New report of exempt distribution aims to reduce the compliance burden for issuers

The Canadian Securities Administrators (CSA) recently adopted a new harmonized report of exempt distribution (the New Report). Issuers that rely on certain prospectus exemptions to distribute securities are required to file a report of exempt distribution within ten days of the date of distribution. The New Report is designed to: (a) reduce the compliance burden for issuers and underwriters by having a harmonized report of exempt distribution; and (b) provide securities regulators with the necessary information to facilitate more effective regulatory oversight of the exempt market and improve analysis for policy development purposes.

The New Report will apply in all CSA jurisdictions to both investment fund issuers and non-investment fund issuers that distribute securities under certain prospectus exemptions. The New Report introduces new information requirements, including disclosure of the following:

  • additional details about the issuer including its size and primary business activity;
  • identities of the directors, executive officers and promoters of certain issuers;
  • identities of control persons of certain issuers in a non-public schedule;
  • additional details about the securities distributed and, for certain jurisdictions, details about the documents provided in connection with the distribution;
  • specific details about the prospectus exemptions relied on, both on an aggregate and per investor basis; and
  • details about compensation paid to registrants, connected persons, insiders and employees of the issuer or the investment fund manager involved in the distribution.

The New Report provides carve-outs from certain information requirements for:

  • investment fund issuers;
  • reporting issuers and their wholly owned subsidiaries;
  • foreign public issuers and their wholly owned subsidiaries; and
  • issuers distributing eligible foreign securities only to permitted clients.

In addition, an issuer is not required to provide certain information in the New Report if the information can be gathered through the issuer’s continuous disclosure filings, the issuer’s profile on the System for Electronic Document Analysis and Retrieval (SEDAR) or a registrant firm’s profile on the National Registration Database (NRD).

Issuers are required to file the New Report electronically in all CSA jurisdictions, except certain foreign issuers when filing on SEDAR. The British Columbia Securities Commission (BCSC) is developing a web-based filing system on eServices to accommodate the structured data format of the New Report. Beginning on June 30, 2016, when the New Report is effective, issuers filing in both British Columbia and Ontario will file the New Report with the BCSC and OSC by completing an electronic form on the BCSC’s eServices and the OSC’s Electronic Filing Portal, respectively. In all CSA jurisdictions other than British Columbia and Ontario, the New Report will be required to be filed on SEDAR, except by certain foreign issuers. Both the BCSC’s eServices and the OSC’s Electronic Filing Portal will generate an electronic copy of the completed report, which issuers can then use to file on SEDAR, if required.

All issuers, other than investment fund issuers filing reports annually, must use the New Report for distributions that occur on or after June 30, 2016, when the Amendments come into force. If an issuer completes a distribution before June 30, 2016, and the deadline to file the report occurs after June 30, 2016, the issuer must file the old report of exempt distribution. If an issuer completes multiple distributions on dates that occur within a 10-day period beginning before and ending after June 30, 2016, the issuer may file either the old report of exempt distribution or the New Report to report such distributions.

The foregoing is a general discussion of certain legal and related developments and should not be relied upon as legal advice. If you require legal advice, please contact the author who would be pleased to discuss the issues above with you, in the context of your particular circumstances.