CANADA: Canadian Securities Administrators Adopt Changes to the Accredited Investor, Minimum Amount Investment and Short-Term Debt Prospectus Exemptions

Friday February 20 2015

The Canadian Securities Administrators (CSA) has announced the adoption of two sets of amendments to National Instrument 45-106 Prospectus and Registration Exemptions (NI 45-106).

The first set of amendments relates to the accredited investor prospectus exemption (AI exemption) and the minimum amount investment prospectus exemption (MA exemption). These amendments are intended to address investor protection concerns. Among other things, the amendments:

• introduce a new risk acknowledgement form for individual accredited investors that describes, in plain language, the categories of individual accredited investor and identifies the key risks associated with purchasing securities in the exempt market;
• provide expanded guidance on the steps a seller should take to verify the status of purchasers acquiring securities under prospectus exemptions, including the AI exemption; and
• restrict the MA exemption to distributions to non-individual investors.

The second set of amendments relates to the short-term debt prospectus exemption (short-term debt exemption) in NI 45-106. These amendments are intended to address investor protection and systemic risk concerns. Among other things, the amendments:

• modify the credit ratings required to distribute short-term debt, primarily corporate commercial paper (CP), under the short-term debt exemption; and
• make the short-term debt prospectus exemption unavailable for short-term securitized products, which are primarily asset-backed commercial paper (ABCP), and create a new prospectus exemption for the distribution of short-term securitized products (the short-term securitized products exemption).

Provided all necessary ministerial approvals are obtained, the amendments will come into force on 5th May 2015.

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