Canada: Canadian Securities Administrators Amend Reporting Requirements For Exempt Financings

Last Updated: April 28 2016
Article by Andrea C. Johnson and Ralph Shay


On April 7, 2016, the Canadian Securities Administrators (the CSA) published final amendments to National Instrument 45-106 Prospectus Exemptions and its Companion Policy. The amendments harmonize the reporting requirements for prospectus exempt financings across Canada, and are scheduled to take effect on June 30, 2016.

The amendments implement most of the changes proposed by the CSA in September of 2015, which we described in a previous alert. They will result in a reporting regime that is, on balance, more onerous than the existing rules. Some key changes between the proposed and final versions, however, reduce or remove required disclosure of sensitive information relating to investors and to certain individuals associated with the issuer.


Currently, issuers and underwriters are required to file a report on Form 45-106F1 following a prospectus exempt distribution of securities in any Canadian jurisdiction other than British Columbia. Since 2011, British Columbia has required reporting of exempt distributions on its own, more comprehensive, Form 45-106F6. As a result of the amendments there will once again be a single, national form of report (the New Form), which will replace the current version of Form 45-106F1, and Form 45-106F6 will be repealed.

Changes to reporting requirements

We set out below the key changes to the reporting requirements between the form of report that was proposed in September of 2015 (the Proposed Form) and the New Form. We also provide a detailed comparison among the requirements of the current Form 45-106F1, British Columbia's Form 45-106F6 and the New Form, in the table at the end of this alert.

Single report for multiple jurisdictions not mandatory

Under the current reporting rules, if an issuer distributes securities into multiple jurisdictions pursuant to certain prospectus exemptions, it must file a single report in each Canadian jurisdiction where a distribution occurred, listing all the purchasers. This provision, which was also included in the Proposed Form, is being removed by the amendments. The New Form provides that the report filed in a given jurisdiction need only reflect the distributions in that jurisdiction. Alternatively, the issuer or underwriter can include the full list of purchasers with each report filed.1

Determining where a distribution has occurred, however, is not always a simple matter. The positions vary among provinces as to whether an issuance of securities to purchasers outside the home jurisdiction of the issuer or underwriter also constitutes a distribution in the home jurisdiction. As the amended Companion Policy indicates, one should look to applicable "securities legislation and securities directions" to determine when a distribution has occurred in a jurisdiction of Canada.2

Reduced disclosure of information regarding key individuals for non-public issuers

As identified in our previous alert, one of the most contentious aspects of the Proposed Form was a requirement for most non-public issuers to report certain details regarding its directors, executive officers, promoters and control persons. Specifically, under the Proposed Form a report would have to include each such person's security holdings in the issuer and the amount paid for those securities, as well as the person's name, jurisdiction of residence and relationship to the issuer. All of this information would have been publicly available.

The CSA has removed the requirement to disclose the security holdings and amount paid for the securities of the applicable persons. The requirement to include the name, jurisdiction and relationship to the issuer for directors, executive officers and promoters will remain, but control person information will only be required in a schedule to the New Form which will not be made publicly available (subject to freedom of information legislation).3

No need to report beneficial owners of certain fully managed accounts

The final key change in respect of the New Form relates to the requirement to disclose beneficial owners of securities issued in an exempt distribution, and requires a bit of background.

The existing rules require the disclosure of beneficial owners of the securities that are distributed. This will continue to be the case under the New Form, other than in two particular circumstances relating to the prospectus exemption for "accredited investors".

To qualify as an accredited investor, a person must satisfy certain criteria relating to assets, income or financial sophistication. Among other categories of persons, the definition includes certain trust companies and registered advisors who are "acting on behalf of a fully managed account" managed by the trust company or advisor.4 We refer to these as the "fully managed account" categories.

A distribution of securities to an investor who satisfies any of the categories of accredited investor and is purchasing as principal is exempt from the prospectus requirement. In the fully managed account categories, however, the trust company or advisor would in reality purchase securities as agent for their client. To address that fact, the accredited investor exemption provides that the trust company or advisor is "deemed to be purchasing as principal".5

The existing reporting rules are incongruent with this provision of the accredited investor exemption, however. While the trust company or advisor is deemed to be purchasing as principal, there is no provision as to whether that person or the client should be named in the report as purchaser. The New Form clarifies this issue by requiring that the trust company or advisor, not the beneficial owner, be disclosed in the report when the purchaser satisfies the requirements of one of the fully managed account categories.


The CSA's amendments to the reporting obligations in respect of exempt financings create rules that are on balance more rigorous than the current regime. Changes between the Proposed Form and the New Form, however, lessen certain reporting obligations, which should ease the disclosure burden in respect of some exempt financings. In that sense, the changes are beneficial for issuers, underwriters and their advisors.

Comparison of disclosure requirements

The following table compares the disclosure requirements of the current Form 45-106F1, Form 45-106F6 and the New Form, to the extent of any significant differences.

Issuer contact and other information
  Current Form 45-106F1 Form 45-106F6 New Form
Employees/SEDAR profile number No requirement No requirement Size of issuer, by number of employees
SEDAR profile number, if applicable
Identifying information Address and telephone number of issuer's head office Address, email address and telephone number of issuer's head office Address and telephone number of issuer's head office, if without SEDAR profile
Legal entity identifier, if applicable
Industry information Industry type from CSA-selected categories Industry type from CSA-selected categories North American Industry Classification Standard code
Other information No requirement No requirement If without SEDAR profile:
- date of formation
- financial year-end
- CUSIP number and listed exchange(s), if any
- assets as at most recent financial year-end
Underwriter information
  Current Form 45-106F1 Form 45-106F6 New Form
General information Name, address and telephone number Name, address, telephone number, email address and website Name and either Firm NRD number, if applicable, or address, telephone number and website
Directors, executive officers, control persons and promoters of the issuer
  Current Form 45-106F1 Form 45-106F6 New Form
Disclosure of directors, executive officers, control persons and promoters No requirement Disclosure requirement only if issuer is not a reporting issuer Disclosure requirement only if issuer is not: (a) a reporting issuer or a subsidiary; (b) a foreign public issuer6 or a subsidiary; or (c) distributing eligible foreign securities only to permitted clients7
Information required for individuals No requirement Name, municipality and country of principal residence

Name and residential address
    Positions held (director, officer, promoter, control person) Positions held (director, officer, promoter, control person)
    Number and type of securities of the issuer beneficially owned, or controlled, on the distribution date No requirement
    Total price paid for all securities beneficially owned, or controlled, on the distribution date No requirement
    No requirement Business contact information of Chief Executive Officer
Information required for non-individual control persons or promoters No requirement Same information as above for all directors and officers of the control person or promoter Same information as above for all directors and officers of the control person or promoter
Information about the distribution
  Current Form 45-106F1 Form 45-106F6 New Form
Type of securities distributed Type of security Type of security Type of security, 3-letter code and CUSIP
Total dollar amount per type of security
Summary of the distribution by jurisdiction Number of purchasers, price per security and total amount raised, by jurisdiction Number of purchasers, price per security and total amount raised, by jurisdiction Number of purchasers and total amount raised, by jurisdiction and exemption
Distribution date State the distribution date(s) State the distribution date(s) State the distribution start and end date(s)
Offering materials No requirement No requirement List offering materials if distribution occurred in Saskatchewan, Ontario Quebec, New Brunswick or Nova Scotia
Currency No requirement No requirement State foreign currency if distribution not in Canadian dollars
Information about the purchasers
  Current Form 45-106F1 Form 45-106F6 New Form
Who must be reported All purchasers Purchasers in respect of a distribution in British Columbia Purchasers in respect of a distribution in the jurisdiction; option to report all purchasers
Exception from requirement to disclose beneficial owners N/A N/A Purchasers under "fully managed account" category of accredited investor
General information Name, address and telephone number Name, address and telephone number Name, address, telephone number and email address
Details of securities purchased Number and type of securities purchased Number and type of securities purchased Number and type of securities purchased, using 3-letter code
Details of exemption relied on Exemption relied on Exemption relied on Exemption relied on, with section and (if applicable) subsection. If relying on section 2.5 (family, friends or business associates), name and position of the individual claiming a relationship to the purchaser
Insider/Registrant No requirement Status as insider or registrant Status as insider or registrant
Publicly available information about individual purchasers N/A Name
Number and type of securities
Status as insider or registrant
Total purchase price
 Publicly available information about non-individual purchasers N/A As above, plus address and exemption relied on N/A
Information about persons being compensated
  Current Form 45-106F1 Form 45-106F6 New Form
Information other than contact and compensation details No requirement Status as insider or registrant Status as insider or registrant
Relationship to the issuer
Purchaser(s) with whom person is associated
NRD number, if applicable
Deferred compensation details, if applicable
Investment fund issuer information
  Current Form 45-106F1 Form 45-106F6 New Form
Investment fund manager information Contact information Contact information Firm NRD number, if applicable; otherwise contact information and website
Type of investment fund No requirement No requirement Type of investment fund and whether fund primarily invests in other investment funds or is a UCITs Fund
Offering proceeds, in addition to disclosure required by all issuers No requirement No requirement Net proceeds by jurisdiction
Other information No requirement No requirement Date of formation
Financial year-end
Reporting issuer status
CUSIP number
Listed exchange(s), if any
Net asset value as of the most recent NAV calculation

This article was co-authored by Daniel McElroy, Knowledge Management Lawyer in Dentons' Vancouver office.


1 Item 1 of the Instructions to the New Form.

2 Section 5.1(1)(a) of the amended Companion Policy to National Instrument 45-106. See also Annex 3 of CSA Staff Notice 45-308 Guidance for Preparing and Filing Reports of Exempt Distribution under National Instrument 45-106 Prospectus Exemptions (as revised on April 7, 2016) and the Background section of OSC Staff Notice 45-709 Tips for Filing Reports of Exempt Distribution

3 See Item 9 and Schedule 2 of the New Form. Note also that when a promoter or control person is not an individual (e.g. a corporation) then the individual directors and executive officers of the promoter or control person will also have to be reported. This is consistent between the Proposed Form and the New Form

4 Section 1.1 of National Instrument 45-106, paragraphs (p) and (q) of the definition of "accredited investor".

5 Subsections 2.3(2) and 2.3(4) of National Instrument 45-106.

6  Foreign public issuer" is a new term being introduced by the amendments. Broadly speaking, it means a public company in the United States, the United Kingdom, Australia, France, Germany, Hong Kong, Italy, Japan, Mexico, the Netherlands, New Zealand, Singapore, South Africa, Spain, Sweden or Switzerland. Wholly-owned subsidiaries of such companies are also exempt from the additional reporting requirements.

7 The term "permitted client" is defined in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations. It includes institutions, registrants, individuals with greater than $5 million in financial assets and non-individuals with at least $25 million in net assets. An "eligible foreign security" is defined in the amendments. Broadly, it means a security issued by a non-Canadian company or issued or guaranteed by a non-Canadian government.

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