Canadian securities regulators are proposing to amend certain
disclosure rules applicable to private placements. The proposed
amendments continue an initiative to eliminate the need to prepare
a "wrapper" when foreign issuers offer securities in
Canada to permitted clients (e.g., institutional investors) under a
prospectus exemption. This initiative was discussed in
a previous edition of MarketCaps. The comment period on the proposed amendments to National Instrument
33-105Underwriting Conflicts ends on February 26,
The proposed amendments would eliminate one of the disclosure
requirements that necessitate a "wrapper" when foreign
securities are offered in Canada. Currently, National
Instrument 33-105 requires that detailed disclosure on the
relationships and conflicts of interest that exist between
underwriters and issuers or selling securityholders be included in
a document provided in connection with an offering of
securities. Market participants have suggested that, in
the context of U.S. and other global offerings, the time and
expense associated with ensuring compliance with these disclosure
requirements discourages some foreign issuers and underwriters from
making foreign offerings available to permitted clients in
The proposed amendments would eliminate the need for such
disclosure with respect to an offering of "designated foreign
securities offered by an issuer that:
is incorporated, formed or created under the laws of a foreign
is not a reporting issuer in a jurisdiction of Canada,
has its head office outside of Canada, and
has a majority of its executive officers and directors outside
securities issued or guaranteed by the government of a foreign
The amendments only apply to offerings:
conducted primarily outside of Canada,
to Canadian permitted clients (e.g., institutional
of non-investment funds and non-redeemable investment funds
(i.e., they do not apply to offerings of mutual funds), and
for which a prospectus has not been filed with any Canadian
The proposed amendments are subject to certain conditions,
an offering document must be provided to purchasers that
complies with United States disclosure requirements with respect to
conflicts of interest between issuers and underwriters (limited
relief is provided in the case of foreign government offerings that
do not include comparable U.S. disclosure); and
the registrant involved in the offering must deliver a notice
(either a one-time notice that covers all distributions or a notice
for each distribution) to the permitted client, prior to or
contemporaneously with the distribution, that describes the terms
and conditions of the disclosure exemptions being relied on.
Other amendments related to the initiative to eliminate the need
for a "wrapper" are proposed for OSC Rule 45-501 Ontario
Prospectus and Registration Exemptions (discussed in the previous
edition of MarketCaps noted above) published on April 25, 2013 and
are set out in proposed Multilateral Instrument 45-107 Listing
Representation and Statutory Rights of Action Disclosure
Exemptions. MI 45-107 was also published on November 28,
2013 and provides the same relief as the proposed OSC amendments
published in April. British Columbia is not participating in
MI 45-107 because it previously issued a blanket order to address
the matters covered in that instrument that are relevant to B.C.
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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