NIN 98/27 - Venture Capital Pool Offerings Amendments to Local Policy Statement 3-02 [NIN - Rescinded]

The Commission is publishing amendments to Local Policy Statement 3-02 - Prospectus Filing Requirements ("LPS 3-02") to provide for the Vancouver Stock Exchange’s (the "Exchange") review of certain initial public offerings and to clarify the application of certain provisions of the Commission’s Local Policy Statements to offerings under the Exchange’s Venture Capital Pool ("VCP") program. These amendments are effective on July 2, 1998, when the Exchange’s review of IPOs and the VCP program come into effect.

The amendments add to LPS 3-02 a new section 7.7, to deal with Exchange review of IPO prospectuses, and a new Part 13, to deal with VCP filings.

Most of the requirements applicable to VCPs are set out in Policy 30 of the Exchange. In addition, except as explicitly exempted, a prospectus of a VCP is subject to all statutory requirements applicable to any other prospectus and to all policies of the Commission. VCPs and their advisers should refer to NIN#98/23 for a discussion of disclosure obligations and insider trading prohibitions in the context of material facts and material changes.

Part 13 of LPS 3-02 exempts a VCP that complies with VSE Policy 30 from several Commission policies including LPS 3-07.

Part 13 also varies the application of LPS 3-17 to VCPs. At the time of the initial public offering by a VCP, the underwriter is expected to comply with those parts of LPS 3-17 dealing with due diligence and due diligence reports but not those parts dealing with assessment or specialist’s reports. At the time of the VCP’s Qualifying Transaction (as defined in VSE Policy 30), the sponsor is expected to fully comply with LPS 3-17.

Section 13.6 explains that the Executive Director will generally not issue a receipt for a prospectus of an issuer complying with a similar program in another jurisdiction unless certain conditions are met.

DATED at Vancouver, British Columbia, on June 11, 1998

Douglas M. Hyndman
Chair

Ref: LPS 3-02
NIN#98/23

Effective July 2, 1998, Local Policy Statement 3-02 is amended as follows:

1. By adding section 7.7 and Part 13 to the Table of Contents

"7.7 Exchange Review of Certain IPO Prospectuses

13. VENTURE CAPITAL POOL FILING REQUIREMENTS

13.1 Definitions
13.2 Eligibility
13.3 Exemption from Certain Local Policy Statements
13.4 Variation of Interim Local Policy Statement 3-17 (Registrant Due Diligence)
13.5 Applicability of Other Requirements
13.6 Similar Programs in Other Jurisdictions"

2. By adding the following section 7.7:

7.7 Exchange Review of Certain IPO Prospectuses - If an issuer is filing a prospectus only in British Columbia to qualify its initial public offering and is seeking a listing only on the Exchange, the issuer must file all documents required by this Policy with both the Commission and the Exchange. The Exchange will conduct the primary review of the IPO prospectus filing and, if appropriate, recommend to the Executive Director the issuance of a final receipt. Issuers subject to this section should refer to the Exchange’s Policies with respect to additional Exchange filing requirements. The filing of a preliminary prospectus and final prospectus with the Exchange does not limit the discretion of the Executive Director to refuse to issue a preliminary or a final receipt.

3. By replacing "Qualifying Issuer" with "EOP Qualifying Issuer" throughout Part 12;

4. By adding the following Part 13:

"Part 13 Venture Capital Pool Filing Requirements

13.l Definitions - In this Part,

(a) "Exchange Policy 30" means Policy 30 of the Vancouver Stock Exchange;

(b) "Policies" means the National, Uniform and Local Policy Statements, and Notices and Interpretation Notes of the Commission, as amended from time to time;

(c) "Statutory Requirements" means the Act, Regulation, Commission Rules, Forms and decisions;

(d) "VCP" means a Venture Capital Pool Company;

(e) "VCP Program" means the Venture Capital Pool program established by the Exchange and described in Exchange Policy 30;

(f) "VCP Qualifying Issuer" means an issuer whose securities will be listed on the Exchange, that complies with Exchange Policy 30 and that will be classified as a VCP;.

13.2 Eligibility - Where a VCP Qualifying Issuer intends to file a VCP prospectus with the Commission and the Exchange, the VCP Qualifying Issuer must comply with the requirements of Exchange Policy 30 and file the documents required by this policy statement that are applicable to a VCP with the Commission.

13.3 Exemption from Certain Local Policy Statements - A VCP Qualifying Issuer is exempt from the following local policy statements of the Commission:

(a) LPS 3-07 (Policy Guidelines Respecting Trading Shares, Performance Shares and Other Consideration) - provided that the VCP Qualifying Issuer and its security holders agree to be bound by the escrow provisions contained in Exchange Policy 30;

(b) LPS 3-13 (Policy Guidelines for a Venture Capital Issuer Planning to Make a Distribution);

(c) LPS 3-21 (Share and Unit Offerings of Unlisted Issuers and Options and Warrants Available to Registrants Participating in Such Offerings); and

(d) LPS 3-31 (Incentive Options to Directors and Employees - Unlisted Issuers).

13.4 Variation of Interim Local Policy Statement 3-17 (Registrant Due Diligence) - At the time of the initial offering of securities to the public by a VCP Qualifying Issuer, a Junior Issuer Underwriter (as defined in LPS 3-17) is expected to comply with LPS 3-17, except for Parts 6 through 9. Particularly, the Junior Issuer Underwriter is expected to conduct reasonable investigations of management of the VCP Qualifying Issuer and the stage of any negotiations that the VCP Qualifying Issuer has entered into. At the time of the Qualifying Transaction (as defined in Exchange Policy 30), the Junior Issuer Underwriter is expected to fully comply with LPS 3-17 in the preparation of the Information Circular sent to shareholders of the VCP Qualifying Issuer in connection with a meeting to approve the Qualifying Transaction.

13.5 Applicability of Other Requirements - Except as exempted or varied in section 13.2 or 13.3 above, the Policies and Statutory Requirements apply to the filing of preliminary VCP Prospectuses and final VCP Prospectuses. A VCP Qualifying Issuer seeking relief from the application of any other Policy or Statutory Requirement is required to apply to the Executive Director or Commission, as appropriate.

13.6 Similar Programs in Other Jurisdictions - The VCP Program is established under an agreement between the Commission and the Exchange that provides for ongoing regulatory reviews by the Executive Director of the operation of the VCP Program by the Exchange. The VCP Program also contains a number of structural safeguards, including certain restrictions on non-arm’s length transactions that may not be included in similar programs in other jurisdictions. As a result, the Executive Director will generally not issue a receipt for a prospectus filed by an issuer complying with a similar program in another jurisdiction unless that program contains, or the issuer agrees to, similar structural safeguards and the Commission reaches an appropriate understanding with the securities commission and stock exchange in that jurisdiction regarding the operation and oversight of the program."

DATED at Vancouver, British Columbia on June 11, 1998.

Douglas M. Hyndman
Chair