( 17. 4), ( 17. 5) and ( 17. 6) must be accompanied by a notice of the issuer
disclosing in reasonable detail the use of the aggregate gross proceeds
raised by the issuer under section 2.9 in accordance with Form 45-
106F16, unless the issuer has previously disclosed the use of the
aggregate gross proceeds in accordance with Form 45-106F16.
( 17. 20) In New Brunswick, Nova Scotia and Ontario, an issuer must
make reasonably available to each holder of a security acquired under
subsection (2.1) a notice of each of the following events in accordance
with Form 45-106F17, within 10 days of the occurrence of the event:
(a) a discontinuation of the issuer’s business;
(b) a change in the issuer’s industry;
(c) a change of control of the issuer.
( 17. 21) An issuer is required to make the disclosure required respectively by subsections ( 17. 4), ( 17. 5), ( 17. 6), ( 17. 19) and ( 17. 20) until
the earliest of
(a) the date the issuer becomes a reporting issuer in any jurisdiction of
(b) the date the issuer ceases to carry on business.
( 17. 22) In Ontario, an issuer that is not a reporting issuer in Ontario
that distributes securities in reliance on the exemption in subsection
(2.1) is designated a market participant under the Securities Act
( 17. 23) In New Brunswick, an issuer that is not a reporting issuer in
New Brunswick that distributes securities in reliance on the exemption
in subsection (2.1) is designated a market participant under the Securities Act (New Brunswick).
( 18) [Repealed].
Excerpt from NI 45-106: s. 2.9 – the “OM Exemption”
1.1 De;nitions – In this instrument
“eligible investor” means
(a) a person whose
(i) net assets, alone or with a spouse, in the case of an individual, exceed
(ii) net income before taxes exceeded $75,000 in each of the 2 most
recent calendar years and who reasonably expects to exceed that income
level in the current calendar year, or
(iii) net income before taxes, alone or with a spouse, in the case of an
individual, exceeded $125,000 in each of the 2 most recent calendar
years and who reasonably expects to exceed that income level in the
current calendar year,
(b) a person of which a majority of the voting securities are bene;cially
owned by eligible investors or a majority of the directors are eligible
(c) a general partnership of which all of the partners are eligible
(d) a limited partnership of which the majority of the general partners
are eligible investors,
(e) a trust or estate in which all of the bene;ciaries or a majority of the
trustees or executors are eligible investors,
(f ) an accredited investor,
(g) a person described in section 2.5 [Family, friends and business associ-
(h) in Manitoba, Northwest Territories, Nunavut, Prince Edward Island
and Yukon, a person that has obtained advice regarding the suitability of
the investment and, if the person is resident in a jurisdiction of Canada,
that advice has been obtained from an eligibility adviser.
1. ;e OM Exemption is found in section 2.9 of National Instrument 45-106 – Prospectus
Exemptions (NI 46-106). In particular, the core requirements of the OM Exemption in Ontario to
which we refer in this brie;ng note are set out in section 2.9(2.1) of NI 45-106. When the term “OM
Exemption” is used in this brie;ng note, it refers solely to the elements of the exemption applicable in
Ontario. ;e full text of section 2.9 of NI 45-106 is attached to this brie;ng note as Schedule A. 2.
We understand accredited investors make up less than 4% of Ontario’s population. 3. ;e mandate of
the Ontario Securities Commission is to protect investors while promoting fair and e;cient capital
markets. 4. A “registrant” is a registered dealer or registered adviser under the Securities Act (Ontario).
Given our focus on the private capital markets, we wish to emphasize that the term “registrant”
includes exempt market dealers. Exempt market dealers are vital in any e;ort to stimulate the private
capital markets. 5. ;e PCMA argued in 2014 that investment caps are problematic in general and
should be removed from the OM Exemption altogether (see
http://www.pcmacanadamagazine.com/privatecapitalmarkets/fall_2014?pg=16#pg16). While we may
raise these arguments again in the future, it is not necessary to do so for the purposes of this brie;ng
note. Our future position will depend, in part, on the success of the OM Exemption if the
recommendations advanced in this brie;ng note are implemented. 6. ;e term “eligible investor” is
de;ned in section 1.1 of NI 45-106 and is used to establish the investment caps imposed in sections
2.9(2.1)(b)(i) and (ii), discussed below. ;e full text of the de;nition of eligible investor is set out in
Schedule B to this brie;ng note. 7. ;e PCMA made the same recommendation in 2014. Our
position has only been strengthened by the lackluster performance of the OM Exemption since its
introduction in Ontario in January 2016. 8. In other words, if the registrant recommends that the
client should invest less than the applicable investment cap in section 2.9(2.1)(b)(i) or (ii), the client
should be free to invest up to the applicable investment cap. It would be inconsistent to allow an
investor who has no suitability advice to invest up to the applicable investment cap but not allow the
investor who has had such advice to do so. 9. ;e utility of a rolling 12-month aggregation is limited,
in any event, by the information made available to the registrant by its investor client. We expect
registrants to make reasonable inquiries of their clients. After that, we believe registrants should be
free to act based on the information they receive from their clients. 10. For example, National
Instrument 81-106 – Investment Fund Continuous Disclosure applies to a “mutual fund in the
jurisdiction”. Under the Securities Act (Ontario), the term “mutual fund in Ontario” means a mutual
fund that is a reporting issuer or that is organized under the laws of Ontario (the latter not being
required to be a reporting issuer). ;e PCMA does not believe that mutual funds in the jurisdiction
should be excluded from the OM Exemption, regardless of whether those issuers are reporting issuers.
11. ;e PCMA is considering recommendations on corporate governance for certain issuers in
connection with the OM Exemption, not just investment funds. It is premature to make speci;c
recommendations in this brie;ng note. 12. See section 2.9(2.1)(d)(i) and (ii) of NI 45-106. 13.
Some elements of the disclosure and reporting requirements of the OM Exemption do bear
examination and discussion (including, for example, that there is no mechanism for ceasing to be
obligated to report in compliance with the OM Exemption regime whereas there is a mechanism to
cease to be a reporting issuer). ;at exercise is beyond the scope of this brie;ng note. ;e PCMA may
make separate submissions regarding the disclosure and reporting requirements of the OM Exemption
at a later date. 14. EMAC is a logical body to consider these recommendations as it was very involved
in the evolution of the OM Exemption as the amendments to NI 45-106 were proposed and settled.
EMAC is familiar with the issues and, in our view, can provide meaningful input.
OFFERING MEMORANDUM EXEMPTION – BROADEN THE EXEMPTION
BRIEFING NOTE FOR THE PCMA’S PRESENTATION AT QUEEN'S PARK ON MARCH 9, 2017