Report is generally 10 days after the distribution date. The
CSA is concerned that many issuers and underwriters have
filed the F1 Reports late, and in some cases, haven’t filed
them at all.
3. Failing to pay the required fee for an F1 Report – The CSA
has noted that many F1 Reports have incorrectly calculated
the fee, or submitted no fee at all.
4. Failing to include a complete list of purchasers - F1
Reports must disclose all purchasers from all jurisdictions,
not only those identified purchasers from the jurisdiction in
which the F1 was filed.
5. Failing to reconcile information in the F1 – Some issuers or
underwriters report information that can’t be reconciled, for
example, different total number of securities distributed, total
dollar value raised, number of purchasers and/or exemptions
used in items 6 and 7 of the F1 Report vs. Schedule 1 of the
F1 Report. These figures need to be correct, and you need to
reconcile before you file.
6. Incorrectly identifying the number of purchasers – The
CSA noted that the number of purchasers referred to in the
F1 Report needs to correctly identify the number of investors
and not the number of securities purchased by each investor.
7. Relying on unavailable exemptions Issuers distributing in
multiple jurisdiction must remember that not all exemptions are
available in all jurisdictions. A common mistake here is reporting
reliance on the ‘family friends and business associates’
exemption, which is not available in Ontario, although a similar
‘founder, control person and family’ exemption is available in
Ontario. Schedule 1 of the F1 Report should include a list of
every purchaser and the specific exemption relied upon for the
8. Failing to disclose all commission and finder’s fees
- Some F1 Reports had incomplete disclosure about
commission and finder’s fees. The CSA believes that these
fees are sometimes excluded since they were not specifically
identified as commissions or finders fees. The CSA reminds
capital market participants that all compensation must
be disclose and compensation includes commissions,
discounts, or other fee or payments which result from a
distribution of securities, regardless of what the payment is
called by the issuer.
9. Failing to provide complete information regarding
convertible or exchangeable securities – Some F1
Reports did not provide proper disclosure of the underlying
security where a convertible or exchangeable security was
distributed. F1 Reports must include a description of the
underlying security, the terms of conversion or exercise, and
any expiry date.
10. Improperly reported distributions under the minimum
amount exemption – The CSA has observed instances where
F1 Reports disclose reliance on the $150,000 or minimum
amount exemption however the purchase price was below
the minimum threshold amount. This minimum amount musty
be met be each investor and cannot be achieved through
pooling multiple investors or syndicating an investment.
11. Failing to certify the F1 – Some F1 Reports were unsigned,
or lacked the date or name of the person signing the
Readers are encouraged to read the complete Notice which
is available on the web sites of various Canadian securities
regulatory authorities and on the website of the EMDA at www.
The contents of this article do not constitute legal advice and is provided for
information purposes only. This article does not necessarily reflect the opinions of
Cassels Brock & Blackwell LLP or any of its lawyers or clients. The content of this
article is not intended to be used as a substitute for specific legal advice or opinions.
For more information contact:
1. See the settlement agreement between the BCSC and Genus Capital
Management Inc. at: http://www.bcsc.bc.ca/comdoc.nsf/comdoc.
2. See cease trade order by the Alberta Securities Commission dated
March 13, 2012 against Sundal Resources Limited Partnership#3,
Re, 2012 ABASC 100.
3. The BC F6 Report is slightly different than the F1 Report. For
example, Item 4 of Form 45-106F6 requires that an issuer that is not
a “reporting issuer” in any jurisdiction in Canada disclose detailed
information regarding its insiders and promoters. This in effect has
created a new insider reporting obligation for private companies that
are located in British Columbia that sell outside of British Columbia,
or that sell securities to purchasers located in, British Columbia.
4. Section 2. 5 of NI 45-106
5. Section 2. 7 of NI 45-106