Canada: Increased Complexities For Exempt Market Filings In Canada Effective May 24, 2016

The members of the Canadian Securities Administrators (the CSA), other than the regulators in Ontario and British Columbia, recently adopted rule amendments that will require certain regulatory filings relating to exempt market activities to be filed on SEDAR (the System for Electronic Document Analysis and Retrieval) on and after May 24, 2016.

Amendments to National Instrument 13-101 System for Electronic Document Analysis and Retrieval (SEDAR) and Multilateral Instrument 13-102 System Fees for SEDAR and NRD in respect of these changes will come into force on May 24, 2016. Exempt market filings may be filed on SEDAR on a voluntary basis, with no additional charge, until the amendments come into force, at which point they will become mandatory and a SEDAR system fee of $25 per filing will apply.

Currently, exempt market filings are filed in Ontario and British Columbia using the electronic filing systems maintained by the regulators in these provinces and in paper format in all other jurisdictions. The CSA members participating in the SEDAR filing initiative explain that paper filings limit their ability to analyze the information and increase the administrative burden of handling the files. The new requirement to file the documents on SEDAR is aimed at addressing these issues until such time as the CSA develop a uniform national electronic filing system.

As a result of these rule amendments, there will be three different exempt market filing platforms to be used in Canada – with some regulatory filings still to be made in paper format:

• British Columbia — BCSC eServices
• Ontario — the OSC's Electronic Filing Portal (OSC Portal)
• All other provinces and territories, specific filings must be made on SEDAR, while some filings still must be made in paper format.

Also required to be filed on SEDAR will be offering documents and specified forms used when relying on the crowdfunding prospectus and registration exemptions under Multilateral Instrument 45-108 Crowdfunding in Saskatchewan, Manitoba, Québec, New Brunswick and Nova Scotia only. These will be public documents.

Under NI 45-106, there are deadlines for filing the applicable exempt market regulatory reports and documents. These deadlines must be met to avoid being in breach of securities regulation. There are penalties for late filings in certain jurisdictions.

January 29, 2016 Filing Deadline For Investment Funds

Issuers must generally file a Form 45-106F1 within 10 days of the distribution of securities made in reliance on prospectus exemptions. Investment fund managers may alternatively report private placements of securities of investment funds managed by them on or before the 30 th day following the financial year-end of the funds, if those private placements are made pursuant to certain exemptions. For investment funds with a financial year-end of December 31, this means that reports of distributions made in 2015 should be filed by Friday, January 29, 2016 . All trades must be reported in each jurisdiction where the trades took place using Form 45-106F1. In all jurisdictions, other than Ontario and BC, these reports may be filed in paper format or, on an optional basis, on SEDAR. There will be no SEDAR system fee charged to make these filings this year, whereas on and after May 24, 2016, there will be a SEDAR system fee of $25. Filings in Ontario and BC must still be made via the OSC Portal and via a paper filing, respectively.

Investment fund managers wishing to use SEDAR to make the required filings should use the correct form of Form 45-106F1, with the Schedule 1 being completed using the Excel template available on the various CSA member websites. It will be necessary to complete the form and to calculate the requisite regulatory fees payable earlier than usual, since each issuer must create a separate SEDAR profile for each filing, unless it already has a SEDAR profile. This will take additional time and there may be unanticipated glitches with SEDAR given the fact that these filings will be so new.

Borden Ladner Gervais LLP has extensive experience assisting issuers, managers and exempt market dealers in understanding regulatory requirements as they relate to private placements and the exempt markets. We would be pleased to assist you in making the required SEDAR and other filings and to assist you in understanding the requirements and how they apply to you. Our securities law clerks and paralegals are experts on the complexities of SEDAR and can assist you in making the required exempt market regulatory filings, including if you wish to make the required regulatory filings on SEDAR on a voluntary basis before May 24, 2016.

Investment fund managers wishing to make filings of exempt trades via SEDAR on or before January 29, 2016 should contact their usual lawyer at BLG as soon as possible, so that we can work with you to ensure that the SEDAR and other filings are made on a timely basis.

Footnotes

¹ In Québec, any disclosure document delivered to subscribers when a distribution is made pursuant to an exemption must be filed with the AMF on SEDAR.

² British Columbia has its own exempt distribution form (Form 45-106F6 British Columbia Report of Exempt Distribution) which must be used for distributions in British Columbia unless an exemption is available. Under BC Instrument 45-533, exemptions fromForm 45-106F6 Requirements, exemptions from the requirement to use Form 45-106F6 are available for distributions by investment funds and for certain distributions made solely to "permitted clients".

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