44-103 - Post-Receipt Pricing [NI Proposed - Lapsed]

National Instrument 44-103¹

^{1 This proposed National Instrument, together with Companion Policy 44-102CP (the "Policy") and local implementing rules reformulate the PREP provisions of National Policy Statement No. 44 ("NP44"). The Policy contains those parts of NP44 that are not operative or mandatory, but rather interpretative or explanatory. This Instrument is expected to 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 Canadian Securities Administrators (the "CSA"), other than Quebec. The Commission des valeurs mobilières du Québec (the "CVMQ") agrees with the purpose and intent of this Instrument, but will not be adopting it at this time as the regulations under its securities regulation provide for accessibility to a post-receipt pricing procedure. Proposed amendments to the Securities Act (Quebec) (the "proposed amendments") will give the CVMQ the authority to make rules and, on the coming into force of the proposed amendments, the CVMQ will be conducting a review of its securities regulation to determine what changes are advisable in order to implement this National Instrument. If the proposed amendments are not in force at the time of implementation of this National Instrument, the CVMQ will consider all measures available, including a blanket order, in order to enable issuers to efficiently access the post-receipt pricing system in Quebec. The proposed Policy is expected to be adopted as a policy in all jurisdictions represented by the CSA, other than Quebec, and implementing rules are expected to be adopted in those jurisdictions in which it is necessary to do so and may take the form of blanket rulings or orders in some jurisdictions.}

^{Except as supplemented or varied by this Instrument, Canadian securities legislation applies to a distribution using the PREP procedures.}

PART 1 DEFINITIONS AND INTERPRETATION²

^{2 A national definition instrument has been adopted as National Instrument 14-101 Definitions ("NI14-101"). It contains definitions of certain terms used in more than one national instrument. NI14-101 also provides that a term used in a national instrument and defined in the statute relating to securities of the applicable jurisdiction, the definition of which is not restricted to a specific portion of the statute, will have the meaning given to it in that statute, unless the context otherwise requires. NI14-101 also provides that a provision or a reference within a provision of a national instrument that specifically refers by name to a jurisdiction, other than the local jurisdiction, shall not have any effect in the local jurisdiction, unless otherwise stated in the provision.}

1.1 Definitions

^{3 This definition is new.}

"credit supporter" means, for securities, a person or company, other than the issuer of the securities, that

(a) guarantees payment to a holder of the securities, in the event of non-payment by the issuer of the securities, of all or substantially all of the payments to be made to the holder under the terms of the securities, or

(b) provides payment support, other than by way of a guarantee, that entitles a holder of the securities, in the event of non-payment by the issuer of the securities, to receive from the person or company all or substantially all of the payments to be made to the holder under the terms of the securities;⁴

^{4 This definition is new.}

^{5 This definition is based on paragraph 2.1(o) of NP44.}

"PREP procedures" means the requirements in this Instrument for the distribution under a base PREP prospectus and a supplemented PREP prospectus of securities, the price of which is determined after a receipt has been obtained for the base PREP prospectus;⁶ and

^{6 This definition is based on paragraph 2.1(p) of NP44.}

"supplemented PREP prospectus" means a prospectus filed under the PREP procedures containing PREP information.⁷

^{7 This definition is based on paragraph 2.1(u) of NP44.}

8 This subsection is new.

^{9 This section is new.}

PART 2 USE OF THE PREP PROCEDURES

^{10 This section is new and replaces the restrictions on the availability of the PREP procedures in paragraph 2.2(a) and section 4.1 of NP44.}

2.2 Prohibited Offerings - Despite the other provisions of this Instrument, the PREP procedures shall not be used for a distribution of rights under a rights offering.¹¹

^{11 This section is based on paragraph 4.2(c) of NP44. The restriction in paragraph 4.2(d) of NP44 on using the PREP procedures for distributions of derivatives has been omitted.}

2.3 Opting out of the PREP Procedures After a Preliminary Prospectus has been Receipted and before the Prospectus has been Receipted - If a receipt for a preliminary base PREP prospectus for a distribution of securities has been issued and the issuer or the selling securityholder decides, before a receipt is issued for a base prospectus, no longer to use the PREP procedures for the distribution, the issuer shall file a covering letter, with a prospectus or short form prospectus that is not a base PREP prospectus, stating that the issuer or the selling securityholder, as the case may be, has decided not to use the PREP procedures for the distribution.¹²

^{12 This section is based on paragraph 2.2(b) of NP44.}

2.4 Opting into the PREP Procedures After a Preliminary Prospectus has been Receipted and before the Prospectus has been Receipted - If a receipt for a preliminary prospectus or preliminary short form prospectus that is not a preliminary base PREP prospectus for a distribution of securities has been issued and the issuer or the selling securityholder decides, before a receipt is issued for a prospectus or short form prospectus, to use the PREP procedures for the distribution, the issuer shall file a covering letter, with a base PREP prospectus, stating that the issuer or the selling securityholder, as the case may be, has decided to use the PREP procedures for the distribution.¹³

^{13 This section is new and has been added to clarify how an issuer may opt into the PREP procedures.}

2.5 Opting out of the PREP Procedures After a Prospectus has been Receipted - If a receipt has been issued for a base PREP prospectus for a distribution of securities and the issuer or the selling securityholder decides, before a supplemented PREP prospectus is filed, no longer to use the PREP procedures for the distribution, the issuer shall file

(a) either

(i) an amended prospectus that is not a base PREP prospectus or a supplemented PREP prospectus, or

(ii) a new preliminary prospectus that is not a preliminary base PREP prospectus; and

(b) a covering letter stating that the issuer or the selling securityholder, as the case may be, has decided not to use the PREP procedures for the distribution.¹⁴

^{14 This section is new and has been added to clarify how an issuer may opt out of the PREP procedures after a base PREP prospectus has been receipted.}

PART 3 BASE PREP PROSPECTUSES

^{15 The term "securities legislation" is defined in NI14-101 as meaning the particular statute and legislative instruments of the local jurisdiction set out in an appendix to that instrument and will generally include the statute, regulations and, in some cases, the rules, forms, rulings and orders relating to securities in the local jurisdiction.}

may be varied for a PREP prospectus to the extent provided for in this Instrument.¹⁶

^{16 This section is new.}

3.2 Required Disclosure

(1) A base PREP prospectus of an issuer shall contain the following:

1. A statement at the top of the cover page identifying the prospectus as a base PREP prospectus.¹⁷

^{17 This paragraph is new.}

2. The following statement in red ink in italics on the cover page:

"This [insert throughout in the case of POP system distributions..."short form"] prospectus has been filed under procedures in [insert names of each jurisdiction where qualified] that permit certain information about these securities to be determined after the prospectus has become final and that permit the omission from this prospectus of the information. The procedures require the delivery to purchasers of a supplemented PREP prospectus containing the omitted information within a specified period of time after agreeing to purchase any of these securities."¹⁸

^{18 This paragraph is based on paragraph 2.3(b) of NP44.}

3. A statement that all disclosure contained in a supplemented PREP prospectus that is not contained in the base PREP prospectus will be incorporated by reference into the base PREP prospectus as of the date of the supplemented PREP prospectus.¹⁹

^{19 This paragraph is based on the second sentence of paragraph 4.3(c) of NP44}

4. If securities other than shares are being distributed, a statement of the aggregate dollar amount of securities, to which the base PREP prospectus pertains.²⁰

^{20 This paragraph is new and resolves, for distributions of securities other than shares, the ambiguity that exists under NP44 as to whether the size of a distribution is required disclosure in a base PREP prospectus.}

5. If shares are being distributed,

(a) the aggregate dollar amount of the shares to which the base PREP prospectus pertains, if

(i) the proceeds of the offering are to be applied to a specific purpose identified in the prospectus and a minimum amount must be raised through the offering in order to accomplish the purpose, and

(ii) there is no pre-existing trading market in which securities of the same class as the securities to be distributed under the prospectus are traded; and

(b) otherwise, either the aggregate number of the shares or the aggregate dollar amount of the shares, to which the base PREP prospectus pertains.²¹

^{21 This paragraph is new and resolves, for distributions of shares, the ambiguity that exists under NP44 as to whether the size of a distribution is required disclosure in a base PREP prospectus.}

6. Any earnings coverage ratios required by securities legislation, which may be expressed as ranges based on a reasonable estimate of the PREP information.²²

^{22 This paragraph is based on paragraph 4.3(g) of NP44; the references to asset coverage ratios and dilution have been omitted.}

7. A certificate in the following form signed by the chief executive officer, the chief financial officer, and, on behalf of the board of directors of the issuer, any two directors of the issuer, other than the chief executive officer or chief financial officer, duly authorized to sign and any promoter of the issuer:

"This [describe document - insert throughout in the case of POP system distributions - "short form prospectus"], together with the documents and information incorporated herein by reference, will, as of the date of the supplemented prospectus providing the information permitted to be omitted from this [describe document], constitute full, true and plain disclosure of all material facts relating to the securities offered by this [describe document] as required by securities legislation of [insert name of each jurisdiction in which qualified] [insert if distribution made in Quebec - "For the purpose of the Province of Quebec, this [describe document], [insert in the case of POP system distributions - "as supplemented by the permanent information record,"] will contain no misrepresentation likely to affect the value or the market price of the securities to be distributed"]."²³

^{23 This paragraph is based on paragraph 4.3(i) of NP44.}

8. A certificate in the following form signed by the each underwriter, if any, who for the securities to be distributed under the prospectus, is in a contractual relationship with the issuer or selling securityholder:

"To the best of our knowledge, information and belief, this [describe document - insert throughout in the case of POP system distributions - "short form prospectus"], together with the documents and information incorporated herein by reference, will, as of the date of the supplemented prospectus providing the information permitted to be omitted from this [describe document], constitute full, true and plain disclosure of all material facts relating to the securities offered by this [describe document] as required by securities legislation of [insert name of each jurisdiction in which qualified] [insert if distribution made in Quebec - "For the purpose of the Province of Quebec, this [describe document], [insert in the case of POP system distributions - "as supplemented by the permanent information record,"] will contain no misrepresentation likely to affect the value or the market price of the securities to be distributed"]."²⁴

^{24 This paragraph is based on paragraph 4.3(j) of NP44.}

9. A certificate signed by a credit supporter in the form described in paragraph 7 if securities legislation requires a prospectus certificate of a credit supporter.²⁵

^{25 This paragraph is new. Section 3.5 of the Policy states that there may be circumstances in which it is not appropriate that a credit supporter sign a certificate, and that the Canadian securities regulatory authorities will consider applications for exemptions in this regard.}

(2) Despite subsection (1), a preliminary base PREP prospectus is not required to contain the information required in paragraphs 4, 5 and 6 of subsection (1), if the information is not known at the time of filing the preliminary base PREP prospectus.²⁶

^{26 This subsection is new}

3.3 Disclosure that may be Omitted - A base PREP prospectus may omit the following:

^{27 This paragraph is based on subparagraph 4.3(a)(1) of NP44.}

2. The amount of cash underwriting fees, discounts and commissions for the distribution of the securities.²⁸

^{28 This paragraph is based on subparagraph 4.3(a)(3) of NP44.}

3. The net proceeds of the distribution.²⁹

^{29 This paragraph is based on subparagraph 4.3(a)(4) of NP44; it has been modified to refer to the net proceeds of the distribution.}

4. If shares are being distributed and only the aggregate number of securities to be distributed is disclosed and the aggregate dollar amount of shares is not required to be disclosed under paragraph 5 of subsection 3.2(1), the gross proceeds of the distribution.³⁰

^{30 This paragraph is new and has been added for clarification.}

5. Any dividend or interest rate of the securities to be distributed.³¹

^{31 This paragraph is based on subparagraph 4.3(a)(2) of NP44.}

6. Any dividend or interest payment dates, record dates and any dates from which dividends or interest accrue for the securities to be distributed.³²

^{32 This paragraph is based on subparagraph 4.3(a)(6) of NP44.}

7. Any redemption, purchase for cancellation, conversion and exchange prices of the securities.³³

^{33 This paragraph is based on subparagraph 4.3(a)(5) of NP44.}

8. The identity of, and the disclosure, if any, required by Multilateral Instrument 33-105 concerning, the members of the underwriting syndicate, other than the lead underwriter and any co-lead underwriter.³⁴

^{34 This paragraph is new and has been added for consistency with U.S. procedures.}

9. The delivery dates of securities to be purchased under the distribution.³⁵

^{35 This paragraph is based on subparagraph 4.3(a)(8) of NP44.}

10. If one or more underwriters have agreed to purchase the securities to be distributed at a specified price, the statement required by securities legislation that the securities are to be taken up by the underwriters, if at all, on or before a specified date.³⁶

^{36 This paragraph is based on subparagraph 2.7(b)(2) of NP44}

11. If the securities to be distributed are underwritten on a best efforts basis for which a minimum amount of funds are required by an issuer, disclosure required by securities legislation concerning the maximum length of time for which the distribution may continue and concerning the disposition of subscription funds.³⁷

^{37 This paragraph is based on subparagraph 2.7(c)(2) of NP44.}

12. Other terms of the securities to be distributed that are mathematically derivable from any of the information referred to in paragraphs 1 through 11.³⁸

^{38 This paragraph is based on subparagraph 4.3(a)(9) of NP44 and has been modified for greater clarity.}

3.4 Issuance of Receipt - Despite the omission of PREP information, the regulator³⁹

^{39 The term "regulator" is defined in NI44-101 as meaning, in a local jurisdiction, the person set out in an appendix to that instrument opposite the name of the local jurisdiction.}

may issue a receipt for a base PREP prospectus.⁴⁰

^{40 This paragraph is new.}

3.5 Expiry of Receipt

^{41 This subsection is based on paragraph 4.3(f) of NP44.}

(2) If a supplemented PREP prospectus is not filed within 20 days of the filing of a base PREP prospectus, the receipt issued for the base PREP prospectus expires at the time immediately before the entering into of the first agreement of purchase and sale for a security to which the base PREP prospectus pertains, unless a receipt has been issued within the preceding 20 days for an amended base PREP prospectus that updates to the date of the filing of the amended base PREP prospectus all of the disclosure contained in the base PREP prospectus.⁴²

^{42 This subsection is based on paragraphs 4.3(d) and (e) of NP44.}

3.6 Amendment to a Base PREP Prospectus - An amendment to a base PREP prospectus, other than an amendment filed under section 2.5 to opt out of the PREP procedures, shall contain the certificates required under subsection 3.2(1) to be included in a base PREP prospectus with the following changes:

1. If the amendment is not a restatement of the base PREP prospectus, insert the phrase "as amended by this amendment" after the reference in each certificate to the base PREP prospectus.

2. If the amendment is an amended and restated base PREP prospectus, preface the reference in each certificate to the document with the phrase "this amended and restated".⁴³

^{43 This section is based on paragraph 4.3(k) of NP44.}

PART 4 SUPPLEMENTED PREP PROSPECTUSES

^{44 This section is new.}

4.2 Incorporation by Reference - The content of a supplemented PREP prospectus that is not also contained in the corresponding base PREP prospectus is incorporated by reference in the base PREP prospectus as of the date of the supplemented PREP prospectus.⁴⁵

^{45 This section is based on the first sentence of paragraph 4.3(c) of NP44.}

4.3 Restriction on Changes - A supplemented PREP prospectus shall be identical to the corresponding base PREP prospectus, except for the changes permitted or required by this Part.⁴⁶

^{46 This section is based on paragraph 4.3(b) of NP44. The discretion of the regulator that appears in NP44 to permit changes, other than by way of exemption, has been omitted.}

4.4 Changes in the Size of Distribution

^{47 This section is new.}

4.5 Required Disclosure

^{48 This subsection is based on subparagraph 4.3(b)(3) of NP44.}

(2) A supplemented PREP prospectus shall contain the following:

1. All of the PREP information omitted from the base PREP prospectus.⁴⁹

^{49 This paragraph is based on subparagraph 4.3(b)(1) of NP44.}

2. Instead of the earnings coverage ratios expressed as ranges based on a reasonable estimate of the PREP information as permitted under paragraph 6 of subsection 3.2(1), the earnings coverage ratios required by securities legislation.⁵⁰

^{50 This paragraph is based on subparagraph 4.3(b)(2) of NP44. The references in NP44 to disclosure of asset coverage ratios and dilution have been omitted.}

3. Instead of the prospectus certificate required under paragraph 7 of subsection 3.2(1), a certificate in the following form signed by the chief executive officer, the chief financial officer, and, on behalf of the board of directors of the issuer, any two directors of the issuer, other than the chief executive officer or chief financial officer, duly authorized to sign and any promoter of the issuer:

"This [describe document - insert throughout in the case of POP system distributions - "short form prospectus"] [insert in the case of POP system distributions - ", together with the documents incorporated herein by reference,"] constitutes full, true and plain disclosure of all material facts relating to the securities offered by this [describe document] as required by the securities laws of [insert name of each jurisdiction in which qualified] [insert if distribution made in Quebec - "For the purpose of the Province of Quebec, this short form prospectus, as supplemented by the permanent information record, contains no misrepresentation that is likely to affect the value or the market price of the securities to be distributed"]."⁵¹

^{51 This paragraph is based on subparagraph 4.3(b)(5) of NP44.}

4. Instead of the prospectus certificate required under paragraph 8 of subsection 3.2(1), a certificate in the following form signed by the each underwriter, if any, who for the securities to be distributed under the prospectus, is in a contractual relationship with the issuer or selling securityholder:

"To the best of our knowledge, information and belief, this [describe document - insert throughout in the case of POP system distributions - "short form prospectus"] [insert in the case of POP system distributions - ", together with the documents incorporated herein by reference,"] constitutes full, true and plain disclosure of all material facts relating to the securities offered by this [describe document] as required by the securities laws of [insert name of each jurisdiction in which qualified] [insert if distribution made in Quebec - "For the purpose of the Province of Quebec, this short form prospectus, as supplemented by the permanent information record, contains no misrepresentation that is likely to affect the value or the market price of the securities to be distributed"]."⁵²

^{52 This paragraph is based on subparagraph 4.3(b)(6) of NP44.}

5. Instead of the prospectus certificate required under paragraph 9 of subsection 3.2(1), a certificate signed by a credit supporter in the form described in paragraph 3 if securities legislation requires a prospectus certificate of a credit supporter.⁵³

^{53 This paragraph is new.}

6. A list and brief description of each document that has been incorporated by reference in the base PREP prospectus since the issuance of a receipt for the base PREP prospectus.⁵⁴

^{54 This paragraph is based on subparagraph 4.3(b)(7) of NP44.}

4.6 Legend to be Omitted - A supplemented PREP prospectus shall omit the legend required by paragraph 2 of subsection 3.2(1).⁵⁵

^{55 This section is based on subparagraph 4.3(b)(4) of NP44.}

4.7 Amendment to a Supplemented PREP Prospectus - An amendment to a supplemented PREP prospectus shall contain the certificates required under subsection 4.5(2) to be included in a supplemented PREP prospectus with the following changes:

1. If the amendment is not a restatement of the supplemented PREP prospectus, the phrase "as amended by this amendment" inserted after the reference in each certificate to the supplemented PREP prospectus.

2. If the amendment is an amended and restated supplemented PREP prospectus, the reference in each certificate to the document prefaced by the phrase "this amended and restated".⁵⁶

^{56 This section is based on paragraph 4.3(k) of NP44.}

4.8 Timing of Filing of Supplemented PREP Prospectus - If securities are distributed using the PREP procedures in the local jurisdiction⁵⁷,

^{57 The term "local jurisdiction" is defined in NI14-101. The definition is "in a national instrument adopted or made by a Canadian securities regulatory authority, the jurisdiction in which the Canadian securities regulatory authority is situate".}

a supplemented PREP prospectus prepared in accordance with this Instrument shall be filed in the local jurisdiction by the second business day following the date of the determination of the information omitted from the base PREP prospectus.⁵⁸

^{58 This section is based on the first sentence of paragraph 4.3(b) of NP44.}

4.9 Delivery Requirement - If securities are being distributed using the PREP procedures, the requirement under securities legislation to deliver a prospectus to a purchaser of securities shall be satisfied by the delivery of a supplemented PREP prospectus.⁵⁹

^{59 This section is based on the first sentence of section 4.5 of NP44.}

4.10 Underwriting Agreements - Despite the provisions of securities legislation, an underwriting agreement or other material contract that relates to a distribution of securities that cannot be completed until the distribution is priced and that is required by securities legislation to be filed or delivered to the regulator with a prospectus

(a) shall be filed or delivered, as the case may be, with the base PREP prospectus in draft form and may omit PREP information; and

(b) shall be refiled or redelivered, as the case may be, in final form, together with the supplemented PREP prospectus or base PREP prospectus amendment containing the PREP information and a copy of the agreement, black-lined against the draft form filed under paragraph (a).⁶⁰

^{60 This section is based on paragraph 4.4(d) of NP44}

PART 5 TRANSITIONAL PREP PROCEDURES⁶¹

^{61 This part is new.}

5.1 Transitional PREP Procedures

PART 6 EXEMPTIONS⁶²

^{62 This part is new.}

6.1 Exemption

6.2 Evidence of Exemption⁶⁴

^{64 This section may be deleted from the National Instrument if it becomes unnecessary in light of the proposed National Policy on Mutual Reliance for Prospectuses.}

(1) Subject to subsection (2) and without limiting the manner in which an exemption under this Part may be evidenced,

(a) if a jurisdiction⁶⁵

^{65 The term "jurisdiction" is defined in NI14-101 as meaning a province or territory of Canada except when used in the term foreign jurisdiction.}

other than the local jurisdiction, has been assigned to act as designated jurisdiction in the review of a base PREP prospectus under the expedited review system⁶⁶,

^{66 The term "expedited review system" is defined in NI44-101 as meaning "the system established by the Memorandum of Understanding for Expedited Review of Short Form Prospectuses and Renewal AIFs dated December 18, 1996 of the Canadian securities regulatory authorities".}

the issuance of a final expedited review receipt document for a prospectus or an amendment to a prospectus by the designated jurisdiction is evidence of the granting of the exemption in the local jurisdiction if the final expedited review receipt document confirms the issuance of a final receipt for the prospectus or the amendment to the prospectus in the local jurisdiction;

(b) if a jurisdiction, other than the local jurisdiction, has agreed to act as principal jurisdiction in the review of a base PREP prospectus filed under the POP system, the issuance of a National Instrument 44-101 Receipt for the prospectus or an amendment to the prospectus is evidence of the granting of the exemption in the local jurisdiction if the National Instrument 44-101 Receipt evidences the issuance of a final receipt for the prospectus or the amendment to the prospectus in the local jurisdiction; and

(c) the issuance of a receipt for a base PREP prospectus or an amendment to a base PREP prospectus by the regulator is evidence of the granting of the exemption by the regulator.

(2) An exemption under this Part may be evidenced in the manner set out in subsection (1) only if

(a) the person or company that sought the exemption

(i) sent to the regulator the letter or memorandum referred to in subsection 6.1(4) on or before the date of filing of the preliminary prospectus, or

(ii) sent to the regulator the letter or memorandum referred to in subsection 6.1(4) after the date of filing of the preliminary prospectus and received a written acknowledgement from the regulator that the exemption may be evidenced in the manner set out in subsection (1); and

(b) the regulator has not sent notice to the contrary to the person or company that sought the exemption before, or concurrent with, the issuance of the receipt.