CSA Provides Guidance on Disclosure Requirements related to Prospectus Exemptions

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On April 26, 2012, the Canadian Securities Administrators (“CSA”) published two staff notices addressing disclosure requirements related to the prospectus exemptions found under National Instrument 45-106 – Prospectus and Registration Exemptions (“NI 45-106”). The notices are aimed at improving compliance by issuers, underwriters and their advisors and assisting market participants in avoiding deficiencies in their NI 45-106-related filings.

In CSA Staff Notice 45-308 – Guidance for Preparing and Filing Reports of Exempt Distribution, the CSA provides guidance relating to reports of exempt distribution filed in accordance with Form 45-106F1. Specifically, the notice highlights a number of issues observed by the CSA and clarifies requirements in respect of such topics as filing deadlines, filing fees, improper reliance on unavailable exemptions, failure to include a complete list of purchasers and failure to disclose all commissions and finder’s fees.

In Multilateral CSA Staff Notice 45-309 – Guidance for Preparing and Filing an Offering Memorandum, the CSA addresses compliance with the rules relating to offering memoranda (“OM”). The CSA highlights that issuers must ensure that an OM is in the correct form, does not contain any misrepresentations and provides sufficient information to enable a prospective purchaser to make an informed investment decision. Issues identified by the CSA include the failure to update the OM when distributions are ongoing, using an incorrect form of update and inadequately disclosing the issuer’s business. While the OM exemption is not available in Ontario, the guidance in Staff Notice 45-309 applies to Ontario-based issuers distributing securities in other jurisdictions under the OM exemption.

Each Notice confirms that responsibility for compliance with NI 45-106 rests with the issuer, that the use of a prospectus exemption under NI 45-106 is subject to regulatory oversight and monitoring and that identified non-compliance may result in corrective action where appropriate.