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Securities Law

NIN 98/50 - Advance Notice - National Instrument 71-101, Companion Policy 71-101CP, Implementing Rule 71-801 and Form 71-101F1 The Multijurisdictional Disclosure System [NIN - Rescinded]

Published Date: 1998-08-14
Effective Date: 1998-08-13

Implementation of National Instrument

National Instrument 71-101, Companion Policy 71-101CP and Form 71-101F1 are initiatives of the Canadian Securities Administrators ("CSA") and deal with the multijurisdictional disclosure system. Implementing Rule 71-801 will implement the National Instrument in British Columbia.

The Commission has not yet made National Instrument 71-101 and Implementing Rule 71-801 as rules. This Advance Notice is being published to provide notice that the Commission expects to make the rules before November 1, 1998, when the National Instrument is expected to come into force as a rule in 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 proposed Companion Policy is expected to be adopted as a policy in all of the jurisdictions represented by the CSA on November 1, 1998 as well. In British Columbia, the proposed Form is expected to be specified by the Executive Director under section 182 of the Securities Act.

When made, the rules and related documents will be published in the Weekly Summary. The Commission anticipates publishing the rule and related documents in October 1998, once it has received all necessary approvals. The rule and related documents have already been adopted by the Alberta Securities Commission ("ASC") and Ontario Securities Commission ("OSC") and are being published in the August 14, 1998 issues of the ASC Summary and OSC Bulletin.

Substance and Purpose of the National Instrument, Companion Policy and Implementing Rule

The National Instrument, Companion Policy, Form and Implementing Rule set out the multijurisdictional disclosure system ("MJDS"), a joint initiative that was implemented in 1991 by the CSA and the Securities and Exchange Commission of the United States (the "SEC") to reduce duplicative regulation in cross-border offerings, issuer bids, take-over bids, business combinations, continuous disclosure and other filings.

The National Instrument and related documents are derived in large part from National Policy No. 45 ("NP 45"). The CSA are of the view that the regulatory regime established by NP 45 has operated efficiently and with minimal difficulties since its inception and that major changes to the concepts in NP 45 are not required at this time. Accordingly, the National Instrument and related documents are intended to remain largely consistent with the regulatory regime currently in place for issuers using the MJDS.

The various blanket orders and rulings relating to the MJDS issued by the Canadian securities regulatory authorities, including, in British Columbia, BOR#91/7 dated June 25, 1991, will be revoked effective the date the National Instrument comes into force. The exemption from the trust indenture requirements of the British Columbia Company Act for certain distributions of debt under MJDS, currently provided under BOR#93/3, will be continued under a replacement blanket order.

The MJDS permits public distributions of securities of U.S. issuers that meet specified eligibility criteria to be made in Canada on the basis of disclosure documents prepared in accordance with U.S. federal securities laws (with certain additional Canadian disclosure).

The MJDS also reduces disincentives to the extension to Canadian securityholders of rights offerings by U.S. issuers by permitting such rights offerings to be made in Canada on the basis of U.S. disclosure documents. Similarly, it facilitates the extension to Canadian securityholders of U.S. issuers of take-over bids, issuer bids and business combinations in the circumstances contemplated by the National Instrument. The MJDS permits such transactions to be made in Canada generally in the same manner as in the U.S. and on the basis of U.S. disclosure documents.

Further, the MJDS permits U.S. issuers to use U.S. continuous disclosure documents in Canada in lieu of Canadian documents and exempts insiders of U.S. issuers from the requirement to file insider reports provided the required filings are made with the SEC.

Summary of Comments

On December 4, 1997 the Commission published for comment an earlier draft of the National Instrument and related documents.1

1 NIN#97/51.

Three written comments were received during the comment period that expired on March 5, 1998.

One comment related to drafting points, which the CSA has largely accepted. The other two comments asked the CSA to allow reconciliation of financial statements to International Accounting Standards ("IAS") as an alternative to Canadian generally accepted accounting principles ("GAAP"). The CSA has decided at this time to allow reconciliation of financial statements to Canadian GAAP only. However, the Companion Policy provides that an issuer may apply for permission to reconcile to IAS instead of Canadian GAAP.

The National Instrument and Companion Policy differ from the versions published for comment in their treatment of distributions under the MJDS involving potential underwriting conflicts of interest, namely distributions of securities of registered dealers or connected or related parties of registered dealers. The CSA do not consider the difference to be material.

DATED at Vancouver, British Columbia, on August 13, 1998

Douglas M. Hyndman

References: NIN#97/51
National Policy No. 45