LPS 3-06 - Prospectus Guidelines for the Mortgage Investment Issuer [Rescinded]
| Published Date: | 1987-01-16 |
|---|---|
| Effective Date: | 1987-02-01 |
| Rescinded Date: | 2001-01-31 |
1.0 Implementation
1.1 This Local Policy Statement has been revised solely to conform with the Securities Act S.B.C. 1985 c.83 and the Regulations thereto. Other than consequential amendments, there have been no changes of a substantive nature tothis policy. It becomes effective upon proclamation of the Securities Act on February 1, 1987.
2.0 Application
This Local Policy Statement does not apply to:
2.1 securities issued where the trade is exempt from registration under Section 55 of the Act
2.2 the issuance of a "pass through" security to the public, giving each purchaser an undivided interest in the mortgage collateral
2.3 the issuance of securities to raise funds for the purpose of developing and managing a specific real estate project such as a shopping centre or hotel.
3.0 Guidelines
3.1 The owners' or shareholders' equity of the issuer shall on conclusion of any public offering be not less than $250,000, provided that if debt securities are offered to the public, the owners' or shareholders' equity shall be not less than $500,000.
3.2 Where an issue of a mortgage-backed debt security provides for other than fixed payments of interest and principal and a stated maturity, the issuer shall satisfy the Superintendent that the variable rates and terms provided are consistent with the variable rates and terms in the mortgages held as collateral.
3.3 Subject to paragraphs 3.4 and 3.5, the debt of the issuer shall not exceed three times the equity capital plus retained earnings and realized capital gains less deficit and capital losses whether realized or not.
3.4 When and so long as at least 50% of the book value of the total assets of the issuer consists of:
3.4.1 National Housing Act ("NHA") mortgages;
3.4.2 conventional first mortgage loans whose loan to appraised value of the real estate securing the loan ratio does not exceed 75% unless the excess is insured by an insurance company registered lender the Canadian and British Insurance Company Act (Canada), the Foreign Insurance Companies Act (Canada) or the Insurance Act (B.C.); and
3.4.3 cash, cash items and obligations of Canadian municipal, provincial and federal governments and government agencies;
in the discretion of management the debt of the issuer may be increased so as not to exceed five times the equity capital plus retained earnings and realized capital gains less deficit and capital losses whether realized or not.
3.5 When and so long as at least 90% of the book value of the total assets of the issuer consists of:
3.5.1 National Housing Act ("NHA") mortgages;
3.5.2 conventional first mortgage loans on single-family dwellings (including residential condominiums) and duplexes, whose loan to appraised value of the real estate securing the loan ratio does not exceed 75% unless the excess is insured by an insurance company registered lender the Canadian and British Insurance Company Act (Canada), the Foreign Insurance Companies Act (Canada) or the Insurance Act (B.C.); and
3.5.3 cash, cash items and obligations of Canadian municipal, provincial and federal governments and government agencies; in the discretion of management the debt of the issuer may be increased so as not to exceed ten times the equity capital plus retained earnings and realized capital gains less deficit and capital losses whether realized or not.
3.6 At least 75% of the book value of the issuers' assets must comprise mortgages secured on real property and money either on hand or on deposit with a bank, trust company or credit union.
3.7 Where there is an intention to qualify a mortgage investment company as a "Mortgage Investment Corporation" under the Income Tax Act (Canada) the effect of such qualification shall be disclosed in the prospectus. If the intention is not so to qualify, a statement to that effect shall be made in the prospectus.
3.8 Debt securities of the issuer should be issued under a trust deed or other instrument running in favour of a trustee.
4.0 Prohibitions and Restrictions
4.1 The issuer shall not participate in mining, oil or like ventures or acquire real property for development purposes (but not including development mortgage loans).
4.2 The issuer shall not invest in the securities of other real estate or mortgage investment issuers save for securities exempt from registration under Section 32(a) and (b) of the Act.
4.3 The issuer shall not invest in the securities of any other issuer either controlled, directly or indirectly by any of the directors or other insiders of the issuer or having more than 10% of its issued and outstanding voting shares controlled, directly or indirectly, by any of the directors or other insiders of the issuer.
4.4 No issuer shall invest more than 10% of the book value of its net tangible assets in an entity which is controlled, directly or indirectly, by any one person or group of persons.
5.0 Disclosure on the Canada Deposit Insurance Corporation
5.1 Where the issuer is not a member institution of Canada Deposit Insurance Corporation and/or the debt securities offered in the prospectus are not insured through Canada Deposit Insurance Corporation, the face page of the prospectus shall contain the relevant parts of the following disclosure:
"..... is not a member institution of the Canada Deposit Insurance Corporation and the securities offered in this prospectus are not insured against loss through the Canada Deposit Insurance Corporation."
5.2 The issuer shall disclose in the prospectus any alternative insurance against loss which may apply to the debt securities offered.
DATED at Vancouver, B.C., this 1st day of February, 1987.
Jill Bodkin
Chairman
B.C. Securities Commission