CSA Notice and Request for Comment Proposed Amendments to Certain National and Multilateral Instruments and Policies Related to the Recognition of Aequitas Neo Exchange Inc. December 11, 2014 Introduction The Canadian Securities Administrators (the CSA or we) are publishing for a 90 day comment period proposed amendments (the Proposed Amendments) to: • National Instrument 41-101 General Prospectus Requirements (NI 41-101) • National Instrument 44-101 Short Form Prospectus Distributions (NI 44-101) • National Instrument 45-106 Prospectus and Registration Exemptions (NI 45-106) • National Policy 46-201 Escrow for Initial Public Offerings (NP 46-201) • National Instrument 51-102 Continuous Disclosure Obligations (NI 51-102) • Except in Ontario, Multilateral Instrument 51-105 Issuers Quoted in the U.S. Over-the-Counter Markets (MI 51-105) • National Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings (NI 52-109) • National Instrument 52-110 Audit Committees (NI 52-110) • National Instrument 58-101 Disclosure of Corporate Governance Practices (NI 58-101) • In Ontario and Québec, Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions (MI 61-101) • National Instrument 71-102 Continuous Disclosure and Other Exemptions Relating to Foreign Issuers (NI 71-102) • National Instrument 81-101 Mutual Fund Prospectus Disclosure (NI 81-101)
The text of the Proposed Amendments is contained in Annexes A through L of this notice and will also be available on websites of CSA jurisdictions, including: www.bcsc.bc.ca www.albertasecurities.com www.fcaa.gov.sk.ca www.msc.gov.mb.ca www.osc.gov.on.ca www.lautorite.qc.ca www.fcnb.ca www.gov.pe.ca/securities nssc.novascotia.ca www.gov.nl.ca/gs www.justice.gov.nt.ca/SecuritiesRegistry www.community.gov.yk.ca www.justice.gov.nu.ca Substance and Purpose The Proposed Amendments are intended to address the differences in treatment of certain reporting issuers under current securities legislation that have arisen or will arise as a result of references to specific exchanges under current securities legislation and the recognition of Aequitas Neo Exchange Inc. (Aequitas Neo Exchange) as an exchange pursuant to section 21 of the Securities Act (Ontario) and the exemption from the requirement to be recognized in other jurisdictions, namely British Columbia, Alberta, Saskatchewan, Manitoba, Québec, New Brunswick, Prince Edward Island, Nova Scotia, Newfoundland and Labrador, Yukon, Northwest Territories and Nunavut. The Proposed Amendments aim to ensure that securities legislation applies consistently to issuers listed on Aequitas Neo Exchange and issuers listed on other senior recognized exchanges. Investors will benefit directly from the Proposed Amendments as issuers listed on Aequitas Neo Exchange will be subject to the same regulatory requirements as issuers listed on other senior recognized exchanges and the industry will benefit from a harmonized regulatory regime. Background By order dated November 13, 2014, the Ontario Securities Commission (OSC) approved the recognition of Aequitas Innovations Inc. (Aequitas) and Aequitas Neo Exchange as an exchange pursuant to section 21 of the Securities Act (Ontario), subject to certain terms and conditions (the Recognition Order). The Recognition Order will be effective as of March 1, 2015. Aequitas Neo Exchange operates an electronic, automated exchange to trade securities of qualified senior issuers listed on Aequitas Neo Exchange as well as those listed on other recognized exchanges. Aequitas is the sole parent company of Aequitas Neo Exchange, and was recognized as an exchange for the purpose of complying with the terms and conditions set out in the recognition order published by the OSC. The securities regulatory authorities in British Columbia, Alberta, 2
Saskatchewan, Manitoba, Québec, New Brunswick, Prince Edward Island, Nova Scotia, Newfoundland and Labrador, Yukon, Northwest Territories and Nunavut have exempted or are in the process of exempting Aequitas and Aequitas Neo Exchange from the requirement to be recognized as a stock exchange, exchange or self-regulatory organization, with such exemption being subject to certain conditions, including that: (i) Aequitas and Aequitas Neo Exchange will continue to be recognized as an exchange by the OSC and to comply with the terms and conditions of the Recognition Order; and (ii) Aequitas Neo Exchange will be subject to the oversight program established by the OSC from time to time in accordance with the provisions of the Memorandum of Understanding respecting the Oversight of Exchanges and Quotation and Trade Reporting Systems which took effect on January 1 st , 2010 among the Alberta Securities Commission, Autorité des marchés financiers, British Columbia Securities Commission, Manitoba Securities Commission, the OSC and Saskatchewan Financial Services Commission. Currently, certain definitions, requirements or exemptions in securities legislation do not apply to Aequitas Neo Exchange. The recognition of Aequitas Neo Exchange has several implications for issuers which the Proposed Amendments will address. For example, without the Proposed Amendments, issuers listing on Aequitas Neo Exchange will be “venture issuers”, notwithstanding that such issuers are more appropriately classified as issuers that are not venture issuers under applicable Canadian securities law. Secondly, without the Proposed Amendments, issuers listing solely on Aequitas Neo Exchange will not be qualified to file a prospectus in the form of a short form prospectus, as Aequitas Neo Exchange is not included in the definition of “short form eligible exchange” under NI 44-101. The Proposed Amendments must be made to ensure that securities legislation applies equally to issuers listed on other recognized senior exchanges and issuers listing on Aequitas Neo Exchange. Summary of the Proposed Amendments The Proposed Amendments include: • referencing Aequitas Neo Exchange in the definitions of “venture issuer”, “IPO venture issuer”, “personal information form”, “listed issuer”, “short form eligible exchange” and “OTC issuer” and adding a definition for “Aequitas personal information form” in the applicable national and multilateral instruments listed above, • changing certain provisions contained in NP 46-201 for the purpose of describing certain issuers listing on Aequitas Neo Exchange as being either exempt issuers or established issuers (as such terms are described in NP 46-201), • amending MI 61-101 to include Aequitas Neo Exchange in the list of specified markets identified in certain sections, and 3
• amending NI 71-102 to update and expand the list of Canadian exchanges (including Aequitas Neo Exchange) in certain sections. Existing Security Holder Prospectus Exemptions The securities regulatory authorities in British Columbia, Alberta, Saskatchewan, Manitoba, Québec, New Brunswick, Prince Edward Island, Nova Scotia, Yukon, Northwest Territories and Nunavut have adopted a prospectus exemption that, subject to certain conditions, allows issuers listed on specified exchanges to raise money by distributing securities to their existing security holders (the “Existing Security Holder Prospectus Exemption”). The list of specified exchanges in the definition of “listed security” in the Existing Security Holder Prospectus Exemption does not contemplate Aequitas Neo Exchange. On November 27, 2014, the OSC published in final an exemption that is substantially similar to the Existing Security Holder Prospectus Exemption, which includes reference to Aequitas Neo Exchange in the list of specified exchanges under the definition of “listed security” contained therein. CSA staff recommend that issuers listed on Aequitas Neo Exchange be able to use the Existing Security Holder Prospectus Exemption and accordingly intend to seek approval to amend the relevant rules or revise the blanket orders as necessary to ensure that the Existing Security Holder Prospectus Exemption is consistent with the Proposed Amendments. Interim Measures As discussed above, until the Proposed Amendments are effective, issuers listed on Aequitas Neo Exchange will be “venture issuers” under securities legislation, even though such issuers are more appropriately classified as non-venture issuers. During this period certain interim measures will be taken. Firstly, issuers intending to list on Aequitas Neo Exchange will provide an undertaking that they will comply with Canadian securities legislation as applicable to non-venture issuers. Secondly, other than in Ontario, CSA jurisdictions will issue blanket orders relieving issuers listed on Aequitas Neo Exchange from the requirements pertaining to venture issuers. In Ontario, issuers will gain such relief by application. Designation Orders Subsection 4.8(2) of Multilateral Instrument 62-104 Take-over Bids and Issuer Bids (MI 62-104) and subsection 101.2(1) of the Securities Act (Ontario) provide an exemption from certain issuer bid requirements for issuer bids that are made through the facilities of a designated exchange. CSA jurisdictions have issued or are in the process of issuing orders designating Aequitas Neo Exchange to be a designated exchange for the purpose of MI 62-104 or the Securities Act (Ontario), as applicable. Anticipated Costs and Benefits We expect the Proposed Amendments to contribute to the maintenance of a harmonized regulatory regime by treating issuers listed on Aequitas Neo Exchange in the same 4
manner as those listed on other recognized senior exchanges. We do not expect any costs to be associated with the Proposed Amendments because issuers listed on Aequitas Neo Exchange will already be complying with the same requirements as issuers listed on other senior recognized exchanges as a result of the interim measures discussed above. Alternatives Considered No alternatives to the Proposed Amendments were considered. Unpublished Materials In developing the Proposed Amendments, we have not relied on any significant unpublished study, report, or other written materials. Local Notices Annex M is being published in any local jurisdiction that is making related changes to local securities laws, including local notices or other policy instruments in that jurisdiction. It also includes any additional information that is relevant to that jurisdiction only. Request for Comments Please submit your comments in writing on or before March 11, 2015. If you are sending your comments by e-mail, please also send an electronic file containing the submissions (in Microsoft Word format). Address your submission to all of the CSA as follows: British Columbia Securities Commission Alberta Securities Commission Financial and Consumer Affairs Authority (Saskatchewan) Manitoba Securities Commission Ontario Securities Commission Autorité des marchés financiers Financial and Consumer Services Commission (New Brunswick) Superintendent of Securities, Department of Justice and Public Safety, Prince Edward Island Nova Scotia Securities Commission Securities Commission of Newfoundland and Labrador Superintendent of Securities, Northwest Territories Superintendent of Securities, Yukon Superintendent of Securities, Nunavut 5
Deliver your comments only to the addresses below. Your comments will be distributed to the other participating CSA. The Secretary Ontario Securities Commission 20 Queen Street West 22nd Floor Toronto, Ontario, M5H 3S8 Fax: 416-593-2318 comments@osc.gov.on.ca M e Anne-Marie Beaudoin Corporate Secretary Autorité des marchés financiers 800, square Victoria, 22e étage C.P. 246, tour de la Bourse Montréal (Québec) H4Z 1G3 Fax : 514-864-6381 consultation-en-cours@lautorite.qc.ca We cannot keep submissions confidential because securities legislation in certain provinces requires publication of a summary of the written comments received during the comment period. Contents of Annexes The following annexes form part of this CSA Notice: The Proposed Amendments are set out in the following annexes to this Notice: Annex A Proposed Amendments to NI 41-101 Annex B Proposed Amendments to NI 44-101 Annex C Proposed Amendments to NI 45-106 Annex D Proposed Changes to NP 46-201 Annex E Proposed Amendments to NI 51-102 Annex F Proposed Amendments to MI 51-105 Annex G Proposed Amendments to NI 52-109 Annex H Proposed Amendments to NI 52-110 Annex I Proposed Amendments to NI 58-101 Annex J Proposed Amendments to MI 61-101 Annex K Proposed Amendments to NI 71-102 Annex L Proposed Amendments to NI 81-101 Annex M Local Matters 6
Questions Please refer your questions to any of the following: Ontario Steven Oh Legal Counsel, Corporate Finance Ontario Securities Commission 416-595-8778 soh@osc.gov.on.ca Alberta Lanion Beck Legal Counsel Alberta Securities Commission 403-355-3884 lanion.beck@asc.ca Québec Jacynthe Charpentier Avocate Autorité des marchés financiers 514-395-0337 poste 4384 jacynthe.charpentier@lautorite.qc.ca Manitoba Chris Besko Acting General Counsel and Acting Director The Manitoba Securities Commission 204-945-2561 chris.besko@gov.mb.ca British Columbia Victoria Steeves Senior Legal Counsel British Columbia Securities Commission 604-899-6791 vsteeves@bcsc.bc.ca Alberta Rajeeve Thakur Legal Counsel Alberta Securities Commission 403-355-9032 rajeeve.thakur@asc.ca New Brunswick Ella-Jane Loomis Legal Counsel Financial and Consumer Services Commission (New Brunswick) 506-658-2602 ella-jane.loomis@fcnb.ca Saskatchewan Sonne Udemgba Deputy Director Financial and Consumer Affairs Authority of Saskatchewan 306-787-5879 sonne.udemgba@gov.sk.ca 7
ANNEX A Proposed Amendments to National Instrument 41-101 General Prospectus Requirements 1. National Instrument 41-101 General Prospectus Requirements is amended by this Instrument. 2. Section 1.1 is amended (a) in paragraph (c) of the definition of “IPO venture issuer” by adding the following subparagraph: (i.1) Aequitas Neo Exchange Inc.;, (b) by replacing the definition of “personal information form” with the following: “personal information form” means one of the following: (a) a completed Schedule 1 of Appendix A; (b) a completed TSX/TSXV personal information form submitted by an individual to the Toronto Stock Exchange or to the TSX Venture Exchange to which is attached a completed certificate and consent in the form set out in Schedule 1 — Part B of Appendix A; (c) a completed Aequitas personal information form submitted by an individual to Aequitas Neo Exchange Inc., to which is attached a completed certificate and consent in the form set out in Schedule 1 – Part B of Appendix A;, and (c) by adding the following definition: “Aequitas personal information form” means a personal information form for an individual pursuant to Aequitas Neo Exchange Inc. Form 3, as amended from time to time;. 3. Item 1 of Form 41-101F1 is amended in subsection 1.9(4) by adding “Aequitas Neo Exchange Inc.,” after “on the Toronto Stock Exchange,”. 4. Item 20 of Form 41-101F1 is amended in section 20.11 by adding “Aequitas Neo Exchange Inc.,” after “on the Toronto Stock Exchange,”. 5. This Instrument comes into force on *. 8
ANNEX B Proposed Amendments to National Instrument 44-101 Short Form Prospectus Distributions 1. National Instrument 44-101 Short Form Prospectus Distributions is amended by this Instrument. 2. Section 1.1 is amended by replacing the definition of “short form eligible exchange” with the following: “short form eligible exchange” means each of the Toronto Stock Exchange, Tier 1 and Tier 2 of the TSX Venture Exchange, Aequitas Neo Exchange Inc., and the Canadian Securities Exchange;. 3. This Instrument comes into force on *. 9
ANNEX C Proposed Amendments to National Instrument 45-106 Prospectus and Registration Exemptions 1. National Instrument 45-106 Prospectus and Registration Exemptions is amended by this Instrument. 2. Section 2.22 is amended in paragraph (a) of the definition of “listed issuer” by adding the following subparagraph: (ii.1) Aequitas Neo Exchange Inc.;. 3. This Instrument comes into force on *. 10
ANNEX D Proposed Changes to National Policy 46-201 Escrow for Initial Public Offerings 1. The changes proposed to National Policy 46-201 Escrow for Initial Public Offerings are set out in this annex. 2. Section 3.2 is changed by deleting “or” at the end of paragraph (a) and by adding the following paragraph: (a.i) has securities listed on Aequitas Neo Exchange Inc. and is a Closed End Fund, Exchange Traded Fund or Exchange Traded Product (as defined in the Aequitas Neo Exchange Inc. Listing Manual as amended from time to time); or. 3. Subsection 3.3(2) is changed by deleting “or” at the end of paragraph (a), by adding “or” at the end of paragraph (b) and by adding the following paragraph: (c) has securities listed on Aequitas Neo Exchange Inc. and is not an exempt issuer.. 4. Subsection 4.4(1) is changed by replacing paragraph (a) with the following: (a) lists its securities on the TSX or Aequitas Neo Exchange Inc.;. 5. Item 3 of Form 46-201F1 is changed in section 3.1 by replacing paragraph (a) with the following: (a) lists its securities on the Toronto Stock Exchange Inc. or Aequitas Neo Exchange Inc.;. 6. These changes become effective on *. 11
ANNEX E Proposed Amendments to National Instrument 51-102 Continuous Disclosure Obligations 1. National Instrument 51-102 Continuous Disclosure Obligations is amended by this Instrument. 2. Section 1.1 is amended in the definition of “venture issuer” by adding “Aequitas Neo Exchange Inc.,” after “Toronto Stock Exchange,”. 3. This Instrument comes into force on *. 12
ANNEX F Proposed Amendments to Multilateral Instrument 51-105 Issuers Quoted in the U.S. Over-the-Counter Markets 1. Multilateral Instrument 51-105 Issuers Quoted in the U.S. Over-the-Counter Markets is amended by this Instrument. 2. Section 1 is amended in paragraph (b) of the definition of “OTC issuer” by adding the following subparagraph: (viii) Aequitas Neo Exchange Inc.;. 3. This Instrument comes into force on *. 13
ANNEX G Proposed Amendments to National Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings 1. National Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings is amended by this Instrument. 2. Section 1.1 is amended in the definition of “venture issuer” by adding “Aequitas Neo Exchange Inc.,” after “Toronto Stock Exchange,”. 3. This Instrument comes into force on *. 14
ANNEX H Proposed Amendments to National Instrument 52-110 Audit Committees 1. National Instrument 52-110 Audit Committees is amended by this Instrument. 2. Section 1.1 is amended in the definition of “venture issuer” by adding “Aequitas Neo Exchange Inc.,” after “Toronto Stock Exchange,”. 3. This Instrument comes into force on *. 15
ANNEX I Proposed Amendments to National Instrument 58-101 Disclosure of Corporate Governance Practices 1. National Instrument 58-101 Disclosure of Corporate Governance Practices is amended by this Instrument. 2. Section 1.1 is amended in the definition of “venture issuer” by adding “Aequitas Neo Exchange Inc.,” after “Toronto Stock Exchange,”. 3. Section 1.3 is amended by replacing paragraph (c) with the following: (c) an exchangeable security issuer or credit support issuer that is exempt under sections 13.3 and 13.4 of NI 51-102, as applicable; and. 4. This Instrument comes into force on *. 16
ANNEX J Proposed Amendments to Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions 1. Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions is amended by this Instrument. 2. Paragraph 4.4(1)(a) is amended by adding “Aequitas Neo Exchange Inc.,” after “Toronto Stock Exchange,”. 3. Paragraph 5.5(b) is amended by adding “Aequitas Neo Exchange Inc.,” after “Toronto Stock Exchange,”. 4. Subparagraph 5.7(1)(b)(i) is amended by adding “Aequitas Neo Exchange Inc.,” after “Toronto Stock Exchange,”. 5. This Instrument comes into force on *. 17
ANNEX K Proposed Amendments to National Instrument 71-102 Continuous Disclosure and Other Exemptions Relating to Foreign Issuers 1. National Instrument 71-102 Continuous Disclosure and Other Exemptions Relating to Foreign Issuers is amended by this Instrument. 2. Section 1.1 is amended by replacing the definition of “marketplace” with the following: “marketplace” has the same meaning as in National Instrument 21-101 Marketplace Operation;. 3. Section 4.7 is amended by replacing paragraph (2)(a) with the following: (a) the aggregate published trading volume of the class on the TSX, Aequitas Neo Exchange Inc., the Canadian Securities Exchange and the TSX Venture Exchange exceeded the aggregate published trading volume of the class on all U.S. markets (i) for the 12 calendar month period before commencement of the proxy solicitation, if there is no other proxy solicitation for securities of the same class in progress, or (ii) for the 12 calendar month period before commencement of the first proxy solicitation, if another proxy solicitation for securities of the same class is already in progress;. 4. Section 5.8 is amended by replacing paragraph (2)(a) with the following: (a) the aggregate published trading volume of the class on the TSX, Aequitas Neo Exchange Inc., the Canadian Securities Exchange and the TSX Venture Exchange exceeded the aggregate trading volume on securities marketplaces outside Canada (i) for the 12 calendar months before commencement of the proxy solicitation, if there is no other proxy solicitation for securities of the same class in progress, or (ii) for the 12 calendar month period before the commencement of the first proxy solicitation, if another proxy solicitation for securities of the same class is already in progress;. 5. This Instrument comes into force on *. 18
ANNEX L Proposed Amendments to National Instrument 81-101 Mutual Fund Prospectus Disclosure 1. National Instrument 81-101 Mutual Fund Prospectus Disclosure is amended by this Instrument. 2. Section 1.1 is amended by (a) replacing the definition of “personal information form” with the following: “personal information form” means one of the following: (a) a completed Schedule 1 of Appendix A to National Instrument 41-101 General Prospectus Requirements; (b) a completed TSX/TSXV personal information form submitted by an individual to the Toronto Stock Exchange or to the TSX Venture Exchange to which is attached a completed certificate and consent in the form set out in Schedule 1 — Part B of Appendix A to National Instrument 41-101 General Prospectus Requirements; (c) a completed Aequitas personal information form submitted by an individual to Aequitas Neo Exchange Inc., to which is attached a completed certificate and consent in the form set out in Schedule 1 – Part B of Appendix A to National Instrument 41-101 General Prospectus Requirements;, and (b) adding the following definition: “Aequitas personal information form” means a personal information form for an individual pursuant to Aequitas Neo Exchange Inc. Form 3, as amended from time to time;. 3. This Instrument comes into force on *. 19
SCHEDULE 1 Ontario Securities Commission Rule 56-501 Restricted Shares Ontario Amendment Instrument 1. Ontario Securities Commission Rule 56-501 Restricted Shares is amended by this Instrument. 2. Section 2.2 is amended by replacing subsection (1) with the following: (1) If restricted shares and the appropriate restricted share term, or a code reference to restricted shares or the appropriate restricted share term, are included in a trading record published by The Toronto Stock Exchange, the TSX Venture Exchange, the Canadian Securities Exchange or Aequitas Neo Exchange Inc., the appropriate restricted share term shall be included in (a) any confirmation sent in accordance with section 36 of the Act in respect of transactions in restricted shares; (b) any statement of transactions or security positions sent by a registered dealer to a customer that refers to restricted shares; and (c) all recommendations, selling documents and other literature prepared by or on behalf of a registered dealer or adviser and published by a registered dealer or adviser or sent by a registered dealer or adviser to a customer or potential customer that refer to restricted shares.. 3. This Instrument comes into force on *. 20
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