BCN 2000/60 - Adoption of National Instrument 44-101 Short Form Prospectus Distributions and Related Documents and Rescission of National Policy No. 47 [BCN - Rescinded]
The Commission, together with other members of the Canadian Securities Administrators, has adopted National Instrument 44-101 Short Form Prospectus Distributions (the “National Instrument”), including related forms Form 44-101F1 AIF, Form 44-101F2 MD&A and Form 44-101F3 Short Form Prospectus, and Companion Policy 44-101CP (the “Policy”). The Commission has also made local implementing rule 44-801. In this notice, the National Instrument and the forms are referred to collectively as “NI 44-101”. NI 44-101 and the Policy, which together establish a regulatory regime for qualified issuers to make short form prospectus distributions, replace National Policy No. 47 Prompt Offering Qualification System.
The full texts of NI 44-101 (B.C. Reg 424/2000), the Policy and the implementing rule (B.C. Reg 427/2000) are attached to this notice. NI 44-101, the Policy and the implementing rule will be effective on December 31, 2000.
NI 44-101 is an initiative of the CSA and has been or will be adopted as a rule in each of British Columbia, Alberta, Manitoba, Ontario and Nova Scotia, as a commission regulation in Saskatchewan and as a policy in all other jurisdictions represented by the CSA. The Policy is expected to be implemented as a policy in all CSA jurisdictions by December 31, 2000.
Effective December 31, 2000, NP 47 is rescinded and superseded by NI 44-101 and the Policy. The Commission has also revoked BOR#93/1 and BOR#96/16 effective December 31, 2000 pursuant to the revocation order attached to this notice. These blanket orders were revoked because the implementing rule now provides the relief they formerly provided. In addition, NIN#93/12 Restriction applicable to the solicitation of expressions of interest under BOR#91/7 and BOR#93/1 is no longer effective as of December 31, 2000.
Earlier versions of NI 44-101 and the Policy were published for comment on February 20, 19981, July 23, 1999,2and December 17, 19993. The CSA developed a detailed Summary of Comments Received and Responses of the CSA for the comment periods following the February 1998 and July 1999 publications, which were referred to in NIN#99/28 and NIN#99/49 respectively.
Comments on the drafts published in December 1999 were received from seven commenters. Details of the comments received, the responses of the CSA to those comments and specific changes made to the last published drafts may be found in the Ontario Securities Commission notice dated October 13, 2000 relating to NI 44-101, a copy of which is available on the OSC’s web site at www.osc.gov.on.ca.
In addition to considering public comments, the CSA also considered proposed OSC Rule 41-501 General Prospectus Requirements, which was published for comment by the OSC on May 2, 1997, July 23, 1999 and December 17, 1999. The OSC has now finalized this rule which, subject to Ministerial approval, will also become effective on December 31, 2000. Given the extensive similarities between the subject matter of NI 44-101 and the proposed OSC rule, many of the comments received by the OSC on the latter and the OSC’s responses to those comments are also relevant to NI 44-101. A list of commenters on the December 17, 1999 version of the proposed OSC rule, a summary of their comments and the OSC’s responses are contained in the OSC notice relating to NI 44-101.
The implementing rule was published for comment with NIN#98/11. No comments were received on this rule during the public comment period. It has been expanded to provide more extensive relief than was contemplated in the original published version, but these amendments do not change the rule in a material way.
The Commission provided advance notice of NI 44-101, the Policy and the implementing rule on October 12, 20004. A number of drafting changes have been made to the implementing rule since it was published for information purposes with that notice, but, again, the amendments do not materially change the rule.
Substance and Purpose
NI 44-101 prescribes conditions for the use of a short form prospectus to distribute securities to the public. It, together with the Policy, replaces NP 47, which has governed the use of a short form prospectus in CSA jurisdictions other than Québec since 1993.
Central to the short form prospectus distribution system (referred to in NP 47 as the “POP” or “prompt offering qualification” system) is the use of a short form prospectus, which incorporates by reference, rather than restates, information contained in the issuer's annual information form, financial statements and other continuous disclosure documents. The system, and the more concise offering document, were designed to enable qualifying issuers to respond more quickly to market opportunities without diminishing the information and protection available to investors.
The CSA are of the view that the regulatory regime established by NP 47 has operated efficiently and effectively. The CSA’s broader project of reformulating policies and other instruments has, however, provided an opportunity to reconsider and update substantive and administrative elements of the short form prospectus distribution system. NI 44-101 and the Policy largely preserve the substance of NP 47 but are intended to better serve the CSA’s original objectives by clarifying and simplifying important aspects of the system, broadening access and modifying disclosure and other requirements in a manner consistent with other developments and initiatives of the CSA and member jurisdictions.
The local implementing rule provides to issuers that comply with NI 44-101 relief from certain provisions of the Securities Act and the Securities Rules. The implementing rule replaces BOR#93/1.
Summary of Changes from NP 47
NI 44-101 and the Policy carry forward the regime established under NP 47 with several enhancements and some changes. The most significant changes include the following:
- The timing of the application of the public float test has been changed so that it may be satisfied on any date within 60 days before the filing of the preliminary short form prospectus.
- The system has been expanded to provide expressly for distributions of cash settled derivatives and asset-backed securities by special purpose issuers. Also, eligible offerings now include any non-convertible security with an approved rating rather than only non-convertible debt with an approved rating.
- The requirement that a guarantor have approved rating securities outstanding and the requirement that the guaranteed securities being distributed have an approved rating no longer apply where the guarantor has a public float of $75 million.
- The treatment of renewal AIFs has been revised to provide that a renewal AIF will be subject to regulatory review without a regulator issuing a notice of review within 10 days of filing, as is the current practice.
- Three alternative tests have been introduced for purposes of determining whether an acquisition of a business by an issuer is “significant”. These tests are substantially the same as the tests applied under US securities laws. Also, a “sliding scale” approach similar to the US approach has been adopted with respect to business acquisition disclosure. The effect of this approach is that the more significant an acquisition is to an issuer, the more historical information about the acquired business must be disclosed.
- The three tests for determining the significance of an acquisition may be applied at two points in time: first, at the time of acquisition and, again, at the time of filing the preliminary short form prospectus. Testing at the second point in time is optional for the issuer and may result in an acquisition not being significant, or having lesser significance, as a result of the issuer’s growth since the date of acquisition.
- To ensure that incorporated financial information is current, a requirement has been added that an issuer doing a short form prospectus distribution more than 90 days after the end of its most recently completed financial year must have filed financial statements for that year.
Application for Qualification as Reporting Issuer
An issuer that is not a reporting issuer under British Columbia law but that wishes to be designated as such in order to use the National Instrument may apply for an order under section 1(1) of the Securities Act once its initial AIF is accepted, provided all continuous disclosure documents referred to in subparagraph 2.2(1)(a)(ii) of the National Instrument have been filed with the Executive Director.
Under NI 44-101 and the Policy, the existence of a “current AIF” is a condition of qualification to file a short form prospectus. Part 1 of the National Instrument defines the term to include an AIF, filed before December 31, 2000, that would constitute a “Current AIF” under NP 47 if that instrument were applicable at the time the condition is being considered.
Under Section 2.1(4) of the National Instrument, if an issuer filed and obtained a receipt for a final short form prospectus under NP 47 before December 31, 2000, the prospectus requirement as it relates to form and content does not apply to the related distribution for one year from the date of the receipt.
Related National Instruments
Concurrent with the adoption of NI 44-101 and the Policy, the Commission has also adopted National Instrument 44-102 Shelf Distributions, Companion Policy 44-102CP and a local implementing rule. BCN#2000/61 provides additional information.
DATED at Vancouver, British Columbia, on December 20, 2000.
Douglas M. Hyndman
Ref: NP 47 OSC Rule 41-501
BOR#96/16 Securities Act, s. 1(1)
NIN#93/12 NI 44-102
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.
Revocation of BOR#93/1, BOR#96/16 and BOR#91/2
The Commission orders that BOR#93/1, BOR#96/16 and BOR#91/2 are revoked effective December 31, 2000.
DATED at Vancouver, British Columbia, on December 20, 2000.
Douglas M. Hyndman
(This part for administrative purposes only and is not part of the Order)
Authority under which Order is made:
Act and sections:- Securities Act, section 171