For collective investment vehicles with December 31 year ends, upcoming interim financial statement deadlines should be on your radar. In particular, issuers that rely on the offering memorandum (OM) prospectus exemption in Ontario are subject to new requirements regarding interim financial reports this year.
You may recall reading about the new requirements for issuers relying on the OM prospectus exemption in National Instrument 45-106 Prospectus Exemptions that took effect on March 8, 2023 (the Amendments). There is a new requirement for an issuer to amend its OM to include interim financials for the most recently completed six-month period where a distribution is ongoing if more than 60 days have elapsed since the end of the second interim period. For issuers with a December 31st year end, this means addressing this requirement by August 29th. Amending an OM to include the semi-annual financials may necessitate updates to other disclosure in the OM to ensure that it continues to meet the OM form requirements as of the date of the amended OM. An exemption from having to update the interim financial statements is available if the issuer appends an additional certificate to the OM certifying that:
- the OM does not include a misrepresentation when read as of the date of the additional certificate;
- there has been no material change in relation to the issuer that is not disclosed in the OM; and
- the OM, when read as of the date of the additional certificate, provides a reasonable purchaser with sufficient information to make an informed investment decision.
In either case, the updated OM must be filed with the Ontario Securities Commission and any other applicable regulators within 10 days of a distribution under the updated OM. The new OM requirements do not yet apply to issuers with OMs dated prior to March 8, 2023 that qualify for the transition provisions contained in the Amendments. The Amendments also include an exemption for issuers with OMs that include an interim financial report for the issuer’s most recently completed third interim period.
In addition, all investment funds that are reporting issuers, and investment funds that are not reporting issuers that qualify as mutual funds under securities legislation (other than those organized under the laws of certain provinces) with December 31st year ends that are subject to the financial statement delivery and filing requirements under National Instrument 81-106 Investment Fund Continuous Disclosure must prepare, file and deliver interim financial statements for the semi-annual period ending June 30th by August 29th (subject to applicable exemptions and any standing or annual instructions received from unitholders). The statements must be prepared in accordance with NI 81-106. One potential filing exemption exists for issuers who have filed a letter with the relevant securities commission (a Section 2.11 Notice) and indicated that they are relying on the exemption in the financial statements, but those issuers must still prepare the statements by the deadline and deliver them to investors who have not otherwise properly opted out of receipt. To the extent issuers have obtained financial statement delivery opt-outs from investors pursuant to annual or standing instructions, there is a requirement to send an annual reminder to such investors with the prescribed information.
If you have any questions about your interim financial reporting requirements, please contact us.
July 31, 2023