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Friday, September 28, 2018

On July 19, 2018, the Canadian Securities Administrators (“CSA”) published amendments (the “Amendments”) to National Instrument 45-106 Prospectus Exemptions and Companion Policy 45-106CP Prospectus Exemptions (collectively, the “Instruments”). The Amendments introduce changes to the Canadian exempt distribution trade reporting process in an effort to address, among other things, the unintended consequences of certain amendments made to the Instruments in June 2016 (the “Previous Amendments”).

Following completion of certain prospectus exempt distributions, underwriters and issuers must file Form 45-106F1 Report of Exempt Distribution (“Form 45-106F1”) with applicable securities regulators to provide disclosure with respect to the distribution. The Previous Amendments required the inclusion of significantly more information in Form 45-106F1 than had been previously required, as described in our prior update. Concerns were expressed by foreign securities dealers conducting offerings into Canada and Canadian institutional investors about the unintended effects of the certification requirement and other information requirements in Form 45-106F1. 

It is hoped that the Amendments will provide greater clarity and flexibility with respect to the certification requirement of Form 45-106F1 and streamline certain information requirements to assist filers in completing Form 45-106F1.

Provided all the requisite approvals are obtained, the Amendments will come into force on October 5, 2018 and all issuers and underwriters will be required to use the new Form 45-106F1 for any filings submitted on or after such date.



Under the existing Form 45-106F1, an officer or director of the issuer or the securities dealer acting as an underwriter or initial purchaser, must certify the contents of the report. This certification may not be delegated to an agent or other individual preparing the report on behalf of the issuer or underwriter.

Pursuant to the Amendments, an individual certifying Form 45-106F1 may be an agent doing so on behalf of an issuer or underwriter. Law firms and other filing agents who commonly prepare and file Form 45-106F1 will be permitted to sign and certify such report on behalf of the issuer, if authorized to do so by an officer or director of the issuer. Furthermore, the information being certified will be required to be “true and, to the extent required, complete” as opposed to being “true”, as set out under the existing Form 45-106F1.

North American Industry Classification Standard (NAICS) Code

Currently, Form 45-106F1 requires that the issuer’s six-digit NAICS industry code be included. Concerns were expressed by many stakeholders in response to the Previous Amendments that choosing a NAICS code required a significant amount of judgment and may result in inconsistencies of classification among issuers. While the CSA chose to maintain the requirement to provide a NAICS code under the Amendments, the new Form 45-106F1 requires filers to provide a NAICS code that in their “reasonable judgement” most closely corresponds to the issuer’s primary business activity.

Public Listing Status

Form 45-106F1 currently requires a non-investment fund issuer to list the names of all exchanges on which its securities trade. Concerns were expressed that such disclosure was burdensome to some issuers who have different types of securities listed on exchanges globally. Pursuant to the Amendments, a non-investment fund issuer will only need to identify the exchange on which its equity securities primarily trade. Such an issuer will no longer be required to provide any information pertaining to any exchange(s) on which its debt securities trade.

Size of Assets

The existing Form 45-106F1 requires a filer to select the size of the issuer’s assets for its most recent financial year-end. This presented some confusion and issues for those issuers who may have completed a financial year-end but had not yet prepared their annual financial statements. The Amendments attempt to clarify this requirement by requiring filers to select the size of the issuer’s assets based on its most recently available annual financial statements. If the issuer has not prepared financial statements for its first financial year, the filer is required to provide the size of the issuer’s assets at the distribution end date.

Distribution by Co-issuers

The Amendments streamline the existing requirement that a Form 45-106F1 be filed on behalf of each issuer where two or more issuers distribute a single security. An issuer or underwriter will not be required to file a Form 45-106F1 for a particular distribution of a security if another issuer or underwriter has already filed a Form 45-106F1 for the distribution of the same security. In such a scenario, the filer of the report will be required to identify the co-issuer(s) of the security. 

Cryptocurrencies and Cryptocurrency-related Assets

Under the new Form 45-106F1, a filer must indicate if a non-investment fund issuer’s primary business is to invest all or substantially all of its assets in cryptoassets. In the case of an investment fund, a filer must identify where the type of investment fund that most accurately identifies an investment fund issuer is a cryptoasset investment fund. The purpose of these changes is to allow the CSA to more accurately monitor issuers that invest in cryptocurrencies and cryptocurrency-related assets, and to identify distributions of securities involving digital coins or tokens.

If you have any questions with respect to the matters discussed above, please contact Ragu Anantharajah at, Niall Sweeney at or any other member of our Corporate Finance and Securities practice group.

This update is intended as a summary only and should not be regarded or relied upon as advice to any specific client or regarding any specific situation.