Category: Corporate Finance

FAQ Corner: Now that Joint Oversight Over Distributions of Non-Qualified Syndicated Mortgage Investments (NQSMIs) by FSRA and the OSC is Underway, What Should Firms Operating in this Space Keep in Mind?

Answer: As of July 1, 2021, the OSC will have regulatory oversight over the distribution of NQSMIs to persons that are not permitted clients. Firms distributing NQSMIs to investors that are not permitted clients will need to rely on another available prospectus exemption and will need to be registered as an exempt market dealer (EMD) or engage the services of a third-party EMD (or rely on an available exemption). FSRA will retain regulatory oversight over the distribution of NQSMIs to permitted clients (although there is no prohibition on EMDs distributing NQSMIs to permitted clients under the OSC’s regime).

FSRA requires the filing of a quarterly report containing certain data about each NQSMI with permitted clients. Firms that distribute NQSMIs in reliance on the “accredited investor” prospectus exemption or the “offering memorandum” prospectus exemption will need to file a report of exempt distribution with the OSC (and any other applicable securities regulators) within 10 days of the distribution. Issuers relying on the “offering memorandum” prospectus exemption will need to comply with certain supplemental disclosure obligations and will also need to prepare audited financial statements. Although there are no prescribed disclosure requirements for issuers relying on the “accredited investor” prospectus exemption, be aware that presentations and marketing materials could fall within the broad definition of “offering memorandum” which exposes the issuer to potential liability for misrepresentation and triggers the need to include a summary of applicable damages and rescission rights and to file a copy of the materials with the OSC within 10 days of the distribution.

EMDs distributing NQSMIs must comply with know-your-client, know-your-product and suitability obligations as well as conflicts of interest and client relationship disclosure. While the OSC does not require prescribed forms, the OSC expects registrants to perform a meaningful suitability assessment and to appropriately document that assessment. If you have any questions about the changes to the treatment of NQSMIs, please contact your usual lawyer at AUM Law.

June 30, 2021

Start-Up Crowdfunding Exemptions are Revved up and Ready to Go

On June 23, the CSA announced the final publication of National Instrument 45-110 Start-Up Crowdfunding Registration and Prospectus Exemptions (NI 45-110), along with CSA Staff Notice 45-329 Guidance for using the start-up crowdfunding registration and prospectus exemptions. As previously noted in our February 2020 bulletin, NI 45-110 sets up a national framework to permit securities crowdfunding for start-up and early stage issuers and will replace the blanket orders that had been issued in a number of jurisdictions. A dealer registration exemption will be available for funding portals that facilitate online distributions by issuers that use the prospectus exemption set out in the National Instrument. The prospectus exemption will allow an issuer to distribute eligible securities through an online portal, and both the dealer and prospectus exemptions require the portal (even if already registered as an investment dealer or EMD) and the issuer to satisfy numerous conditions.

NI 45-110 was first published for comment in February 2020, and the final rule has been responsive to comments indicating that the individual investment limits were too low by increasing the limit from $5,000 to $10,000 for a purchaser who has obtained suitability advice from a registered dealer, and also increased the limit on aggregate proceeds raised by the issuer group in the last 12 months from $1 million to $1.5 million. While the CSA noted that numerous commentators had asked for further increases for issuers, in their view it is more appropriate for issuers to utilize the offering memorandum exemption in order to crowdfund larger amounts. The annual working capital certification (renamed to the financial resources certification) has become a semi-annual certification, and the prospectus exemption will not be available for issuers whose only operations are to identify and evaluate assets or a business with a view to completing an investment in, merger with, amalgamation with or acquisition of a business, or purchasing the securities of one or more other issuers. Some local amendments will also be made; for example, in Ontario, OSC Rule 13-502 Fees will be amended to classify an unregistered portal relying on the new exemption as an ‘unregistered capital markets participant’ (the same category as unregistered investment fund managers) and pay fees as such. NI 45-110, the related guides, and consequential amendments to other rules is expected to come into force September 21, 2021.

June 30, 2021

To Promote or Not to Promote – Proposed New Disclosure Requirements in BC

The British Columbia Securities Commission has released for comment Proposed BCI 51-519 Promotional Activity Disclosure Requirements which sets out a framework for required disclosure relating to promotional activities. The proposals stem from problematic promotional activities by certain issuers that were identified by the CSA back in 2018, including campaigns that provided unbalanced or unsubstantiated material claims about reporting issuers. Other concerns expressed related to the lack of disclosure about compensation paid to others for promotional activities, the absence of conflict of interest disclosure, as well as inadequate oversight of promotional activities on behalf of issuers. The proposals would require issuers to include specified information about promotional activities when they are undertaken, such as a description of the compensation paid to third parties, any interest in any security or derivative that is the subject of the promotional activity, and each platform or medium through which the activity is being conducted. Certain of such information must also be provided in response to an inquiry relating to promotional activities when a third party is retained or compensated to conduct promotions. Venture issuers would have additional obligations, such as a requirement to include specific information about promotional expenses in their MD&A if total expenditures on promotional activities exceed 10% of the issuer’s total operating expenses in any annual or interim period. Venture issuers would also have to issue and file a news release that includes specified information if they retain or compensate a person to engage in promotional activity. Certain activities would be excluded from the application of the instrument, including promotional activity conducted by directors, officers and employees (who identify themselves as such), registrants when conducting registerable activities, and activities of investment funds or persons engaged in promotional activity in respect of such funds. If you wish to comment on the proposals, please contact your usual lawyer at AUM Law prior to the deadline of July 26.

May 31, 2021

Can a Registrant Act as a Trustee, Executor, or Under a POA for a Client? When Are Such Activities Reportable as an OBA?

Answer: Registrants are often asked by their clients, as trusted advisors, to act as their trustee under family trusts, executors under their will or as powers of attorney. The potential issue with accepting any of these roles for a registrant is that they may present a material conflict of interest. For instance, if a client is deceased and the advisor takes on the role of the executor of the estate, he or she will be required to review the registrant’s work and decide if the investments are still appropriate, and potentially whether the executor should even keep the assets with the advisor or the advisor’s firm. The conflict becomes most obvious if the registrant is responsible for reviewing his or her own work.

While the CSA chose not to explicitly prohibit such relationships in the Client Focused Reforms, personal financial dealings are referenced in certain IIROC and MFDA rules. For example, in IIROC rule 3115. Personal financial dealings, there is a prohibition on acting as a power of attorney, trustee, executor or otherwise having full or partial control or authority over the financial affairs of a client except in limited circumstances, such as when the client is a related person as defined in the Income Tax Act (Canada) and control is exercised in accordance with firm policies and procedures, or in the case of certain control granted in a discretionary account. The CSA is also of the view that a registrant having full control or authority over the financial affairs of a client may create a material conflict of interest. So, if a firm is not going to avoid this conflict, it should create a specific procedure to ensure that these conflicts are identified and are addressed in the client’s best interest. For example, specific pre-approval from the CCO could be obtained, based on a justification of why such activity would be in the best interests of the client in the specific instance, and procedures to manage the potential conflict such as having the individual advisor recuse himself or herself on matters involving the appointment of an investment manager could be implemented, where possible.

We understand that simply being appointed an executor in a will does not currently amount to a disclosable OBA in Form 31-103F4, and will only become disclosable once a registrant steps into that role and is vested with the powers of the office of an executor. We believe the same logic could apply to other powers of attorney as well, depending on the type of powers granted.

May 31, 2021

A Summer for Consideration – CSA Proposes Amendments to Continuous Disclosure Obligations and Semi-Annual Reporting for Venture Issuers

On May 20, the CSA proposed amendments to NI 51-102 Continuous Disclosure Obligations in order to streamline and clarify continuous disclosure requirements for reporting issuers other than investment funds. The proposed amendments would include consolidating the MD&A form with the AIF form and financial statements into new annual and interim disclosure statements. The proposed amendments would eliminate some disclosure requirements found to be duplicative or redundant, such as the current MD&A requirement to disclosure summary information for the last 8 quarters, as that information can be located in previous filings. A few new requirements are proposed to be added to address perceived gaps in disclosure as well. The final amendments are expected to be effective December 15, 2023 and various transition provisions have been proposed. The CSA expects the amendments will streamline reporting and increase reporting efficiency for reporting issuers while increasing the quality of the disclosure for investors. Of particular interest, at the same time the CSA has proposed a framework for future consideration that would allow venture issuers (on a voluntary basis) to report semi-annually instead of quarterly, if they are not SEC issuers and provide alternative disclosure for interim periods where financial statements and MD&A are not being filed. The comment period on the proposals close on September 17, and we expect that market participants will want to review the extensive changes closely.

May 31, 2021

CSA Proposed Amendments to NI 14-101 Definitions and Consequential Amendments

The CSA has proposed certain amendments to the National Instrument which sets out definitions that apply across various other national instruments, including the definition of “Canadian financial institution”, and consequential amendments resulting from the change. The revised definition would exclude foreign banks listed in Schedule III to the Bank Act (Canada), and adds a reference to a central credit union, financial services cooperative, credit union league or federation that is incorporated or authorized to carry on business under an Act of the legislature of a jurisdiction. The change will ensure that the definition is uniform across the relevant national instruments. In addition, a change is proposed to the definition of “Handbook” only to reflect that CPAC has different publications for accounting and assurance. Comments on the proposal are due on July 21.

May 31, 2021

CSA Publishes Guidance on Crypto-Asset Trading Platforms

On March 29, the Canadian Securities Administrators (CSA) and the Investment Industry Regulatory Organization of Canada (IIROC, and together with the CSA, Regulators) jointly published Staff Notice 21-329 Guidance for Crypto-Asset Trading Platforms: Compliance with Regulatory Requirements (Staff Notice). The Staff Notice is intended to provide regulatory guidance on how securities legislation, as it currently stands, applies to platforms (Crypto Asset Trading Platforms, or CTPs) that facilitate or propose to facilitate the trading of crypto assets that are securities (Security Tokens) or instruments or contracts involving crypto assets (Crypto Contracts) in the interim period while the Regulators continue working on establishing a long-term regulatory framework for CTPs. The Regulators’ work in this area began with the publication of Consultation Paper 21-402 Proposed Framework for Crypto-Asset Trading Platforms back in March 2019 (Consultation Paper), which we reported on in a previous issue of our bulletin.

In providing their guidance, the Regulators divide the CTPs into two broad categories: The Marketplace Platforms, which operate in a manner similar to marketplaces as currently defined in securities legislation and the Dealer Platforms, which are CTPs that are not marketplaces.

Dealer Platforms: The two most common characteristics of a CTP that is a Dealer Platform are that:

  • It only facilitates the primary distribution of Security Tokens; and
  • Clients do not interact with one another on the CTP.

The Regulators indicate that for a Dealer Platform that only facilitates distributions or the trading of Security Tokens in reliance on prospectus exemptions and does not offer margin or leverage, registration as an exempt market dealer or, in some circumstances, restricted dealer may be required.

A Dealer Platform that trades Crypto Contracts, on the other hand, would be expected to be registered in an appropriate dealer category, and where it trades or solicits trades for retail investors that are individuals, it will generally be expected to be registered as an investment dealer and be an IIROC member.

Marketplace Platforms: Generally, a CTP would be a Marketplace Platform if it:

  • Constitutes, maintains or provides a market or facility for bringing together multiple buyers and sellers and their orders for trading in Security Tokens and/or Crypto Contracts; and
  • Uses established, non-discretionary methods under which such orders will be executed and processed.

Marketplace Platforms will generally be subject to the requirements applicable to alternative trading systems, such as those set out in National Instrument 21-101 Marketplace Operations.

Additionally, it is contemplated that activities on Marketplace Platforms will be subject to market integrity requirements, such as IIROC’s Universal Market Integrity Rules or similar provisions.

Where a Marketplace Platform also conducts activities similar to those performed by Dealer Platforms, it would also be subject to the appropriate dealer requirements, including dealer registration requirements, discussed above.

The Regulators acknowledge the continued evolution of fintech businesses and the emergence of a wide variety of CTP models, and note in all cases that exemptive relief may be available and terms and conditions that are tailored to their businesses may be appropriate.

The Staff Notice also contains in an appendix the Regulators’ responses to the comments received from industry stakeholders on the Consultation Paper, but does not give much indication on what the long-term regulatory framework may look like (other than, perhaps, the taxonomy of CTPs that is used in the Staff Notice) or an expected timeline.

They encourage CTPs to consult with their legal counsel and to contact staff of their local securities regulatory authority on the appropriate steps to comply with securities legislation and IIROC rules. If you have any questions on the implications of this guidance, please contact us.

April 30, 2021

Alberta Eliminates Director Residency Requirements

On March 29, 2021, Bill 22, Red Tape Reduction Implementation Act, 2020, was proclaimed into force in Alberta. As a result, an Alberta corporation will no longer be required to have any Canadian citizens on its board of directors. In addition, director residency information will no longer be collected.

Previously, businesses incorporated under the Business Corporations Act (Alberta) were required to have a minimum of 25% of their directors be Canadian residents. The move is part of a larger Government of Alberta mandate to attract businesses by reducing costs and regulatory burden for Alberta businesses. We previously reported similar proposed changes for corporations incorporated under the Business Corporations Act (Ontario) pursuant to Bill 213. Bill 213 has received royal assent on December 8, 2020 but has not yet been proclaimed into force.

April 30, 2021

CSA Multilateral Notice and Request for Comment re Proposed Order 45-539 Small Business Financing

The Alberta Securities Commission and the Financial and Consumer Affairs Authority of Saskatchewan have proposed a new prospectus exemption to assist small businesses in Alberta and Saskatchewan to raise up to $5 million from investors in those provinces, based on a simple offering document (which would be considered an offering memorandum under securities legislation).

There are many proposed conditions to the use of the exemption, which vary depending on whether or not financial statements are provided to an investor. For example, if the statements are not provided, the maximum an issuer group could raise from investors that would not qualify to invest under other specified prospectus exemptions over a 12 month period would be $1.5 million, subject to a lifetime limit of $5 million. The maximum any one investor could invest would be $2,500, or a higher limit of $10,000 if they qualify as a “minimum income investor” (which would have lower thresholds than those required of an “accredited investor”). The individual investor thresholds are slightly higher if financial statements are provided.

It is proposed that the financial statements provided under the exemption would not need to be audited (review engagement only) and could be prepared based on Canadian GAAP applicable to private enterprises (with some modifications). It is noted that corporate or other legislation might still require certain issuers to provide audited statements. The financial statements would have to continue to be provided to investors but only until such time as the proceeds from the offering are expended, and continuous distribution offerings would not be permitted. The exemption is intended to address financing challenges for small businesses that do not yet attract venture capital investors, and the exemption would not be available to issuers that are reporting issuers or investment funds. Other conditions to the exemption include requiring investors to sign a prescribed risk acknowledgement, the filing of a report of exempt distribution and the filing of the offering document on SEDAR.

Interestingly, an issuer would be given the choice of creating their own offering document with the specified information included, or to use a pre-designed form of offering document with a drop down menu that could be completed electronically in a Q&A format. Comments on the proposal are due on May 7 (May 24 with respect to the technical amendments relating to SEDAR filing requirements).

April 30, 2021

ASC Notice and Request for Comment re Blanket Order 31-536 Alberta Small Business Finder’s Exemption

The Alberta Securities Commission is continuing to explore unique exemptions to revitalize Alberta’s capital markets and assist small businesses to raise capital efficiently while balancing investor protection.

The proposed new blanket order would provide an exemption from the dealer registration requirement in Alberta for individual finders who utilize pre-existing personal contacts. It would replace the current Northwestern Exemption which has been revoked everywhere except Alberta. The targeted exemption is intended to assist early stage businesses raising modest amounts of capital without the participation of a registered dealer. There are a number of requirements for the use of the exemption, including that the issuer must have its head office in Alberta, and that the issuer can not have raised more than $5 million under all exemptions from the prospectus requirements. The registration exemption for finders would only be available if the issuer uses certain specified prospectus exemptions, such as the private issuer exemption where the purchaser is an accredited investor or not a member of the “public”, the offering memorandum exemption and the accredited investor exemption.

Finders would not be permitted to solicit prospective purchasers other than people with whom they have a “substantial pre-existing relationship”, and as a result advertising would also be prohibited. In addition, the finder would not be allowed to rely on the dealer exemption if they have previously provided certain financial services to the purchaser of securities, such as financial planning, provision of insurance products or mortgage services. Investors would be required to sign a specified risk acknowledgement form, and an information form with respect to the finder would need to be filed with the ASC within 10 days of the distribution. Comments on the new proposal are due by May 7.

April 30, 2021

Regulatory Penalties in British Columbia Not Discharged Through Bankruptcy

The Supreme Court of British Columbia has confirmed that monetary penalties and disgorgement orders from regulatory proceedings are exempt from a bankruptcy discharge. In 2015, the British Columbia Securities Commission ordered Thalbinder Singh Poonian and Shailu Poonian to pay more than $19 million in penalties and disgorgement after the commission found that the pair had engaged in market manipulation. In 2018, the Poonians sought a discharge from bankruptcy absolving them of their debts. The British Columbia Supreme Court denied their application for an absolute or suspended discharge from bankruptcy under the Bankruptcy and Insolvency Act.

The ruling sends a strong message that securities law violators may have difficulty using bankruptcy laws to release themselves of the financial consequences of their wrongdoing.

April 30, 2021

Expansion of Ontario Securities Commission’s Mandate

In January 2021, the Capital Markets Modernization Taskforce published its final report after completing its review of the status of Ontario’s capital markets. In its most recent provincial budget, the Government of Ontario indicated that it will proceed with certain of the recommendations made in the report, including to expand the Ontario Securities Commission’s mandate to include fostering capital formation and competition in the markets. The OSC’s current mandate is to provide protection to investors from unfair, improper, or fraudulent practices, to foster fair and efficient capital markets and confidence in capital markets, and to contribute to the stability of the financial system and the reduction of systemic risk.

April 30, 2021

Updates on Amendments re Syndicated Mortgages

As reported in our December 2020 bulletin, on December 7, the Ontario Securities Commission (OSC) released the final amendments to OSC Rule 45-501 Ontario Prospectus and Registration Exemptions (Amendments). The Amendments form part of the changes across Canada which, in Ontario, will have as one of their effects the transfer from the Financial Services Regulatory Authority of Ontario (FSRA) to the OSC of regulatory oversight over the distribution of non-qualified syndicated mortgages (NQSMIs) to persons that are not permitted clients.

On February 25, 2021, the Canadian Securities Administrators (CSA) published CSA Staff Notice 45-328 Update on Amendments relating to Syndicated Mortgages. In that notice, the CSA confirmed that the Amendments and the amendments in the local jurisdictions to the syndicated mortgage rules, took effect in all jurisdictions on March 1, 2021, except in Ontario and Quebec where the amendments are expected to take effect on July 1, 2021.

Accordingly, if a firm trading syndicated mortgages is operating only in Ontario or Quebec, they have until July 1, 2021 to comply with the Amendments. Firms operating in all other Canadian jurisdictions needed to comply with the Amendments by March 1, 2021.

Furthermore, on March 10, 2021, FSRA released final approach guidance (the “SMI Guidance”) for supervising mortgage brokerages and administrators that engage in NQSMIs. FSRA consulted on the proposed guidance in August-September 2020. The SMI Guidance will apply to: (a) mortgage brokerages dealing and/or trading in NQSMs with permitted clients on or after July 1, 2021; (b) mortgage brokerages acting on behalf of the borrower in NQSMIs with investors/lenders that are non-permitted clients; (c) mortgage brokerages that dealt and/or traded in legacy NQSMIs (conducted prior to July 1, 2021); and (d) mortgage administrators administering NQSMIs. The SMI Guidance highlights the division of regulatory oversight of NQSMIs, risk profile factors for mortgage brokerages, administrators and NQSMIs, information required for the quarterly data report for NQSMIs with permitted clients and data collection for legacy NQSMIs. Firms in Ontario dealing and/or trading in NQSMIs or mortgage administrators administering NQSMIs will want to review the final guidance in detail. Please don’t hesitate to contact your usual lawyer at AUM Law.

April 30, 2021

Ontario’s Capital Markets Modernization Taskforce Releases Final Report

In our July 2020 Bulletin we reported on the Consultation Report of Ontario’s Capital Markets Modernization Taskforce. On January 22, the Taskforce released its Final Report after engaging with over 110 stakeholders and receiving over 130 stakeholder comment letters in response to the Consultation Report.

Background: The Taskforce was appointed by Ontario’s former Finance Minister to review the capital markets regulatory framework and make recommendations to modernize Ontario’s capital markets regulation. One of the Taskforce’s main objectives was to amplify growth and competitiveness in Ontario’s capital markets.

As we did in our July 2020 Bulletin when we last reported on the Consultation Report, in this month’s bulletin we have highlighted the proposals that we think will be of particular interest to readers who are following this initiative.

Improving Regulatory Structure: The Final Report sets out a number of recommendations which the Taskforce believes will lead to a more modern and efficient securities regulator including:

  • Replacing the Securities Act (Ontario) and Commodity Futures Act (Ontario) with the Capital Markets Act (CMA). The recommendation is to see the implementation of the CMA by the end of 2021. As for this timing … we’re betting on the Over.
  • Expanding the mandate of the OSC to include fostering capital formation and competition in the markets in order to encourage economic growth and help facilitate capital raising.
  • Enhancing collaboration between the Ontario Securities Commission (OSC) and Financial Services Regulatory Authority of Ontario (FSRA) to achieve efficiencies including examining the potential of back-office efficiency opportunities.
  • Introducing a single self-regulating organization (SRO) that covers all advisory firms, including investment dealers, mutual fund dealers, portfolio managers, exempt market dealers (EMDs) and scholarship plan dealers. In the short term the new SRO would regulate both investment and mutual fund dealers. In the long term this SRO would replace IIROC and MFDA and would also regulate exempt market dealers, portfolio managers and scholarship plan dealers and ultimately the OSC would delegate more registration responsibilities to the new SRO.
  • Speed up the SEDAR+ project to create a more modern, centralized and user-friendly electronic filing/document retrieval system with the first phase to be complete in 2021. We’d love to see this happen in 2021 but again, don’t see this as being likely considering the heavy regulatory agenda this year.

Improving Regulations and Enhancing Investors Protection: Based on the Taskforce’s findings, capital markets participants are in favour of reducing regulatory burden and streamlining regulatory requirements. The Final Report recommends streamlining regulatory requirements and enhancing investor protection including:

  • Lowering to 30 days the current four-month hold period for securities issued by a qualified reporting issuer using the accredited investor exemption and eliminating the hold requirement altogether after two years.
  • Providing the Director of Corporate Finance at the OSC with power to impose terms and conditions on issuers similar to the power the Director of Compliance and Registrant Regulation has regarding registrants.
  • Expanding civil liability for offering memorandum misrepresentation to extend to parties other than the issuer such as its board of directors, promoters, influential persons and experts.
  • Allowing the OSC to adapt prospectus liability to address regulatory gaps resulting from new and evolving financing structures.
  • For consistency with other jurisdictions, decreasing the ownership threshold for early-warning reporting disclosure from 10 to 5 per cent for non-passive investors.
  • Designating a dispute resolution services organization that would have the power to issue binding decisions.

The Rise of Private Markets, Exempt Market Activities and Ensuring a Level Playing Field: The Taskforce included recommendations that aim to increase capital raising opportunities for small intermediaries and increase the variety and quality of independent products available to retail investors, such as:

  • A dealer registration safe harbour for issuers that wish to distribute their own securities without an intermediary. We agree that this would be incredibly helpful to market participants.
  • A finder category of registration which would impose fewer obligations compared to those imposed on EMDs or investment dealers (such as lower capital requirements) and eliminate the need for a finder to have an ultimate designated person or chief compliance office in certain instances. We also think this is a good idea, provided there’s clarity regarding when one crosses into being a registrable finder.
  • The OSC and TMX to re-allow EMDs to act as “selling group members” in the distribution of securities made under a prospectus offering. This door was closed to EMDs a few years ago due to various policy concerns, so will be interesting to monitor this proposal.
  • Additional accredited investor categories to include individuals that have passed relevant proficiency requirements.
  • Improving access to the shelf system for independent product through guidance to address product shelf issues and the makeup of New Product Committees, title clarification for proprietary product to ensure a level playing field for all products gaining action to a distribution channel and that conflicts are addressed in the best interest of clients.

Fostering Innovation: The Taskforce made recommendations to help support stakeholders request for a more nimble and flexible regulator in order to foster innovation in the Ontario capital markets including:

  • Foster an Ontario Regulatory Sandbox to benefit entrepreneurs and in the longer-term, consider developing a Canadian Super Sandbox where the OSC and FSRA should design an approach that would offer rapid exemptive relief or use other available regulatory tools to permit companies with innovative business models operating across the financial services sector in Ontario to test new financial services and products.
  • Encourage access to retail investors in less liquid private equity and debt markets by introducing an appropriate retail investment fund structure (e.g. Interval Funds in the U.S.)

Other Recommendations: The summary above highlights only a handful of the Taskforce’s 70 plus recommendations. The Final Report also included other proposals such as:

  • A fully electronic or digital delivery in relation to documents mandated under securities law requirements within six months.
  • Name change of the Ontario Securities Commission to the Ontario Capital Markets Authority.
  • Reducing the minimum consultation period for rule-making from 90 days to 60 days.
  • Providing the OSC with additional tools for continuous disclosure and exemption compliance.
  • Modernizing Ontario’s short selling regulatory regime to include protections allowed for in other jurisdictions (e.g., U.S. and U.K.)
  • Introducing an exemption from the disclosure of conflicts of interest in connection with private
    placements to institutional investors. An issue that’s been kicking around for years.

What’s Next? The next steps for the Final Report are now up to recently appointed Minister of Finance. The Minister may choose to act on some, none or all of the recommendations. As we have previously mentioned, we think that initiatives that can be implemented by Ontario authorities on their own could start moving forward if no legislative or rule changes are required. Other proposals (such as SRO reform) will require coordinated, cooperative and determined actions by multiple parties across the country and therefore likely to take much more time to achieve, if they are achievable at all.

AUM Law will continue to monitor the status of the recommendations and update you on significant developments. If you are interested in discussing any of the recommendations, please do not hesitate to contact Sandy Psarras, Chris von Boetticher or another member of our team.

January 29, 2021

OSC Publishes Final Amendments Regarding Syndicated Mortgages

On December 7, the Ontario Securities Commission (OSC) released the final amendments to OSC Rule 45-501 Ontario Prospectus and Registration Exemptions (Amendments). The Amendments are a part of the proposed changes across Canada which, in Ontario, will have as one of their effects the transfer from the Financial Services Regulatory Authority of Ontario (FSRA) to the OSC of regulatory oversight over the distribution of non-qualified syndicated mortgages (NQSMIs) to persons  that are not permitted clients. The final version of the Amendments contain no substantive changes from the earlier version released on August 6 other than coming into effect on July 1, 2021, a few months later than the originally scheduled effective date of March 1, 2021. A firm that intends to engage in trades of NQSMIs to persons other than permitted clients on or after July 1, 2021 will be required to 1) either meet the prospectus requirements (or rely on an available exemption) and 2) either be registered as an exempt market dealer (EMD) or engage the services of a third-party EMD (or rely on an available exemption).

December 11, 2020