The British Columbia Securities Commission published a blanket order, B.C. Instrument 51-512 Certain Private Placements, on March 23, 2015 which expands existing exemptions in B.C. from the application of Multilateral Instrument 51-105 Issuers Quoted in the US Over-the-Counter Markets.
As we've previously discussed MI 51-105 can subject issuers who carry out private placements to Canadian public company obligations. Adopted by every province other than Ontario, MI 51-105 is intended to discourage the manufacture and sale of OTC-quoted shell companies that can be used to facilitate abusive market practices.
In response to the concern that MI 51-105 would have the unintended effect of subjecting major well-established issuers that trade OTC in the U.S. to Canadian public company reporting obligations, regulators in almost all Canadian jurisdictions that adopted MI 51-105 have issued blanket orders to exempt certain issuers from the application of the instrument (links to the orders are available on our Resources page).
B.C.'s local instrument 51-512 replaces a previously issued B.C. blanket order, B.C. local instrument 51-511, that exempted the application of MI 51-105 to issuers with a primary listing on certain specified stock exchanges or those distributing only non-convertible debt securities.
While preserving the exemptions from the previous local instrument, B.C. local instrument 51-512, has also adopted an investor-based exemption for issuers that limit their promotional activities to "permitted clients" under NI 31-103 (essentially, institutional accredited investors). In doing so, B.C.'s exemption is now more closely in line with blanket orders adopted in Quebec on July 31, 2012 and Alberta on November 20, 2014.
Also similar to the Alberta order, B.C. instrument 51-512 exempts firms a disclosure requirement under s. 2.1(1) of NI 33-105 Underwriting Conflicts where the distribution is made to "permitted clients" purchasing under a prospectus exemption. Under section 2.1(1) of NI 33-105, firms are prohibited from acting either as an underwriter in a distribution of securities in which it is the issuer or selling securityholder, or as a direct underwriter in a distribution of securities of or by a connected issuer or a related issuer of the specified firm registrant, unless the distribution is made under a prospectus or another document containing certain specified disclosure.
Ultimately, the order is intended to be an interim measure while the BCSC continues to work with other members of the CSA to develop proposals to improve "sophisticated investors' access" to foreign issuers' securities.
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