The Ontario Securities Commission has recently granted relief to dealers distributing foreign securities by way of private placement into Canada to address uncertainties caused by new forward-looking information disclosure requirements.
Effective December 31, 2007, the Canadian Securities Administrators (CSA) made significant amendments to forward-looking information disclosure requirements under continuous disclosure rules applicable to Canadian reporting issuers. The Ontario Securities Commission (OSC) also concurrently amended requirements relating to offering memoranda disclosure contained in OSC Rule 45-501. As a result of these amendments to OSC Rule 45-501, any offering memorandum provided to purchasers in Ontario that contains material forward-looking information (including future-oriented financial information and financial outlooks) is required to also contain certain prescribed forward-looking information disclaimers or safe-harbour type of disclosure. While this disclosure is similar to safe-harbour disclosure provided under U.S. or foreign securities law requirements, it also requires the issuer to address additional matters not typically encompassed by the equivalent non-Canadian disclosure.
As a result of the amendments to OSC Rule 45-501, uncertainty has arisen in the market in the context of foreign issuer private placements and the disclosure requirements, if any, regarding forward-looking information, including future-oriented financial information and financial outlooks. To address this uncertainty, the OSC recently granted exemptive relief to certain foreign dealers allowing for the distribution of securities by way of private placement to "accredited investors", provided the foreign offering documents contain safe-harbour disclosure that complies with U.S. federal securities laws or a disclaimer that the disclosure may differ from that which is required under Ontario securities laws. To deal with this issue in the long-term, the OSC has also proposed to repeal these requirements from OSC Rule 45-501. However, if implemented, this proposed repeal will not take effect until December 2008. Until then, staff at the OSC have advised that they will attempt to deal with exemptive relief applications on an expedited basis.
Until such time as the OSC repeals the forward-looking information disclosure requirements in OSC Rule 45-501, foreign dealers and issuers offering foreign securities into Canada should be aware of these potential issues in order to avoid any unnecessary delays when carrying out private placements into Canada. In addition, consideration should be given to applying for exemptive relief from the forward-looking information disclosure required under OSC Rule 45-501 consistent with the relief recently granted by the OSC.
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