NIN 96/34 - Proposed Rescission Of National Policy No. 33 Financing Of Film Productions [NIN - Rescinded]

Proposed Rescission

The Canadian Securities Administrators (the "CSA") are proposing to rescind National Policy Statement No. 33 ("NP 33") - Financing of Film Productions.

Reasons for Proposed Rescission

NP 33 originally came into force on December 6, 1981 in response to perceived shortcomings in the public financing of certified feature film productions and certified short film productions that were intended to flow through to investors a capital cost allowance tax incentive available under the Income Tax Act (Canada). A revised NP 33 became effective January 1, 1991. The revised NP 33 reflected the experience of the CSA with respect to NP 33 and addressed changes in the securities legislation of various jurisdictions.

The tax incentive has been eliminated for all film financings completed after December 31, 1995 (subject to limited extensions if principal photography is completed before March 1, 1996). A new Canadian film tax credit has been announced as a replacement. A key difference of the new incentive is that the credit is only available to a corporation that produces and owns the film production; the credit may not be flowed out to investors.

NP 33 is predicated primarily on the flow-through nature of the previous incentive. In light of the elimination of this aspect of the tax incentive and the uncertainty of what structure film financings relying on the new incentive will take in the future, the CSA have decided that it is not appropriate to retain NP 33. The CSA will monitor new issuances of securities involving film financings and will reconsider the need for a replacement national policy or national instrument governing film financings as circumstances warrant.

NP 33 also failed to address the specific characteristics of the film industry in British Columbia. To a large extent, this has been as a result of British Columbia's Venture Capital Program under the Small Business Venture Capital Act, S.B.C. 1985, c. 56. This program has been used to finance a number of film productions, however, it imposes a limit on the amount that can be invested in eligible small businesses by a Venture Capital Corporation. In addition, the program encourages investment in a business rather than a project. In the film context, this would involve production of a number of films rather than a single film project. NP 33, however, is drafted on the assumption that financing will be raised for a single film. It has been the practice of the British Columbia Securities Commission to waive certain sections of NP 33 where the proposed offering met other Commission requirements.

Unpublished Materials

In coming to this decision, the CSA have not relied on any significant unpublished study, report, decision or other written materials.

Comments

Interested parties are invited to make written submission with respect to the proposed rescission. Submission received by December 5, 1996 will be considered.

Submissions should be addressed to all of the Canadian securities regulatory authorities listed below in care of the Ontario Securities Commission, in duplicate, as indicated below:

British Columbia Securities Commission
Alberta Securities Commission
Saskatchewan Securities Commission
The Manitoba Securities Commission
Ontario Securities Commission
Office of the Administrator, New Brunswick
Registrar of Securities, Prince Edward Island
Nova Scotia Securities Commission
Securities Commission of Newfoundland
Securities Registry, Government of the Northwest Territories
Registrar of Securities, Government of the Yukon Territory

c/o Daniel P. Iggers, Secretary
Ontario Securities Commission
20 Queen Street West
Suite 800, Box 55
Toronto, Ontario M5H 3S8

Submissions should also be addressed to the Commission des valeurs mobilières du Québec as follows:

Jacques Labelle, General Secretary
Commission des valeurs mobilières du Québec
800 Victoria Station
Stock Exchange Tower
P.O. Box 246, 17th Floor
Montréal, Québec H4Z 1G3

A diskette containing the submissions (in DOS or Windows format, preferably WordPerfect) should also be submitted. As securities legislation in certain provinces requires that a summary of written comments received during the comment period be published, confidentiality of submissions received cannot be maintained.

DATED at Vancouver, British Columbia, on October 1, 1996.

Douglas M. Hyndman
Chair