BCN 2012/10 - Notice of Adoption of Multilateral Instrument 51-105 Issuers Quoted in the U.S. Over-the-Counter Markets [BCN - Lapsed]

Concurrently Published:

• 11-203 - Process for Exemptive Relief Applications in Multiple Jurisdictions [NP Blackline Amendment Advance Notice - Lapsed]
• 51-105 - Issuers Quoted in the U.S. Over-the-Counter Markets [MI Advance Notice - Lapsed]
• 51-105CP - Issuers Quoted in the U.S. Over-the-Counter Markets [CP Advance Notice - Lapsed]
• 51-105F1 - Notice – OTC Issuer Ceases to be an OTC Reporting Issuer [F Advance Notice - Lapsed]
• 51-105F2 - Notice of Promotional Activities [F Advance Notice - Lapsed]
• 51-105F3A - Personal Information Form and Authorization of Indirect Collection, Use and Disclosure of Personal Information [F Advance Notice - Lapsed]
• 51-105F3B - Personal Information Form and Authorization of Indirect Collection, Use and Disclosure of Personal Information [F Advance Notice - Lapsed]
• 51-105F4 - Notice – Issuer Ceases to be an OTC Reporting Issuer [F Advance Notice - Lapsed]

CSA Notice
We attach the Canadian Securities Administrators notice announcing the adoption of Multilateral Instrument 51-105 Issuers Quoted in the U.S. Over-the-Counter Markets and consequential amendments, effective July 31, 2012.

Background
BC Instrument 51-509 Issuers Quoted in the U.S. Over-the-Counter Markets designates an issuer as reporting in BC if,

• the issuer’s securities are quoted only on a U.S. OTC market, and
• the issuer has a significant connection to BC.

With the exception of the Ontario Securities Commission, the Canadian Securities Administrators intend to adopt the BC rule, with the changes we identify below, as Multilateral Instrument 51-105 Issuers Quoted in the U.S. Over-the-Counter Markets.

In British Columbia, we will revoke BCI 51-509, and adopt MI 51-105.  In doing so, we will streamline compliance, improve investor protection, and make related amendments to the forms, companion policy and local instruments and policies.  These changes to the BC rule that will be reflected in MI 51-105 are not significant and are briefly described below.

Streamlining Compliance

1. Securities for services
BCI 51-509 restricts an OTC reporting issuer from using the securities for debt prospectus exemption.  In MI 51-105, we will permit OTC reporting issuers to use the exemption when issuing shares for services to related parties provided the consideration is reasonable, the debt is bona fide, and the price is at least market price.

2. Use of SEC Form 8-K as a material change report
Under BCI 51-509, an OTC reporting issuer must file a copy of its news release and a material change report.  In MI 51-105, we will permit the issuer to file its SEC Form 8-K Current Report instead of a material change report.

3. Resale of seed stock exemptions
In BCI 51-509, we provide an exemption for the resale of seed stock. In MI 51-105, we will add resale exemptions for corporate transactions, including bids, amalgamations, reorganizations and dissolutions.

4. Addition of shorter form of Personal Information Form
BCI 51-509 requires a person to file a personal information form.  In MI 51-105, we will permit a person to file a shorter form of personal information form.   Specifically, if a person has filed a personal information form with the Commission, the Toronto Stock Exchange or TSX Venture Exchange and the information has not changed, the person may instead file Form 51-105F3B Personal Information Form and Authorization of Indirect Collection, Use and Disclosure of Personal Information.

5. Definition of promotional activities
BCI 51-509 relies on the definition in the Securities Act (British Columbia) of investor relations activities. In MI 51-105, we will include a similar definition of those activities.

6. Alpha Exchange
In MI 51-105, we will indicate that issuers listed on the Alpha Exchange will not be subject to MI 51-105.

Improving Investor Protection

7. Insider reports
In BCI 51-509, insiders of OTC reporting issuers may comply with their obligations to file insider reports by complying with their insider reporting obligations under U.S. federal securities law.  However, insiders of some OTC issuers are not required to file insider reports under U.S. federal securities law.  In MI 51-105, we will add a provision that requires these insiders to file insider reports in Canada.

8. Certification requirements
In MI 51-105, we will require OTC reporting issuers to file the same certificates as venture issuers for annual and interim filings.

Related amendments

In BCI 51-509, the forms are not part of the rule. The executive director specified the forms under the Securities Act. We will rescind the BCI 51-509 forms because they will be part of MI 51-105.

We will amend

• BC Instrument 11-502 Voluntary Surrender of Reporting Issuer Status and its companion policy to change the references in those documents to Multilateral Instrument 51-105 Issuers Quoted in the U.S. Over-the-Counter Markets, and
• BC Policy 13-601 Required Forms to state that MI 51-105 sets out the personal information required to be filed in connection with OTC reporting issuers.

We will revoke

• BC Instrument 51-509 Issuers Quoted in the U.S. Over-the-Counter Markets, and its companion policy
• BC Instrument 52-511 Relief for OTC Reporting Issuers from Certain Certification Requirements, and
• BC Instrument 71-503 Material Change Reporting by OTC reporting issuers

May 10, 2012

Brenda M. Leong
Chair