BC Amends BCI 51-509 to Parallel New CSA OTC Rule


Effective July 31, 2012, the BC Securities Commission will revoke BC Instrument 51-509 and adopt Multilateral Instrument 51-105 Issuers Quoted in the U.S. Over-the-Counter Markets. (“MI 51-105”). BCI 51-509 first came into effect in 2008, and is being revoked in order for BC to have the same rules as other Canadian jurisdictions other than Ontario, which is not adopting MI 51-105. Changes from the current BC rule are not significant and include:

1. Securities for services

BCI 51-509 restricts an OTC reporting issuer from using the securities for debt prospectus exemption. In MI 51-105, OTC reporting issuers are permitted to use the exemption when issuing shares for services to related parties, provided the consideration is reasonable, the debt is bona fide, and the price is at least market price.

2. Use of SEC Form 8-K as a material change report

Under BCI 51-509,an OTC reporting issuer must file a copy of its news release and a material change report. In MI 51-105, the issuer may file its SEC Form 8-K Current Report instead of a material change report.

3. Resale of seed stock exemptions

In BCI 51-509, there is an exemption for the resale of seed stock. In MI 51-105, there are also resale exemptions for corporate transactions, including bids, amalgamations, reorganizations and dissolutions.

4. Addition of shorter form of Personal Information Form

BCI 51-509 requires a person to file a personal information form. In MI 51-105, a person may file a shorter version of the personal information form. Specifically, if a person has filed a personal information form with the Securities Commission, the Toronto Stock Exchange or TSX Venture Exchange and the information has not changed, the person may instead file Form 51-105F3B Personal Information Form and Authorization of Indirect Collection, Use and Disclosure of Personal Information.

5. Definition of promotional activities

BCI 51-509 relies on the definition in the Securities Act (British Columbia) of investor relations activities. MI 51-105 contains a similar definition of those activities.

6. Alpha Exchange

Issuers listed on the Alpha Exchange will not be subject to MI 51-105.

7. Insider reports

In BCI 51-509, insiders of OTC reporting issuers may comply with their obligations to file insider reports by complying with their insider reporting obligations under U.S. federal securities law. However, insiders of some OTC issuers are not required to file insider reports under U.S. federal securities law. Under MI 51-105, these insiders must file insider reports in Canada.

8. Certification requirements

In MI 51-105, OTC reporting issuers must file the same certificates as venture issuers for annual and interim filings.

If you have questions about the new requirements imposed on OTC Issuers with connections to Canada, contact any member of Clark Wilson’s Corporate Finance & Securities Law Group.