BCN 2000/61 - Adoption of National Instrument 44-102 Shelf Distributions and Related Documents and Rescission of National Policy No. 44 [BCN - Rescinded]
The Commission, together with other members of the Canadian Securities Administrators, has adopted National Instrument 44-102 Shelf Distributions (“NI 44-102”) and Companion Policy 44-102CP (the “Policy”). The Commission has also made local implementing rule 44-802. NI 44-102 and the Policy establish a regulatory regime for shelf prospectus distributions. Together with National Instrument 44-103 Post-Receipt Pricing, these documents replace National Policy No. 44 Rules for Shelf Prospectus Offerings and for Pricing Offerings After the Final Prospectus is Receipted.
The full texts of NI 44-102 (B.C. Reg 425/2000), the Policy and the implementing rule (B.C. Reg 428/2000) are attached to this notice. NI 44-102, the Policy and the implementing rule will be effective on December 31, 2000.
NI 44-102 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Effective December 31, 2000, NP 44 is rescinded and superseded by NI 44-102, the Policy, National Instrument 44-103 and Companion Policy 44-103CP. The Commission has also revoked BOR#91/2 effective December 31, 2000 pursuant to the revocation order attached to BCN#2000/60.
The Commission, in conjunction with other members of the CSA, published drafts of NI 44-102, the Policy and the implementing rule for comment on October 2, 19981. The CSA received one comment letter on NI 44-102. Details of the comments received and the responses of the CSA to those comments may be found in the Ontario Securities Commission notice dated October 13, 2000 relating to NI 44-102, a copy of which is available on the OSC’s web site at www.osc.gov.on.ca.
The Commission provided advance notice of NI 44-102, the Policy and the implementing rule on October 12, 20002. Minor drafting changes have been made to the implementing rule since it was published for information purposes with that notice.
Substance and Purpose
NI 44-102, the Policy and the implementing rule establish a system for the distribution of securities using a shelf prospectus that is available only to issuers qualified under National Instrument 44-101 Short Form Prospectus Distributions. The shelf prospectus, which contains general information about the issuer and its securities, covers all offerings (other than rights offerings) that the issuer may undertake during the ensuing 25 months. Information specific to a particular offering is provided by way of a shelf prospectus supplement that is filed and delivered to investors at the time of doing the offering. Together with the Policy, NI 44-102 will reformulate and replace the provisions of NP 44 relating to shelf distributions, maintaining the substance of the shelf distribution system while adding clarity, operational efficiency and opportunities for access to the system.
The local implementing rule provides to issuers that comply with NI 44-102 relief from certain provisions of the Securities Act. Among other things, the implementing rule will exempt a shelf distribution made in accordance with NI 44-102 from the one-year lapse date ordinarily applicable to a prospectus, with the result that no specific application for relief from that lapse date will be required in British Columbia.
Summary of Changes from NP 44
The regime under NI 44-102 involves three main changes from the shelf distribution system established under NP 44:
- Access to the shelf procedures has been expanded through the interaction of NI 44-102 and National Instrument 44-101. Issuers can now use the shelf procedures for distributions of cash settled derivatives and asset-backed securities. Specific requirements apply if the securities to be distributed are “novel”.
- Under NI 44-102, a shelf prospectus may contemplate both equity and debt offerings without specific allocation between them. This added flexibility is balanced by provision for early disclosure of an equity offering under an unallocated shelf prospectus. A news release must be issued when an issuer or selling security holder has discussions with an underwriter concerning the distribution of a tranche of equity securities under an unallocated shelf prospectus, where those discussions are of sufficient specificity that it is reasonable to expect that the distribution will proceed.
- A shelf receipt under NI 44-102 will expire if, immediately prior to the issuance of securities under the shelf prospectus, the issuer is not qualified under National Instrument 44-101.
Summary of Changes to NI 44-102 and the Policy from the 1998 Drafts
The changes made to the drafts of NI 44-102 and the Policy published in 1998 are not material. Accordingly, the Commission has not republished NI 44-102 and the Policy for comment.
A change has been made to section 6.5 of NI 44-102, which prescribes the manner in which the provisions of securities legislation that regulate conflicts of interest in connection with a distribution of securities using the shelf procedures are to be satisfied. NI 44-102 stipulates that the requirements concerning the participation of independent underwriters are to be satisfied, in the case of medium term note programs or other continuous distributions, on the basis of the total dollar amount of securities that, at any given time, have been or are being distributed under the program. This requires the independent underwriter participation requirements to be satisfied on a "rolling" basis, rather than at the end of the distribution of all of the securities to be distributed under the program.
Also, the lapse date of a shelf prospectus has been extended from two years to 25 months to assist issuers in maintaining their shelf prospectuses on an “evergreen” basis.
Other minor changes have been made to conform the substance, terminology and drafting style of NI 44-102 to National Instrument 44-101, or for clarification or drafting purposes.
Related National Instruments
Concurrent with the adoption of NI 44-102, the Commission has also adopted National Instrument 44-101, including certain related forms, Companion Policy 44-101CP and a local implementing rule and National Instrument 44-103, Companion Policy 44-103CP and a local implementing rule. BCN#2000/60 and BCN#2000/62 provide additional information.
DATED at Vancouver, British Columbia, on December 20, 2000.
Douglas M. Hyndman
Ref: NI 44-103 44-101CP
NP 44 BCN#2000/62
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.