BCN2003/28 - Request for Comment - Notice of Proposed Amendments to Multilateral Instrument 45-102 Resale of Securities, National Instrument 13-101 System for Electronic Document Analysis and Retrieval, Multilateral Instrument 45-103 Capital Raising Exemptions and National Instrument 62-101 Control Block Distribution Issues [BCN - Rescinded]

Introduction
The Commission, together with the securities regulatory authorities in Alberta, Manitoba, Newfoundland and Labrador, Northwest Territories, New Brunswick, Nova Scotia, Nunavut, Prince Edward Island, Saskatchewan and the Yukon Territory (the MI 45-103 Jurisdictions), is publishing proposed amendments to Multilateral Instrument 45-103 Capital Raising Exemptions, Form 45-103F1 Offering Memorandum of a Non-Qualifying Issuer, Form 45-103F2 Offering Memorandum of a Qualifying Issuer, and Companion Policy 45-103 (collectively, MI 45-103) for comment.

The Commission is also publishing for comment a revised Appendix D to the version of Multilateral Instrument 45-102 Resale of Securities published for comment on January 31, 2003 (proposed MI 45-102), and proposed amendments to National Instrument 13-101 System for Electronic Document Analysis and Retrieval (NI 13-101) and National Instrument 62-101 Control Block Distributions (NI 62-101).

The Commission is seeking public comment on the revised Appendix D to proposed MI 45-102 and the proposed amendments to NI 13-101, MI 45-103 and NI 62-101. Certain other members of CSA published the proposed amendments to NI 13-101 and NI 62-101 for comment on January 31, 2003.

Each member of the CSA is expected to amend NI 13-101 and NI 62-101.  The MI 45-103 Jurisdictions are expected to amend MI 45-103. The amendments will be implemented as a rule, commission regulation, or policy in all applicable jurisdictions.

In this Notice, NI 13-101, MI 45-103 and NI 62-101 are referred to collectively as the Instruments.

Notice of Amendments
We have revised Appendix D of proposed MI 45-102 to add certain exemptions from the prospectus requirements under the British Columbia Securities Act. Any securities distributed under these exemptions will be subject to a restricted period.  This revision will be effective when proposed MI 45-102 is implemented.

The amendments to the Instruments are consequential housekeeping amendments resulting from Multilateral Instrument 45-102 Resale of Securities that is currently in place (current MI 45-102), proposed MI 45-102 and proposed National Instruments 51-102 Continuous Disclosure Obligations (NI 51-102) and 52-107 Acceptable Accounting Principles, Auditing Standards and Reporting Currency (NI 52-107). We expect these amendments to come into effect concurrently with the implementation of proposed MI 45-102.

Substance and Purpose of Amendments

Appendix D of proposed rule
We have revised Appendix D of proposed MI 45-102 to expand the list of prospectus exemptions in the British Columbia Securities Act.  Securities distributed under these exemptions will be subject to a restricted period. The revisions are consistent with the current treatment of securities issued under these prospectus exemptions under current MI 45-102.

The text of the amendments is attached as Schedule 1.

NI 13-101
We propose to amend Appendix A of NI 13-101 to delete the annual information form (AIF) and related documents filed under the former Shortened Hold with an Annual Information Form (SHAIF) system. We have also added the forms that will be filed under proposed MI 45-102.

The text of the amendments is attached as Schedule 2.

NI 62-101
We propose to delete sections of NI 62-101 that relate to distributions of securities by a pledgee, and how to calculate the period of time the pledgee held the security. Proposed MI 45-102 will deal with these matters.

The text of the amendments is attached as Schedule 3.

MI 45-103
MI 45-103 currently permits qualifying issuers, as defined in current MI 45-102, to use a shorter form of offering memorandum because those issuers have filed an AIF. Under proposed MI 45-102, the concept of qualifying issuers will be removed, and issuers will not be required to file an AIF to rely on the four-month hold period. Instead, proposed MI 45-102 will rely on the continuous disclosure structure set out in NI 51-102 as a basis for reducing all hold periods to four months. As a result, MI 45-103 must set other criteria for issuers to use the shorter form of offering memorandum.

We propose to define qualifying issuer in MI 45-103 to be an issuer that

• is a reporting issuer and SEDAR filer,
• has filed an AIF, management’s discussion and analysis and annual financial statements under NI 51-102,
• has complied with any applicable continuous disclosure obligations under National Instrument 43-101 Standards of Disclosure for Mineral Projects and National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities.

As currently published for comment, NI 51-102 will not require venture issuers to file AIFs. Under our proposed definition of qualifying issuer, a venture issuer may use the shorter form of offering memorandum by voluntarily filing an AIF under NI 51-102 and incorporating that AIF into its offering memorandum. Issuers listed on TSX Venture Exchange are venture issuers under the definition proposed in NI 51-102.

Our proposed amendments to MI 45-103 revise the resale restrictions to mirror the provisions in proposed MI 45-102. 

Amendments are also proposed to Form 45-103F1 Offering Memorandum of a Non-Qualifying Issuer and Form 45-103F2 Offering Memorandum of a Qualifying Issuer as a result of proposed MI 45-102, NI 51-102 and NI 52-107. These amendments include

• amending the description of the resale restrictions in item 10 to reflect proposed MI 45-102,
• requiring that the financial statements comply with NI 52-107, whether or not the issuer is a reporting issuer,
• requiring that business acquisition reports filed under NI 51-102 be incorporated by reference into Form 45-103F2,
• adjusting the provisions in Items D.6 and D.7 of the Instructions to Form 45-103F1 concerning acceptable alternative disclosure for an acquisition of a business that is an interest in an oil and gas property to reflect a similar provision in NI 51-102, and
• adjusting the significance tests in item C.2 of the Instructions to Form 45-103F1 issuers use to determine whether to include financial statements of an acquired business or business to be acquired.

Item C.2 of the Instructions to Form 45-103F1 sets out two significance tests for issuers to determine if they must include financial statements of an acquired business or business to be acquired in the offering memorandum. We propose to lower the level of the significance tests from 50% to 40% to reflect the level proposed in NI 51-102 for venture issuers.  The significance tests apply to all issuers who want to use Form 45-103F1, whether or not the issuer is reporting issuer. 

Companion Policy 45-103CP will be amended to reflect the changes to MI 45-103 and the forms.

The text of the amendments to MI 45-103 and its related documents, together with blackline versions of the amended documents, is set out in Schedule 4.

Specific Request for Comment on Amendments to MI 45-103
1. Do you agree that we should lower the threshold for the significance tests from 50% to 40%?  If not, why not?

2. How long a transition period should we provide to allow issuers to continue to use their offering memorandum without including the financial statements of an acquired business or business to be acquired that did not meet the significance test at 50% but would meet it at 40%? 

How to Provide Your Comments
Please provide your comments by September 24, 2003. Please send your submissions to the British Columbia Securities Commission at the following address:

Leslie Rose
Senior Legal Counsel, Legal and Market Initiatives
British Columbia Securities Commission
PO Box 10142, Pacific Centre
701 West Georgia Street
Vancouver, BC V7Y 1L2
Tel: (604) 899-6654
Fax: (604) 899-6814
E-mail: lrose@bcsc.bc.ca

If you are not sending your comments by e-mail, please send a diskette containing your comments (in DOS or Windows format, preferable Word).

We cannot keep submissions confidential because securities legislation in certain provinces requires that a summary of the written comments received during the comment period be published.

Questions
If you have any questions, please contact:

Rosann Youck
Senior Legal Counsel, Legal and Market Initiatives
British Columbia Securities Commission
Tel: (604) 899-6656
Fax: (604) 899-6814
E-mail: ryouck@bcsc.bc.ca

Or

Leslie Rose
Senior Legal Counsel, Legal and Market Initiatives
British Columbia Securities Commission
Tel: (604) 899-6654
Fax: (604) 899-6814
E-mail: lrose@bcsc.bc.ca

July 25, 2003

Brent W. Aitken
Vice Chair

Ref: Multilateral Instrument 45-102 Resale of Securities
 Multilateral Instrument 45-103 Capital Raising Exemptions
 National Instrument 13-101 System for Electronic Document Analysis and Retrieval
 National Instrument 62-101 Control Block Distribution Issues

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.

Schedule 1

REVISED
APPENDIX D
TO
MULTILATERAL INSTRUMENT 45-102
RESALE OF SECURITIES

RESTRICTED PERIOD TRADES
(Section 2.3)

Sections 131(1)(a), (b), (c), (d), (l), (m), (q), (r), (s),  (t),  (u) and (bb) of the Securities Act (Alberta), and section 131(1)(f)(iii) of the Securities Act (Alberta) if the right to purchase, convert or exchange was previously acquired under
(i) one of the above-listed exemptions under the Securities Act (Alberta),
(ii) section 122(b) or (d) of the Alberta Securities Commission Rules, or
(iii) under an exemption from the prospectus requirement that specifies that the first trade is subject to section 2.5 of MI 45-102

Sections 74(2)(1) to (6), (16), (18), (19), (23) and (25) of the Securities Act (British Columbia)

Sections 128(a), (b), (c), (e), (f) and (h) of the Securities Rules (British Columbia)

Sections 74(2)(11)(ii) and 74(2)(13) of the Securities Act (British Columbia) if the security acquired by the selling security holder was initially acquired by a person or company under any of the sections of the Securities Act (British Columbia), or the Securities Rules (British Columbia) referred to in this Appendix

Section 74(2)(11)(iii) of the Securities Act (British Columbia) if the right to purchase, convert or exchange or otherwise acquire was originally acquired under sections 74(2)(1) to (6), (16), (18), (19), (23) and (25) of the Securities Act (British Columbia), section 128(a), (b), (c), (e), (f) and (h) of the Securities Rules (British Columbia), or under an exemption from the prospectus requirement that specifies that the first trade is subject to section 2.5 of MI 45-102
 
Section 74(2)(12) of the Securities Act (British Columbia) if the security acquired by the selling security holder under the realization on collateral was initially acquired by a person or company under any of the sections of the Securities Act (British Columbia) or the Securities Rules (British Columbia) referred to in this Appendix

Clauses 54(3)(f) and (g) and 73(1)(a), (b), (c), (d), (h), (l), (m), (p) and (q) of the Securities Act (Newfoundland and Labrador) and subclause 73(1)(f)(iii) of the Securities Act (Newfoundland and Labrador) if the right to purchase, convert or exchange was previously acquired under one of the above listed exemptions under the Securities Act (Newfoundland and Labrador) or under an exemption from the prospectus requirement that specifies that the first trade is subject to section 2.5 of MI 45-102 

Paragraphs 3(a), (b), (c), (k), (l), (m), (r), (s), (t), (u), (w) and (z), and subparagraph 3(e)(iii) of Blanket Order No. 1 of the Registrar of Securities (Northwest Territories) if the right to purchase, convert or exchange was previously acquired under one of the above-listed exemptions under Blanket Order No. 1 of the Registrar of Securities (Northwest Territories) or under an exemption from the prospectus requirement that specifies that the first trade is subject to section 2.5 of MI 45-102

Clauses 77(1)(a), (b), (c), (d), (l), (m), (p), (q), (u), (w), (y), (ab) and (ad) of the Securities Act (Nova Scotia), and subclause 77(1)(f)(iii) of the Securities Act (Nova Scotia) if the right to purchase, convert or exchange was previously acquired under one of the above listed exemptions under the Securities Act (Nova Scotia) or under an exemption from the prospectus requirement that specifies that the first trade is subject to section 2.5 of MI 45-102

Paragraphs 3(a), (b), (c), (k), (l), (m), (r), (s), (t), (u), (w) and (z), and subparagraph 3(e)(iii) of Blanket Order No.1 of the Registrar of Securities (Nunavut) if the right to purchase, convert or exchange was previously acquired under one of the above-listed exemptions under Blanket Order No. 1 of the Registrar of Securities (Nunavut) or under an exemption from the prospectus requirement that specifies that the first trade is subject to section 2.5 of MI 45-102

Clauses 72(1)(a), (b), (c), (d), (l), (m), (p) and (q) of the Securities Act (Ontario) and subclause 72(1)(f)(iii) of the Securities Act (Ontario) if
(A) the right to purchase, convert or exchange was previously acquired under one of the above-listed exemptions under the Securities Act (Ontario), or
(B)  the right to purchase, convert or exchange was previously acquired under an exemption from the prospectus requirement that specifies that the first trade is subject to section 2.5 of MI 45-102. 

Clauses 13(1)(a), (b), (c), (g) and (i) and subclause 13(1)(e)(iii) of the Securities Act (Prince Edward Island) if the right to purchase, convert or exchange was previously acquired under one the above-listed exemptions under the Securities Act (Prince Edward Island)

Clauses 81(1)(a), (b), (c), (d), (m), (n), (s), (t), (v), (w), (z), (bb) and (ee) of The Securities Act, 1988 (Saskatchewan)

Subclauses 81(1)(f)(iii) and (iv) of The Securities Act, 1988 (Saskatchewan) if the convertible security, exchangeable security or multiple convertible security was acquired under one of the exemptions of The Securities Act, 1988 (Saskatchewan) referred to in this Appendix or under an exemption from the prospectus requirement that specifies that the first trade is subject to section 2.5 of MI 45-102

Clause 81(1)(e) of The Securities Act, 1988 (Saskatchewan) if the person or company from whom the securities were acquired obtained the securities under one of the exemptions of The Securities Act, 1988 (Saskatchewan) referred to in this Appendix

Schedule 2

Amendments To National Instrument 13-101
System For Electronic Document Analysis and Retrieval (SEDAR)

PART 1 AMENDMENTS TO NATIONAL INSTRUMENT 13-101

1.1  Amendments  - Appendix A to National Instrument 13-101 System for Electronic Document Analysis and Retrieval (SEDAR) is amended by

(a) under Other Issuers - Continuous Disclosure,

(i)  deleting item 15 Annual Information Form,

(ii)  deleting item 16 Amended Annual Information Form (SHAIF System),

(iii)  deleting item 17 Notice (SHAIF),

(iv) substituting the following items:

15. Form 1 (Resale Rule)

16. Notice  (Resale Rule)

PART 2  EFFECTIVE DATE

2.1  Effective Date - This Amendment comes into force on ·.

Schedule 3

AMENDMENTS TO NATIONAL INSTRUMENT 62-101
Control Block Distribution Issues

PART 1 AMENDMENTS TO NATIONAL INSTRUMENT 62-101

1.1  Amendments - National Instrument 62-101 Control Block Distribution Issues is amended by

(a)  deleting section 2.2 Pledgees;

(b)  deleting Appendix B; and

(c) deleting Appendix C.

PART 2  EFFECTIVE DATE

2.1  Effective Date - This Amendment comes into force on ·.