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On October 8, the Ontario Securities Commission (OSC) announced measures relating to the use of the Offering Memorandum Prospectus Exemption in section 2.9 of National Instrument 45-106 Prospectus Exemptions. As signaled in other publications, the OSC will be enhancing its monitoring of the use of the exemption. As a result, both issuers relying on the offering memorandum exemption and exempt market dealers distributing these products should ensure the issuers comply with all requirements of the exemption.
Under the Offering Memorandum Prospectus Exemption, an issuer must, within 120 days of its financial year end, deliver annual audited financial statements to the OSC, prepared in accordance with IFRS, among other delivery requirements. In order to provide retail investors with additional information on non-reporting issuers raising capital in the exempt market, it has introduced an AFS non-delivery list (the List).
The List consists of names of non-reporting issuers that have used that exemption to distribute securities in Ontario but have not delivered their annual financial statements to the OSC as required in one or both of the issuer's two most recently completed financial years. Issuers will be placed on the List no earlier than 30 days after the deadline for filing the statements, and staff will notify the issuer in advance to provide an opportunity to remedy the default or explain why the issuer is not in default. The List should be consulted frequently by issuers and dealers, as it is updated monthly as required.
In addition, the OSC's Registration, Inspections and Examinations division has indicated that they will review exempt market dealers that distribute securities of certain non-reporting issuers that are not in compliance with the exemption in the context of the registrants' know-your-product policies and procedures.
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