45-519 - Retention of Current Exemptions for Six Months [BCI - Rescinded]

BRITISH COLUMBIA SECURITIES COMMISSION

BC INSTRUMENT 45-519

The Commission, having considered that to do so would not be prejudicial to the public interest, orders that the attached BC Instrument 45-519 entitled “Retention of Current Exemptions for Six Months” is made effective from April 3, 2002 to and including October 2, 2002.

April 3, 2002

Douglas M. Hyndman
Chair

(This part for administrative purposes only and is not part of the Order)

Authority under which Order is made:
Act and sections:- Securities Act, sections 48 and 76
Other (specify):-

BC INSTRUMENT 45-519
Retention of Current Exemptions for Six Months

Order Under Sections 48 and 76 of the Securities Act

Definitions
1. In this Instrument,
“sophisticated purchaser” means a purchaser that, in connection with a distribution, gives an acknowledgment in the form prescribed by section 4 to the issuer, if the issuer does not believe, and has no reasonable grounds to believe, that the acknowledgment is false, acknowledging both that

(a) the purchaser is able, on the basis of information about the investment provided by the issuer, to evaluate the risks and merits of the prospective investment because of

(i) the purchaser’s financial, business or investment experience, or
(ii) advice the purchaser receives from a person that is registered to advise, or is exempted from the requirement to be registered to advise, in respect of the security that is the subject of the trade and that is not an insider of, or in a special relationship with, the issuer of the security, and

(b) the purchaser is one of the following:

(i) a person registered under the Act;
(ii) an individual who

(A) has a net worth, or net worth jointly with the individual’s spouse, at the date of the agreement of purchase and sale of the security, of not less than $400 000, or
(B) has had in each of the 2 most recent calendar years, and reasonably expects to have in the current calendar year

(1) annual net income before tax of not less than $75 000, or
(2) annual net income before tax, jointly with the individual’s spouse of not less than $125 000;

(iii) a corporation, partnership or trust that

(A) has net assets of not less than $400 000, or
(B) has had in each of the 2 most recent calendar years, and reasonably expects to have in the current calendar year, net income before tax of not less than $125 000;

(iv) a corporation in which all of the voting shares are beneficially owned by sophisticated purchasers or which the majority of the directors are sophisticated purchasers;
(v) a general partnership in which all of the partners are sophisticated purchasers;
(vi) a limited partnership in which a majority of the general partners are sophisticated purchasers;
(vii) a trust in which all of the beneficiaries are sophisticated purchasers or the majority of the trustees are sophisticated purchasers.

Exemptions
2. Sections 34(1)(a) and 61 of the Act do not apply to a trade or distribution in the following circumstances:

50 purchasers

(a) the trade is made by an issuer in a security of its own issue if

(i) during the 12 month period immediately preceding the trade, sales under this subsection and section 128(a) of the Securities Rules have been made to not more than 49 different purchasers,
(ii) the purchaser is

(A) a sophisticated purchaser,
(B) a spouse, parent, brother, sister or child of a senior officer or director of the issuer, or of an affiliate of the issuer, or
(C) a company, all the voting securities of which are beneficially owned by one or more of a senior officer or director of the issuer, or of an affiliate of the issuer, or a spouse, parent, brother, sister or child of a senior officer or director of the issuer, or of an affiliate of the issuer,

(iii) the purchaser, in connection with the trade of the security, makes the acknowledgment referred to in section 4,
(iv) the purchaser purchases as principal,
(v) the offer and sale of the security is not accompanied by an advertisement and no selling or promotional expenses have been paid or incurred in connection with the offer and sale, except for professional services or for services performed by a registered dealer or for services referred to in subsection 128 (f) (ii) (C) of the Rules, and
(vi) an offering memorandum is delivered to the purchaser in compliance with section 7;

$25 000 - sophisticated purchaser

(b) the trade is made by  an issuer in a security of its own issue if

(i) the purchaser purchases as principal,
(ii) the purchaser is a sophisticated purchaser,
(iii) the aggregate acquisition cost to the purchaser is not less than $25 000, and
(iv) an offering memorandum is delivered to the purchaser in compliance with section 7; or

Friends and relatives

(c) the trade is made by an issuer in a security of its own issue if

(i) during the 12 month period immediately preceding the trade, sales under this subsection and section 128(h) of the Rules have been made to not more than 24 different purchasers,
(ii) the amount paid for the security of the issuer in respect of the trade, together with the amount paid for the securities of the issuer in respect of all trades under this subsection and section 128(h) of the Rules during the 12 month period immediately preceding the trade, does not exceed $250 000,
(iii) the purchaser purchases as principal,
(iv) the purchaser is

(A) a spouse, parent, brother, sister, child or close personal friend of a senior officer or director of the issuer, or of an affiliate of the issuer, or
(B) a company, all the voting securities of which are beneficially owned by one or more of a senior officer or director of the issuer, or of an affiliate of the issuer, or a spouse, parent, brother, sister, child or close personal friend of a senior officer or director of the issuer, or of an affiliate of the issuer,

(v) the purchaser, in connection with the trade of the security, makes the acknowledgment referred to in section 4,
(vi) the offer and sale of the security is not accompanied by an advertisement and no selling or promotional expenses have been paid or incurred in connection with the offer and sale, and
(vii) if an offering memorandum is delivered to a purchaser, the offering memorandum is delivered to the purchaser in compliance with section 7.

$25 000 - registrant required

3. Section 61 of the Act does not apply to a distribution made by an issuer in a security of its own issue if

(a) the purchaser purchases as principal,
(b) the purchaser, in connection with the distribution of the security, makes the acknowledgment referred to in section 4,
(c) the aggregate acquisition cost to the purchaser is not less than $25 000, and
(d) an offering memorandum is delivered to the purchaser in compliance with section 7.

Acknowledgment

4. If an issuer distributes a security to a person under this Instrument, the issuer must obtain from the person, before the agreement of purchase and sale is entered into, an acknowledgment in BC Form 45-903F1 or BC Form 45-903F2, as appropriate.

5. The issuer must retain the acknowledgment referred to in section 4 for a period of 6 years after the distribution.

6. The executive director may require the issuer to produce a copy of the acknowledgment referred to in section 4.

Form of Offering Memorandum

7. An offering memorandum required to be delivered in connection with a distribution under section 2(a), 2(b) or 3, or delivered in connection with a distribution under section 2(c), must

(a) be delivered to the purchaser before an agreement of purchase and sale is entered into,
(b) contain a right against the issuer for rescission or damages that

(i) is available to a purchaser to whom an offering memorandum containing a misrepresentation has been delivered,
(ii) is enforceable on notice being given to the issuer on or before the 90th day after the date

(A) on which payment was made for the securities, or
(B) on which the initial payment was made for the securities, if payments subsequent to the initial payment are made under a contractual commitment entered into before, or concurrently with, the initial payment,

(iii) reasonably corresponds to the rights provided in section 131 of the Act applicable to a prospectus,
(iv) is subject to the defence that the purchaser had knowledge of the misrepresentation, and
(v) is in addition to and not in derogation from any other right the purchaser may have, and

(c) be in BC Form 45-904F, unless

(i) the offering is under the Immigrant Investor Program, then the offering memorandum must be in BC Form 45-905F,
(ii) the offering is of real estate securities, then the offering memorandum must be in BC Form 45-906F, or
(iii) the offering is for a distribution of a syndicated mortgage, then the offering memorandum must be in BC Form 45-901F.

Filing Offering Memorandum

8. If an offering memorandum was required to be delivered in connection with section 2(a), 2(b) or 3, or was delivered in connection with a distribution under section 2(c), the person required to deliver the offering memorandum must file a copy of the offering memorandum on or before the 10th day after the distribution.

Report on distribution

9. If an issuer distributes a security under this Instrument, the issuer must file a report in the form required under section 139 of the Rules on or before the 10th day after the distribution.

Resale Restriction

Any trade in a security acquired under this Instrument is subject to section 2.5 of Multilateral Instrument 45-102 Resale of Securities.