The CSA Proposes Amendments to National Instrument 33-105 Underwriting Conflicts 


December 2013

Securities Bulletin
On November 29, 2013, the Canadian Securities Administrators (the "CSA") published for comment proposed amendments to National Instrument 33-105 Underwriting Conflicts ("NI 33-105") that provide limited relief from the requirements to include connected and related issuer disclosure in certain offering documents for private placements of foreign securities to sophisticated investors in Canada.

Under NI 33-105, underwriters that are "connected issuers" or "related issuers" that propose to sell foreign securities in Canada under a private placement exemption using a disclosure document must also include in the disclosure document certain disclosure about the relationship the underwriter has with the issuer. This disclosure often takes the form of a "wrapper" to the foreign disclosure document.

Underwriters and other market participants have submitted to the CSA that the "connected issuer" test, which is based on the viewpoint of the "reasonable prospective purchaser", is very broad and it is very difficult, costly and time consuming to comply with the disclosure requirements in the context of a foreign offering. As such, Canadians are often left out of a U.S. or global offerings of foreign securities.

To address this issue, the CSA proposes to amend NI 33-105 to provide that the connected and related issuer disclosure requirement be eliminated in private placement offerings of securities that qualify as "designated foreign securities" that are sold to "permitted clients", who are generally sophisticated, usually institutional investors, and provided that the offering document complies with U.S. disclosure requirements on conflicts of interest between issuers and underwriters. The proposed exemptions do not apply to prospectus offerings in Canada.

Designated foreign securities are defined as securities offered primarily in a foreign jurisdiction that are issued or guaranteed by a foreign government or securities of an issuer that:

  • is incorporated, formed or created under the laws of a foreign jurisdiction;

  • is not a reporting issuer in Canada;

  • has its head office outside of Canada; and

  • has a majority of its executive officers and directors outside of Canada.

Registrants involved in offerings of designated foreign securities will need to provide permitted clients purchasing such securities an alternative notice of any conflicts of interest that would normally trigger the disclosure requirements under NI 33-105. In particular, a registrant can provide a one-time notice that explains that any offering document provided in connection with future foreign private placements is made in reliance of the provisions of the proposed amendments to NI 33-105.

The comment period is open until February 26, 2014.

a cautionary note

The foregoing provides only an overview and does not constitute legal advice. Readers are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained.

© McMillan LLP 2013