As we've previously discussed
MI 51-105 can subject issuers who carry out private placements to
Canadian public company obligations. Adopted by every province
other than Ontario, the instrument is intended to discourage the
manufacture and sale of OTC quoted shell companies that can be used
to facilitate abusive market practices.
In response to the concern that the instrument would have the
unintended effect of subjecting major well-established issuers that
trade OTC in the U.S. to Canadian public company reporting
obligations, regulators in almost all Canadian jurisdictions that
adopted MI 51-105 have issued blanket orders to exempt certain
issuers from the application of the instrument (links to the orders
are available on our Resources page).
Alberta's Blanket Order 45-514, released yesterday, replaces
an earlier order that exempted
the application of the instrument to issuers with a primary listing
on certain stock exchanges or those distributing only
non-convertible debt securities.
While preserving the exemptions from the previous order, the new
order, has also adopted an investor-based exemption that exempts
issuers that limit their promotional activities to "permitted
clients" under NI 31-103 (essentially,
institutional accredited investors). In doing so, Alberta's
exemption is now more closely in line with the one adopted in
Further, under section 2.1(1) of NI 33-105 Underwriting Conflicts, firms are
prohibited from acting either as an underwriter in a distribution
of securities in which it is the issuer or selling securityholder,
or as a direct underwriter in a distribution of securities of or by
a connected issuer or a related issuer of the specified firm
registrant, unless the distribution is made under a prospectus or
another document containing certain specified disclosure. Notably,
the order also exempts firms from this prohibition where the
distribution is made to "permitted clients" purchasing
under a prospectus exemption.
The order also provides an exemption from the prohibition
against making representations that a security will be listed or
quoted on, or that an application has been made to list or quote a
security on, any exchange or quotation and trade reporting system
in the same circumstances. Similar relief has also been proposed by
the OSC in April of 2013 (as discussed here in our
post) but has yet to proceed beyond the proposal
As a consequence of the order, issuers and dealers offering
securities to "permitted clients" resident in Alberta
under an exemption from the prospectus requirements may no longer
be required to disclose to such investors any actual or potential
conflicts of interest otherwise subject to the "connected
issuer" and "related issuer" disclosure requirements
contained within NI 33-105.
Ultimately, the order is intended to be an interim measure while
the ASC continues to work with other members of the CSA to develop
proposals to improve "sophisticated investors'
access" to foreign issuers' securities.
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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