Canada: New British Columbia Disclosure Requirements For Private Placements Of Securities

Changes Expected to Limit Canadian "Wrapper" Sales in British Columbia

New private placement trade reporting requirements came into effect in British Columbia on October 3, 2011. The British Columbia Securities Commission (BCSC) has now also introduced some limited exemptions from these new requirements.

When are Canadian Private Placement Trade Reports Required?

A private placement trade report must be filed when newly-issued securities are sold by an issuer, or an underwriter on its behalf, in reliance upon one of the exemptions from the Canadian prospectus requirements that triggers a requirement to report the use of that exemption. The report must be filed within ten calendar days of the completion of the distribution of securities. However, for an investment fund (within the meaning of Canadian securities laws), a single report may be filed within 30 days of the fund's financial year-end covering all securities distributed during that financial year.

Resales of previously issued and outstanding securities are never subject to a private placement trade report requirement. Sometimes this is because the prospectus requirements do not apply to that resale, so no exemption from the prospectus requirements is being used. In other situations, such as a resale of securities by a "control person", the prospectus requirements will apply to that resale and an exemption from the prospectus requirements will be used, but even then no report is required.

Some Canadian prospectus exemptions do not trigger a trade report requirement. One example is the exemption for sales of "Specified Debt Securities". This exemption covers debt securities issued or guaranteed by the Canadian federal government or a provincial government, or by a government of a jurisdiction outside Canada if it has an approved credit rating, or by certain supranational agencies if the securities are payable in Canadian or U.S. dollars.

A trade report is required when the "accredited investor" prospectus exemption is used by an issuer or an underwriter making a sale on the issuer's behalf. However, there is an exemption from the reporting requirement available if: (1) the security is a debt security, or an equity security that is being sold together with a debt security of the same issuer, and (2) the purchaser is any bank, loan corporation, trust company, insurance company, treasury branch, credit union or caisse populaire that is authorized to carry on business in Canada, or is a Canadian Schedule III bank.

What are the Current Trade Reporting Requirements?

Form 45-106F1 is the trade report form currently in use in every province and territory of Canada (the National Form). It requires disclosure of information such as: the name, address and telephone number of the issuer of the securities; the name, address and telephone number of the underwriter (if an underwriter is filing the report); whether or not the issuer is a reporting issuer in Canada; the issuer's industry; details of the distribution, including the date; details of the securities being distributed, and the Canadian prospectus exemption being relied upon; the number of purchasers in each province or territory of Canada where a prospectus exemption is being relied upon and the total dollar value raised from purchasers in those jurisdictions; and details of commissions and finder's fees.

Schedule I to the National Form requires listing the full name, residential address and telephone number of each purchaser being reported on the National Form; the number and type of securities purchased; the total purchase price paid; the Canadian prospectus exemption relied upon; and the date of the distribution. The information in Schedule I is not placed on the public file of any securities regulatory authority in Canada. However, the information on Schedule I may be subject to disclosure under freedom of information legislation in certain provinces or territories.

What are the New British Columbia Requirements?

Starting on October 3, 2011, the BCSC will require the use of a new Form 45-106F6 (the B.C. Form) to report sales of securities made under a Canadian prospectus exemption to any purchaser in British Columbia, and all sales of securities made anywhere in the world by an issuer that has a significant connection to British Columbia (such as, for example, being headquartered in that province), unless an exemption from the trade report requirement is available. However, all investment funds (within the meaning of Canadian securities laws) are permitted, at their option, to file the National Form instead of the B.C. Form.

Additional Disclosure About Purchasers – In addition to the other information about purchasers required by the National Form, the B.C. Form requires, in all cases, disclosure as to whether each purchaser named in the report is either an "insider" of the issuer (within the meaning of Canadian securities laws) or registered as a dealer, adviser or otherwise in any province or territory of Canada (the "Additional Purchaser Disclosure"). For non-individual purchasers, the Additional Purchaser Disclosure is included in the body of the report and will be publicly available in electronic format on the BCSC's website. For purchasers in British Columbia who are individuals, the name, insider or registrant status, number and type of securities purchased, total purchase price paid and distribution date is disclosed in a Schedule which is made available for public inspection at the BCSC's offices in paper format only. A second Schedule, containing the residential address, telephone number and exemption relied upon for individual purchasers, will not be publicly available in either electronic or paper format.

Additional Disclosure About Recipients of Compensation – In addition to the other information about commissions and finder's fees required by the National Form, the B.C. Form requires, in all cases, disclosure of whether each person who has received or will receive compensation in connection with the distribution (including commissions, discounts or other similar fees or payments) is either an "insider" of the issuer (within the meaning of Canadian securities laws) or registered as a dealer, adviser or otherwise in any province or territory of Canada (the "Additional Compensation Disclosure"). This information will be publicly available in electronic format on the BCSC's website.

Additional Disclosure Regarding Insiders and Promoters of the Issuer – The B.C. Form requires the following additional disclosure about insiders and promoters of the issuer (the "Insider and Promoter Disclosure"):

  • the name, municipality and country of residence of each"insider" and "promoter" of the issuer (as those terms are defined under Canadian securities laws),
  • if any "insider" or "promoter" of the issuer is not an individual, then the name, municipality and country of residence of each director and officer of the insider or promoter must also be disclosed, and
  • for each "insider" and "promoter", and each of the directors and officers of any non-individual insiders or promoters, a list of all of the securities of the issuer held by each of them individually, including the price paid on each date that any securities were acquired, for both previously held securities and securities purchased in the distribution subject to the report.

Insider and Promoter Disclosure is not required to be included in the B.C. Form if: (i) the issuer is an investment fund (within the meaning of Canadian securities laws) that has elected to file the B.C. Form (despite being permitted to file the National Form instead) and is managed by an investment fund manager registered in a province or territory of Canada; or (ii) the issuer is a "reporting issuer" in any province or territory of Canada; or (iii) the issuer is a "foreign public issuer". An issuer qualifies as a "foreign public issuer" if it has a class of securities registered under section 12 of the U.S. Securities Exchange Act of 1934, as amended or is required to file reports under section 15(d) of that Act. An issuer also qualifies as a "foreign public issuer" if it is required to provide disclosure to the public, to securityholders or to a regulatory authority and that disclosure is publicly available in a "designated foreign jurisdiction" (see below).

The Insider and Promoter Disclosure will be publicly available in electronic format on the BCSC's website.

What is a "Designated Foreign Jurisdiction"?

The following countries are designated foreign jurisdictions: Australia, France, Germany, Hong Kong, Italy, Japan, Mexico, the Netherlands, New Zealand, Singapore, South Africa, Spain, Sweden, Switzerland and the United Kingdom of Great Britain and Northern Ireland.

Are there any Special Considerations for Investment Funds?

If the issuer is an investment fund managed by an investment fund manager registered in a province or territory of Canada, the B.C. Form requires disclosure of the name of the investment fund manager and the provinces or territories of Canada where it is registered.

Investment funds managed by a Canadian-registered investment manager that choose to file the B.C. Form instead of the National Form are exempt from the Insider and Promoter Disclosure requirements of the B.C. Form.

All investment funds are permitted to utilize the National Form instead of the B.C. Form, at their election.

Which Purchasers of Securities Must be Listed in the B.C. Form?

Any issuer or underwriter filing the B.C. Form must include disclosure regarding all purchasers that are resident in the Province of British Columbia. However, it is not necessary to include any disclosure regarding other purchasers in Canada, or elsewhere in the world, unless the issuer has a significant connection to British Columbia (such as, for example, being headquartered in that province). If the issuer has no significant connection to British Columbia, and there are no purchasers resident in British Columbia, then there is no requirement to file the B.C. Form.

If the issuer has a significant connection to British Columbia, then disclosure must be provided in the B.C. Form regarding all purchasers in the distribution on a worldwide basis (even if no purchasers are resident in British Columbia, or elsewhere in Canada).

What are the Implications of the New B.C. Form Requirement for "Wrapper" Sales?

U.S. and other non-Canadian offerings of securities are often extended into Canada by non-Canadian dealers on a private placement basis using a Canadian "wrapper", or supplement to the non-Canadian prospectus or other offering document.

The new B.C. Form requirement will likely mean that most non-Canadian dealers will generally not be in a position to make Canadian private placement or "wrapper" sales to purchasers in the Province of British Columbia under a Canadian prospectus exemption except where: (1) the nature of the trade does not give rise to a trade reporting requirement; or (2) if there is a trade reporting requirement, the trades can be reported in British Columbia using the National Form; or (3) if the B.C. Form must be used to report the trade, an exemption from the Insider and Promoter Disclosure requirements is available and the Additional Purchaser Disclosure and Additional Compensation Disclosure requirements of the B.C. Form can be satisfied.

Sales of securities to purchasers in British Columbia should not be adversely impacted by the new B.C. Form requirement in the following cases:

  • Resales of previously issued and outstanding securities even where the use of a prospectus exemption is required because the resale is from the holdings of a "control person" within the meaning of Canadian securities laws (no trade report requirement);
  • Sales of Specified Debt Securities, as discussed above (no trade report requirement);
  • Sales of debt securities, or equity securities together with debt securities of the same issuer, to a purchaser that is a bank, loan corporation, trust company, insurance company, treasury branch, credit union or caisse populaire that is authorized to carry on business in Canada, or is a Canadian Schedule III bank (exemption from the trade report requirement);
  • Sales of securities of any "investment fund" within the meaning of Canadian securities laws (the fund may elect to report sales on the National Form rather than the B.C. Form); and
  • Sales of securities of a "foreign public issuer" (as discussed above) which will be exempt from the Insider and Promoter Disclosure requirements, provided that the dealers distributing the securities into Canada are able to establish that the issuer so qualifies, and are able to obtain and provide the Additional Purchaser Disclosure and Additional Compensation Disclosure required by the B.C. Form, and provided that none of the parties involved have objection to the public disclosure of that information (to the extent required) in electronic format on the BCSC's website.

In all other cases, the desire to make sales to investors in the Province of British Columbia would have to be sufficiently compelling to justify collecting all of the information necessary to comply with the Insider and Promoter Disclosure requirements (in which case all necessary information to complete the B.C. Form should be obtained by the issuer or the underwriter before making any sales in British Columbia, to ensure that the subsequent reporting obligations can be satisfied).

Rob Lando is a cross-border corporate and securities lawyer with significant practice experience in the United States and Canada.

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 Mondaq.com.

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

Authors
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
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
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration
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

    Mondaq.com (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 www.mondaq.com

    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 Mondaq.com’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.

    Disclaimer

    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.

    Registration

    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 unsubscribe@mondaq.com 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.

    Cookies

    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.

    Links

    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.

    Mail-A-Friend

    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.

    Emails

    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 .

    Security

    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 webmaster@mondaq.com.

    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 EditorialAdvisor@mondaq.com.

    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 enquiries@mondaq.com.

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com 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