BCN 2003/22 - Adoption of Amended Multilateral Instrument 45-103 Capital Raising Exemptions and Retention of $97,000 Exemption [BCN - Rescinded]

Introduction
The British Columbia Securities Commission is adopting amended Capital Raising Exemptions effective June 20, 2003.  The BCSC has implemented the amended exemptions with the securities regulatory authorities in Alberta, Manitoba, Newfoundland and Labrador, Northwest Territories, Nova Scotia, Nunavut, Prince Edward Island and Saskatchewan, through the following instruments:

• Multilateral Instrument 45-103 Capital Raising Exemptions (Revised MI 45-103)
• Companion Policy 45-103CP
• Form 45-103F1 Offering Memorandum for Non-Qualifying Issuers
• Form 45-103F2 Offering Memorandum for Qualifying Issuers
• Form 45-103F3 Risk Acknowledgement
• From 45-103F4 Report of Exempt Distribution
• Form 45-103F5 Risk Acknowledgement - Saskatchewan Close Personal Friends and Close Business Associates

Background
In spring 2002, the BCSC and the Alberta Securities Commission jointly adopted Multilateral Instrument 45-103 Capital Raising Exemptions (Original MI 45-103).  Subsequently, several other jurisdictions expressed interest in adopting the instrument.  We formed a committee of staff from each of the jurisdictions to draft Revised MI 45-103. 

Prior publications
We published Revised MI 45-103 and related documents for comment on September 20, 2002 (BCN 2002/39).  We received 26 written comment letters.  Based on the comments received, the securities regulatory authorities in Saskatchewan, Northwest Territories and Nunavut decided to remove most of the additional conditions and restrictions proposed in those jurisdictions to better harmonize the exemptions with the other jurisdictions.  In January 2003, the securities regulatory authority in Saskatchewan published a revised version of MI 45-103 for comment.  A summary of the comments and our responses is attached as Appendix A.

Summary of changes
We attach a summary of all the differences between Original MI 45-103 and Revised MI 45-103 as Appendix B.  The most significant changes are: 

• the participation of additional jurisdictions,
• the restriction on payment of commissions or finders’ fees to directors, officers, founders and control persons when distributing securities under the private issuer and family, friends and business associates exemptions,
• the requirement that charities receive investment advice to qualify as accredited investors,
• the inclusion of  “founders” in the list of permitted placees under the private issuer and family, friends and business associates exemptions,
• the introduction of a new form, Form 45-103F4 Report of Exempt Distribution, which replaces BC Form 45-902F for issuers reporting distributions under exemptions.  The new form is harmonized with all the jurisdictions adopting Revised MI 45-103,
• the introduction of a new form, Form 45-103F5 Risk Acknowledgement - Saskatchewan Close Personal Friends and Close Business Associates, to be used in Saskatchewan in connection with the family, friends and business associates exemption, and
• an option for mutual funds using the accredited investor exemption to file a Form 45-103F4 Report of Exempt Distribution annually instead of within 10 days of the distribution.

Forms and Transition Period
Effective June 20, 2003, the Executive Director is rescinding and specifying the following forms related to Revised MI 45-103 to reflect the changes discussed in Appendix B:

• Form 45-103F1 Offering Memorandum for Non-Qualifying Issuers
• Form 45-103F2 Offering Memorandum for Qualifying Issuers
• Form 45-103F3 Risk Acknowledgement

Effective June 20, 2003, the Executive Director specifies Form 45-103F4 Report of Exempt Distribution as the form required by section 139 of the Securities Rules and by section 7.2 of Revised MI 45-103.  The Executive Director is also rescinding BC Form 45-902F Report of Exempt Distribution, effective June 20, 2003. 

Effective June 20, 2003, the Executive Director specifies Form 45-103F5 Risk Acknowledgement - Saskatchewan Close Personal Friends and Close Business Associates as the form required by section 3.3(1) of Revised MI 45-103. 

We attach copies of the specified and respecified forms.  While the Executive Director’s rescission and respecification of these forms is effective June 20, 2003, the old forms can be used until September 19, 2003.

Sample offering memorandum
When we first published proposed MI 45-103 in September 2001 (BCN 2001/67), we also published a sample offering memorandum prepared by outside counsel for a fictitious company.  We are republishing the sample offering memorandum revised to reflect the changes made to Form 45-103F1.  The sample offering memorandum is short, concise and in plain language.  It does not look like a prospectus; nor does it contain the broad, detailed disclosure found in a prospectus.  The sample offering memorandum reflects what we expect offering memoranda to look like. 

Consequential amendments to other instruments
The Commission has revised the following instruments to ensure consistency with MI 45-103:

• BCI 13-501 Filing BC Form 45-103F4 (Formerly Form 45-902F) By Facsimile
• BCP 13-601 Required Forms and Index of Forms
• BCI 45-504 Trades to Trust Companies, Insurers and Portfolio Managers Outside British Columbia

$97,000 Exemption
We have decided to retain the $97,000 exemption (sections 45(2)(5) and 74(2)(4) of the Securities Act) indefinitely.  We anticipate harmonizing this exemption with other jurisdictions. 

Questions
You may refer questions to:

Leslie Rose
Senior Legal Counsel
Legal and Market Initiatives
British Columbia Securities Commission
(604) 899-6654
(800) 373-6393 (in B.C. and Alberta)
lrose@bcsc.bc.ca

June 20, 2003

Adrienne Salvail-Lopez   James Sasha Angus
Vice Chair                           Acting Executive Director

Ref:  Multilateral Instrument 45-103
Companion Policy 45-103CP
Form 45-103F1
Form 45-103F2
Form 45-103F3
From 45-103F4
Form 45-103F5
BCN 2002/39
BCI 13-501
BCP 13-601
BCI 45-504

This Notice may refer to other documents. These documents can be found at the B.C. Securities Commission public website at www.bcsc.bc.ca in the Commission Documents database or the Historical Documents database.