will only be required for distributions effected
pursuant to prescribed prospectus exemptions. The practical
feasibility of collecting the required information and the fact
that the additional information will be publicly accessible must be
carefully considered by issuers before they decide to make a
private placement in British Columbia.
Specifically, the new form will require non-reporting issuers to
provide disclosure in the main body of the report regarding the
securities beneficially owned, or directly or indirectly
controlled, by each insider and promoter of the issuer. The term
"insider" under British Columbia securities legislation
captures a wide range of persons including, for example, directors
and officers of entities holding more than 10% of the voting rights
of the issuer. Investment funds managed by an investment fund
manager registered in a Canadian jurisdiction, however, will not
have to provide the additional information. Importantly, the
required information will include the price paid for all securities
held by the insider or promoter and their directors and officers on
the distribution date, including securities previously
acquired. Underwriters and issuers, particularly those
involved in global offerings by major non-Canadian issuers will
likely face significant practical difficulties in collecting,
vetting and disclosing the required information within the
prescribed 10-day timeframe for filing. Also, since the information
will be required in the main body of the form, it will be publicly
accessible in electronic form.
As such, non-reporting issuers should carefully consider these
new requirements before undertaking an exempt distribution in
British Columbia. Those continuing to make exempt distributions in
British Columbia after October 3 should review their subscription
and other related documentation to ensure they are obtaining the
information necessary to fulfill these new reporting
For more information, see our blog post of August 16, cited
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.
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The Supreme Court of Canada has provided guidance to financial institutions holding otherwise "highly sensitive" information to determine when that information is somewhat less sensitive, such that it can be disclosed.
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