Exemption From “Wrapper” Requirement for Foreign Offerings Into Canada May now Be Obtained by Exemption Application

Published by the Securities Regulation & Investment Products Group

Last week, we alerted you to rule amendments proposed by the Ontario Securities Commission that aim to eliminate the need to prepare a Canadian "wrapper" for offerings of foreign securities made in Ontario on a private placement basis to sophisticated investors. A wrapper is usually a short separate document that supplements a non-Canadian offering document. The wrapper contains prescribed information required by Canadian law for private placements of foreign securities into Canada.

On April 23, 2013, a discretionary exemption was granted by Canadian securities regulators to a group of applicants involved in private placements of foreign securities to Canada-based accredited investors that qualify as "permitted clients" under National Instrument 31-103 from the need to prepare separate Canadian wrappers. The exemption order is not available to investment fund offerings. The exemption order takes effect on June 22, 2013, and can be found on the Ontario Securities Commission website or by clicking here.

A 60-day window of opportunity now exists to make "tag-along" applications to obtain the same exemption.

The order permits applicants and their affiliates to participate as underwriters in this category of private placement of foreign securities without preparing a separate wrapper as long as:

  • prospective purchasers of the securities receive and acknowledge a standard-form notice regarding the exemption;
  • the disclosure required for offerings registered under U.S. federal securities laws is provided in each offering memorandum to disclose:
    • underwriter conflicts of interest between the applicant/affiliates and the issuer/selling securityholder; and
    • connected/related issuer relationships;
  • the applicant files the usual post-trade report of exempt distribution (Form 45-106F1) in electronic form; and
  • each month, the applicant provides to the Ontario Securities Commission a list of the distributions made by it or by its affiliates in reliance on the order, together with certain details regarding the offering that are largely duplicative of Form 45-106F1.

If you are interested in making such an application, please contact any of the members of our Securities Regulation & Investment Products Group.