The Canadian Securities Administrators, except for the
OSC, today released Multilateral Instrument 51-105 Issuers
Quoted in the U.S. Over-the-Counter Markets,
intended to improve disclosure by issuers whose securities are
quoted in U.S. OTC markets and with a significant
connection to a Canadian jurisdiction. The instrument is also
intended to discourage the manufacture and sale in Canada of
U.S. OTC quoted shell companies that can be used for abusive
As we discussed in our post describing a draft version of the
rule published in June 2011, a significant connection
to a Canadian jurisdiction will be found to
exist where (i) the OTC issuer's business
is directed or administered in or from Canada;
(ii) promotional activities are conducted from Canada; or
(iii) the issuer distributes securities in Canada prior to
obtaining a ticker symbol for the purpose of having its securities
quoted on an OTC market in the U.S. and those securities
become the issuer's OTC-quoted securities. Under the new rules,
issuers subject to the instrument will generally have to comply
with the continuous disclosure regime to which venture issuers are
subject and, additionally, file annual information forms (which
venture issuers may do voluntarily, but are not required
The instrument follows British Columbia's adoption of a local
rule regulating issuers quoted in U.S.
OTC markets and that have a significant connection to B.C.
Having found that the adoption of the B.C. rule resulted in
OTC issuers migrating to other Canadian jurisdictions, the CSA released a proposed draft of the multilateral
instrument in June 2011. The final version
released today reflects the comments received to the proposed
draft. Assuming ministerial approvals are obtained, the
OTC rule will come into force on July 31, 2012.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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