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Amendments to National Instrument 45-106: Prospectus and Registration Exemptions – Offering Memorandum Exemption [Completed]

Issued: October 29, 2015

Transitional provisions:

The final amendments will come into force in Ontario on January 13, 2016 and in Alberta, New Brunswick, Nova Scotia, Québec and Saskatchewan on April 30, 2016.

Last updated:

October 2015

Overview

On March 20, 2014, the CSA issued for public comment pro­pos­als to amend the prospectus ex-emption in respect of an offering memorandum (the OM Exemption).  Under this proposal, cer­tain provinces (Al­berta, Que­bec, Saskatchewan, and New Brunswick) pro­pose to make amend­ments to Na­tional In­stru­ment 45-106 Prospec­tus and Reg­is­tra­tion Ex­emp­tions, re­lat­ing to the of­fer­ing mem­o­ran­dum ex­emp­tion (OM Ex­emp­tion). The OM Ex­emp­tion is an ex­emp­tion de­signed to fa­cil­i­tate early stage and small busi­ness fi­nanc­ing.

On March 20, 2014, the Ontario Securities Commission (OSC) also pub­lished for com­ment, un­der a sep­a­rate lo­cal no­tice, a similar proposal re­lat­ing to a new OM Ex­emp­tion (which is similar in particular to the amendments proposed by New Brunswick). For further details, refer to this OSC Project.

On October 29, 2015, Ontario, Alberta, Quebec, Saskatchewan, New Brunswick and Nova Scotia finalized these proposals in a final common form, which includes: (i) requiring that non-reporting issuers provide to investors (a) audited annual financial statements; (b) an annual notice on how the proceeds raised under the OM exemption have been used; and (c) in New Brunswick, Nova Scotia and Ontario, notice in the event of a discontinuation of the issuer's business, a change in the issuer's industry or a change of control of the issuer; (d) requiring that marketing materials be incorporated by reference into the offering memorandum to provide investors with the same rights of action in respect of all disclosure made under the OM exemption in the event of a misrepresentation; and (e) imposing additional investment limits in respect of both eligible (i.e., investors who meet certain income or asset thresholds) and non-eligible investors that are individuals to limit the risks associated with an investment in securities acquired under the OM exemption.

The following investment limits will apply to all securities acquired under the revised OM exemption: (a) in the case of a non-eligible investor that is an individual, the acquisition cost of all securities acquired by the purchaser under the OM exemption in the preceding 12 months cannot exceed $10,000; (b) in the case of an eligible investor that is an individual, the acquisition cost of all securities acquired by the purchaser under the OM exemption in the preceding 12 months cannot exceed $30,000; and (c) in the case of an eligible investor that is an individual and that receives advice from a portfolio manager, investment dealer or exempt market dealer that the investment above $30,000 is suitable, the acquisition cost of all securities acquired by the purchaser under the OM exemption in the preceding 12 months cannot exceed $100,000. 

Recent activities

October 2015

On October 29, 2015, several securities regulatory authorities published Multilateral CSA Notice of Amendments to National Instrument 45-106 Prospectus Exemptions Relating to the Offering Memorandum Exemption. The amendments will introduce an offering memorandum prospectus exemption in Ontario and will modify the existing offering memorandum exemption in Alberta, New Brunswick, Nova Scotia, Québec and Saskatchewan to strengthen investor protection. As a result of the amendments, the offering memorandum exemption will now be available in all jurisdictions of Canada.

The following are some of the key investor protection measures included in the offering memorandum exemption:

  • Non-reporting issuers will be required to, among other measures, provide investors with audited annual financial statements and an annual notice describing how the proceeds raised under the offering memorandum exemption were used.
  • Any marketing materials will be required to be incorporated by reference in the offering memorandum so that they are subject to the same liability as the disclosure provided in the offering memorandum in the event of a misrepresentation.
  • Individual investors relying on the offering memorandum exemption will be subject to investment limits in most cases.
  • All investors will be required to sign a risk acknowledgement form.

The offering memorandum exemption was designed to facilitate capital-raising by allowing issuers to solicit investments from a wider range of investors than they would be able to under other prospectus exemptions, provided that certain conditions are met.

March 2014

On March 20, 2014, the CSA is­sued for pub­lic com­ment pro­pos­als to amend the prospec­tus ex­emp­tion in re­spect of an of­fer­ing mem­o­ran­dum (OM Ex­emp­tion).

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