Proposed Canadian Prospectus Exemption Allows Restricted Foreign Securities to be Resold on Foreign Exchanges

On June 29, 2017, the Canadian Securities Administrators (CSA) published for comment proposed amendments to National Instrument 45-102 Resale of Securities (NI 45-102) that would introduce a new prospectus exemption for the resale of securities of a foreign issuer.

“The proposed amendments would facilitate access to global markets,” said Louis Morisset, CSA Chair and President and CEO of the Autorité des marchés financiers. “Canadian investors are increasingly investing abroad, and we understand that some aspects of the current resale regime may pose challenges to participation in prospectus-exempt offerings by foreign issuers.”

If adopted, the proposed exemption would allow Canadian investors to resell, outside of Canada, securities of a foreign issuer acquired under a prospectus exemption where the issuer is not a reporting issuer in any jurisdiction of Canada. The proposed amendments suggest a different approach for determining minimal connection to Canada by introducing a definition of foreign issuer to replace the current 10 per cent Canadian ownership test.

With the increased globalization of capital markets, it may no longer be appropriate to determine minimal connection to Canada based solely on Canadian security holdings. The test for connection to Canada in the proposed exemption is based on whether the foreign company has its head office, or the majority of its executive officers or the majority of its assets in Canada.

The proposed amendments can be found at this link. Comments should be submitted in writing by September 27, 2017.

The CSA, the council of securities regulators of Canada’s provinces and territories, coordinates and harmonizes regulation for the Canadian capital markets.

If you have questions about resale of securities, contact any member of Clark Wilson LLP’s Capital Markets, Securities & M&A Group.