28 Private Capital Markets | Fall 2015 | www.pcmacanada.com
individual is within the investment limits in the Participating
Jurisdictions and Ontario.
7. Net asset test [includes principal residence]
The net asset test under the definition of ‘eligible investor’ includes
an investor’s principal residence [net of all liabilities] in all CSA
jurisdictions, including Ontario.
8. OM Marketing materials
All OM marketing materials of an issuer must be incorporated
by reference by way of a statement into the OM. “OM marketing
materials” means a written communication, other than an OM
standard term sheet, intended for prospective purchasers regarding
a distribution of securities under an offering memorandum
delivered under the OM Exemption that contains material facts
relating to an issuer, securities or an offering.
All OM marketing materials will be subject to the same liability as
the disclosure in the OM in the event of a misrepresentation.
Accordingly, issuers must review and ensure that any disclosures
in OM marketing materials are:
• consistent with the disclosure in the OM;
• Fair, balanced and not misleading; and
• adequately supported by any claims.
All marketing materials must be filed with the securities regulators
in the Participating Jurisdictions and Ontario within 10 days of
the materials being delivered or made reasonably available to a
For example, any advertisement for a seminar by a DR publicized
in the media, such as a newspaper or the Internet, that has
information about the offering must receive prior written approval
by the issuer before it is used and/or published by a DR due to
the new extension of liability imposed upon issuers involving
WHAT ISSUERS NEED TO KNOW
1. Restrictions on types of securities that can be offered
No specified derivatives or structured finance products
are permitted under the OM Exemption in the Participating
Jurisdictions and Ontario.
2. Restrictions on investment funds
The OM Exemption is NOT available to investment funds in New
Brunswick (change in rules), Ontario, Quebec (change in rules).
The OM Exemption is available for issuers that are “non-redeemable
investment funds and mutual funds that are reporting issuers” (so no
change from current rules) in Alberta, Nova Scotia, Saskatchewan.
No restrictions on investment funds (so no change from current
rules) in British Columbia, Manitoba, Newfoundland & Labrador,
Northwest Territories, Nunavut, Prince Edward Island, Yukon.
For guidance on the definition of “investment fund” you can consult:
a. Section 1.2 of Companion Policy 81-106CP to National
Instrument 81-106 Investment Fund Continuous Disclosure;
b. OSC Staff Notice 81- 722 Mortgage Investment Entities and
Investment Funds published September 12, 2013;
c. The November 2012 edition of The Investment Funds
Practitioner under the heading “The Definition of an
3. Ongoing disclosure requirements
Changes made to the OM Exemption in certain of the Participating
Jurisdictions and Ontario will now require issuers to satisfy certain
continuous or ongoing disclosure obligations as discussed below.
Audited financial statements (Participating Jurisdictions and
Non-reporting issuers will have to file with the applicable securities
regulators audited annual financial statements prepared in
accordance with IFRS and make them reasonably available to
investors within 120 days after the financial year-end of an issuer.
This must be done on a continuous basis annually post-closing
and not just while an offering is in distribution and relying on
the OM Exemption. This should be a matter of good corporate
governance for issuers who initially raised capital under the OM
Exemption and were required to provide audited annual financial
statements in order to rely on the OM Exemption.
We note that certain jurisdictions currently provide relief from the
audited financial statement requirement under the OM Exemption
as well as the requirement to prepare financial statements in
accordance with IFRS in certain circumstances. For examples,
such relief is provided in Alberta. See http://www.albertasecurities.
Notice of use of proceeds (Participating Jurisdictions and
Non-reporting issuers will also have to provide a Notice Of Use Of
Proceeds (akin to managements’ discussion and analysis (MD&A)
for reporting issuers along with their audited annual financial
statements to investors. Notice will have to be provided in a
prescribed Form 45-106F16. Note that this is a new form.