Canadian Securities Lawyers Scramble to Protect Foreign Private Placements

Rob Lando

Aug 22, 2012

By: Julius Melnitzer, Financial Post


Securities regulators in Canada have been scrambling to roll back the unintended effects of a new over-the-counter (OTC) issuer rule that threatens to dry up private placements of foreign securities in all provinces other than Ontario.

The new rule imposes burdensome Canadian “reporting issuer” obligations, including the filing of annual reports, mandatory audited statements, and restricted transfer rules, on any issuers who are not listed on a North American exchange and to whom the Financial Industry Regulatory Authority (FINRA) assigns a ticker symbol for OTC trading in the United States.

All Canadian securities regulators, other than the Ontario Securities Commission, signed on to the rule, which came into force on July 31. British Columbia, Alberta and Quebec, however, have already issued hastily-formulated exemption orders designed to mitigate its effect.


Although the rule was published for comment over a year ago, it caused almost no stir until early this summer when Rob Lando, a securities lawyer in Osler, Hoskin & Harcourt LLP’s New York office, twigged to its significance.

At Mr. Lando’s prompting, a working group composed of lawyers from  Blake, Cassels & Graydon LLP; Davies Ward Phillips Vineberg LLP; Goodmans LLP; McCarthy; Osler, Hoskin; and Stikeman Elliott LLP urged regulators in B.C., Quebec, Alberta to rectify the situation.

“It’s unfortunate that the discussions only started in early July, because the timing put constraints on what we could achieve,” Mr. Lando says.

The working group supplied B.C. regulators with a list of foreign exchanges whose issuers would be exempt from the rule. But the B.C. exemption order, issued in early August, did not include all the exchanges named by the lawyers. Alberta and Nova Scotia followed with substantially identical exemptions.

Quebec regulators, however, issued a broader exemption order.

“The Alberta, B.C. and Nova Scotia orders are tied to a limited list of foreign exchanges, but the Quebec order exempts all promotion activities aimed at investors that qualify as ‘permitted clients’ [basically institutional clients and dealers] under Canadian securities rules,” Mr. Lando says. “We believe that the Quebec exemption effectively solves the problem in that province.”

Mr. Lando adds that a second round of consultations is forthcoming.

“The Canadian Securities Administrators are committed to ironing out a final solution in a reasonable time frame,” he says. “We’re hoping it will resemble the Quebec order.”

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