Multilateral CSA Staff Notice 45-309
Guidance for Preparing and Filing an Offering Memorandum under
National Instrument 45-106 Prospectus and Registration Exemptions
April 26, 2012
Introduction and Purpose
Staff of the Canadian Securities Administrators, except in Ontario, (Staff or we) are publishing
this Staff Notice (the Notice) to provide guidance to issuers, underwriters and their advisors that
intend to rely on section 2.9 (the OM exemption) of National Instrument 45-106 Prospectus and
Registration Exemptions (NI 45-106) (the Requirements). This Notice also summarizes common
deficiencies we have observed in offering memoranda (OMs) prepared in accordance with Form
45-106F2 Offering Memorandum for Non-Qualifying Issuers (the F2) and discusses the potential
consequences of non-compliance with the Requirements.
Background
NI 45-106 provides issuers with exemptions from the prospectus requirement for distributions of
securities. Prospectus exemptions, including the OM exemption, require issuers to adhere to the
requirements and restrictions prescribed under NI 45-106. Responsibility for compliance with NI
45-106 rests with the issuer purporting to rely on the applicable exemption(s).
An issuer’s reliance on the OM exemption does not require prior approval as is the case for a
distribution under a prospectus. However, the use of the OM exemption is subject to regulatory
oversight and monitoring. Staff may review an OM as a result of planned compliance-monitoring
programmes, observed market activity, or following specific complaints or referrals. An issuer’s
reliance on the OM exemption may come under Staff scrutiny, and non-compliance may result in
one or more of the consequences outlined in the section Consequences of Failing to Comply with
the Requirements at the end of this Notice.
Guidance and Common Deficiencies
The OM exemption is available in all jurisdictions except Ontario. Although the OM exemption
is not available in Ontario, the guidance in this Notice applies to Ontario-based issuers
distributing securities in other CSA jurisdictions under the OM exemption.
-2-
This Notice focuses on the F2, which is the required form of OM under the OM exemption,
except in certain circumstances.
1
When preparing an OM, issuers must comply with the
instructions for completing the F2 (the Instructions), which are attached to the F2, and should
refer to section 3.8 of the Companion Policy 45-106CP Prospectus and Registration Exemptions
(the CP) for additional guidance.
Issuers must ensure that the OM complies with the applicable requirements when it is prepared
as well as when it is delivered to prospective purchasers. This means that the OM must be in the
correct form, not contain any misrepresentations,
2
and provide sufficient information to enable a
prospective purchaser to make an informed investment decision. Issuers must also ensure that the
OM is easy to read and understand, concise, and drafted in clear, plain language.
The following are common issues identified in OMs that have been filed with us.
1.
Failing to file an OM on time
An issuer using the OM exemption is required to file a copy of the OM it delivered to
prospective purchasers with us no later than 10 days after the first distribution under that OM.
3
An issuer that has already filed its most current OM does not need to re-file it after subsequent
distributions unless the OM is updated. Staff have observed that some issuers are filing their
OMs late and in some cases are not filing them at all.
2.
Failing to update the OM when distributions are ongoing
We have observed a number of issuers making distributions under the OM exemption using a
stale-dated OM. An OM can become stale-dated either as a result of the certificate ceasing to be
true or the annual financial statements included in the OM becoming out-dated.
An issuer relying on the OM exemption must ensure that the OM does not contain a
misrepresentation when it signs the OM certificate, as well as at the date the OM is delivered to
prospective purchasers. For example, if a material change occurs in the business of an issuer
after the OM has been prepared, the issuer must update the OM before it is delivered to
prospective purchasers (see item 3 below for guidance on preparing an update).
1
Qualifying issuers (as defined in NI 45-106) can use Form 45-106F3 Offering Memorandum for Qualifying
Issuers. In Alberta, issuers offering “real estate securities” under the OM exemption must prepare the OM in
accordance with Form 45-509F Offering Memorandum for Real Estate Securities. In BC, issuers offering syndicated
mortgages must use Form 45-901F Offering Memorandum for Syndicated Mortgages, while issuers offering real
estate securities must use Form 45-906F Offering Memorandum – Real Estate Securities.
2
Misrepresentation means: (i) an untrue statement of a material fact, or (ii) an omission to state a material fact that
is required to be stated, or (iii) an omission to state a material fact that is necessary in order for a statement not to be
misleading.
3
Under section 40.1 of Securities Act (Québec), the OM prescribed by section 2.9 of NI 45-106 shall be drawn up in
French only or in French and English for issuers distributing securities in Québec. The issuer must file the French
version or the French and English versions of the OM with the Autorité des marchés financiers no later than 10 days
after the distribution.
-3-
In cases where distributions under the OM are ongoing, item B.12 of the Instructions requires the
OM to be updated to include annual audited financial statements for the issuer’s most recently
completed financial year no later than 120 days after the issuer’s financial year-end. Item B.13 of
the Instructions also requires an issuer to update the OM to include interim financial reports for
periods completed after the date that is 60 days before the date of the OM, if doing so would be
necessary to prevent the OM from containing a misrepresentation.
An issuer should have processes in place to ensure that stale-dated OMs are not delivered to
prospective purchasers by any of its directors, officers, staff, promoters, exempt market dealers,
or agents.
3.
Using an incorrect form of update
Section 3.8(3) of the CP provides guidance to issuers on how to update an OM in the
circumstances when an OM certificate ceases to be true after it has been delivered to a
prospective purchaser, as contemplated under section 2.9(14) of NI 45-106. It is our view that the
same guidance may be applied when updating an OM before it is delivered to a prospective
purchaser.
Section 3.8(3) of the CP explains that issuers can update their OMs by either preparing:
•
an amendment to their existing OM; or
•
a new OM.
4
Both approaches require a newly signed and dated certificate in accordance with NI 45-106.
Issuers that prepare an amendment to their existing OM must ensure that the amendment, which
includes the updated information and new certificate, is attached to the existing OM when the
existing OM is delivered to a prospective purchaser. The new certificate, which states: “This
Offering Memorandum does not contain a misrepresentation,” would apply to the information in
the existing OM and the amendment when read together as of the date of the new certificate.
Issuers should also note that they are required to file the OM in the same form that it is delivered
to prospective purchasers. This means, in the situation described above, that both the amendment
and the existing OM would need to be filed together.
Item A.1 of the Instructions states that an OM must be “easy to read and understand” and directs
issuers to “be concise and use clear, plain language.” When the updating of an OM results in
many disclosure changes to the OM, or when an issuer has prepared multiple amendments to its
OM, we generally take the position that the issuer’s OM, as amended, is not easy to read and
understand and is not clear or concise. In such circumstances, issuers should prepare a new OM
with up-to-date information.
4
Section 3.8(3) of the CP also includes the option of updating an OM by preparing a material change report.
However, this option is only available to qualifying issuers that prepare an OM using Form 45-106F3 – Offering
Memorandum for Qualifying Issuers
-4-
4.
Failing to include sufficient information to make an informed investment decision
While an OM is generally not required to contain the level of detail and extent of disclosure
required by a prospectus, it must provide a prospective purchaser with sufficient information to
make an informed investment decision (see item A.3 of the Instructions for more information).
To comply with this requirement an issuer may need to disclose information about entities that
the issuer is required to consolidate, proportionately consolidate, or account for using the equity
method under the issuer’s generally accepted accounting principles (GAAP), such as a
subsidiary, joint venture or a company over which it has significant influence.
For example, we encountered cases where issuers intended to use a significant portion of the
proceeds from an offering to purchase securities in a subsidiary and then have the subsidiary
transact the main business of the issuer (such as acquiring and developing assets, entering into
agreements, managing operations and acquiring additional financing as required). However, the
OM neglected to include disclosure at the level of the subsidiary, such as how the subsidiary
intended to use the available funds, the business of the subsidiary and key terms of the material
agreements entered into by the subsidiary. The OM only provided this information at the level of
the parent. Since, in this example, the subsidiary was the ultimate recipient and user of the
offering proceeds, prospective purchasers would require information at the level of the
subsidiary in order to have sufficient information to make an informed investment decision.
5.
Inadequately disclosing the issuer’s business
Some issuers, particularly new entities, have provided very little disclosure about their business
and its development as required under items 2.2 and 2.3 of the F2. In some cases, only a few
generic sentences regarding the business have been provided.
An issuer must provide sufficient information about its business and the development of the
business to enable a prospective purchaser to make an informed investment decision.
•
For mortgage investment entities required disclosure may include the following
information about each mortgage in its mortgage portfolio: priority ranking, loan interest
rate, repayment terms, due date, balance outstanding, estimated loan-to-value ratio, a
description
of
the
property
under
mortgage
(i.e.
“industrial,”
“residential,”
or
“commercial”) and the property’s location, and whether the mortgage is in good standing.
The total allowance for loan losses to the total portfolio, along with disclosure of the
basis for determining the value of the underlying property on which the loan-to-value
ratio is calculated, such as a property appraisal or estimate, may also need to be disclosed.
•
For investment funds required disclosure may include the issuer’s investment policies,
including how potential investments are evaluated and the decision process for
purchasing or selling an investment, and a summary of the entity’s investment portfolio
including the following information about each type of security owned: a description of
the security, the number of units or shares held, the average cost and the fair value.
Issuers may also need to disclose the basis for determining the fair value of the
investments.
-5-
•
For real estate development entities required disclosure may include a summary of the
entity’s projects including the following information for each property: a description of
the property (including legal description), a description of the intended development, the
current stage of development and what will be done with the property when development
is complete, the acquisition cost of the property, a list of any encumbrances on the
property, a list of any outstanding obligations or liabilities relating to the property, the
extent of existing or required servicing, the current and required zoning and permitting (if
different), the amount of any corresponding mortgage and the carrying value. Issuers may
also need to disclose the basis for determining the carrying value of the properties, such
as a property appraisal or estimate. Similar disclosure may also need to be provided for
properties the entity proposes purchasing with some, or all of the proceeds from the
offering.
Under item 2.4 of the F2 the issuer will also need to disclose each significant event that
must occur to accomplish the development project, the specific time period in which each
event is expected to occur and the costs related to each event.
•
For entities with interests in rental properties required disclosure may include a
summary of the entity’s property portfolio including the following information for each
property: a description of the property (including the property’s age and condition,
occupancy
rate,
annual
gross
rent
and
net
operating
income),
amount
of
any
corresponding mortgage and the carrying value. Issuers may also need to disclose the
basis for determining the carrying value of the properties, such as a property appraisal or
estimate. Similar disclosure may also need to be provided for properties the entity
proposes purchasing with some, or all of the proceeds from the offering.
Issuers should consider providing the above information in a tabular format if doing so would
make the section easier to read and understand. The guidance above is based on best practices
observed in OMs filed with us.
Issuers may also need to include information about the resources required to complete their
product’s development (in the case of research and development issuers), the competition they
face, or the political, technological, economic and other factors they are currently aware of that
may impact their business. When discussing competition, issuers should discuss both their
current and prospective competition. This discussion should also address both competing
companies and competing/alternative technologies the issuer faces.
Entities with more complex business structures (such as various subsidiaries, partnerships, or
joint ventures), may need to include information about the business structure, including an
organizational chart, to enable a reader to understand the business.
Issuers should ensure they update the business and the development of the business sections,
when an updated OM is prepared for ongoing distributions.
-6-
6.
Failing to provide balanced disclosure
Some issuers appear to present an unrealistic or excessively promotional picture of themselves to
prospective purchasers in their OMs.
For example, a newly formed investment fund, with no track record, and no assets or capital,
may propose raising $100,000,000 under its “maximum offering” that it will use to build an
investment portfolio.
While this may be the issuer’s long-term goal, we believe that it is unrealistic, and potentially
misleading, to present it in an OM that must, at a minimum, be updated annually. Disclosing,
under “Risk Factors” in the OM, that there is no assurance the issuer will actually be able to raise
the maximum offering does not justify, in our view, the promotional nature of such disclosure.
Issuers should ensure that disclosure in their OMs is balanced, and realistic – relative to their
current stage of development.
7.
Inadequately disclosing available funds and use of available funds
We have observed several forms of non-compliance with respect to the requirements under items
1.1 and 1.2 of the F2. Issuers must ensure that the disclosure in these two items meets the form
requirements and that the disclosure does not misrepresent to prospective purchasers the
available funds or use of funds.
In the table under item 1.1 - Funds:
a) Some issuers have assumed that line E of the table “additional sources of funding
required” is intended to capture anticipated future financings. However, the intent of line
E is to enable an issuer to show other sources of funding currently available to the issuer
(such as financing that has been arranged through a bank), that the issuer plans to
combine with the available funds from the offering to achieve its principal capital-raising
purposes.
b) Some issuers have disclosed that there were no commissions or offering costs, when
other disclosure in the OM indicated otherwise. For example, in one case, an issuer
entered $0 for offering costs, and then disclosed in a footnote that the offering costs
would be paid out of general corporate funds. In this instance, the offering costs should
have been disclosed in the table as required.
c) Issuers frequently fail to include their existing working capital deficiency (as required by
item F of the table) when determining their funds available.
-7-
In the table under item 1.2 - Use of available funds:
d) Several start-up entities have failed to include interest payments or cash distributions as
intended uses of available funds, when the issuer does not or will not have other sources
of cash flow to meet such obligations, other than the net proceeds from the offering.
For example, a start-up mineral resource company offering bonds with a 10% coupon to
prospective purchasers may require three to five years, or longer, for its proposed project
to begin generating cash flow. Assuming a three year timeline, the issuer would be
required to use 30% of the offering to fund interest payments on the bonds if no other
sources of funding were available. Failing to disclose this intended use of available funds
would
not
meet
the
form
requirement
and
would
likely
be
considered
a
misrepresentation.
e) Many issuers have used generic descriptions for the use of available funds, such as “for
the purposes of investment in eligible properties” and then stated the entire amount of the
available funds being used for such purpose.
The F2 requires issuers to provide a detailed breakdown of the intended uses of available
funds. For start-ups, this may include capital costs, general and administrative costs, and
sustaining capital until the issuer expects to be self-sufficient. While the F2 does not
prescribe specific line items, issuers should carefully consider if the disclosure they
provide in this table is sufficient for a prospective purchaser to make an informed
investment decision and if omission of material information would constitute a
misrepresentation.
f)
Issuers frequently fail to identify payments to be made to related parties as required by
the instructions to the table (for example, payments to management companies controlled
by insiders of the issuer).
8.
Inappropriately reallocating available funds
Item 1.3 of the F2 requires the available funds to be used for the purposes disclosed in the OM. If
the available funds may be reallocated to purposes other than those stated, item 1.3 of the F2
requires an issuer to state, “we intend to spend the available funds as stated. We will reallocate
funds only for sound business reasons.” Staff note that nearly all OMs contain this disclosure,
but some issuers have taken great liberty with this statement, using the funds for purposes quite
different than the stated use of funds.
A recent decision, Shire International Real Estate Investments Ltd., Re, 2011 ABASC 608,
clarifies that including disclosure that funds may be reallocated, does not entitle the issuer to
open-ended use of the funds. The funds may only be reallocated for sound business reasons, and
it would be expected that those business reasons would have something to do with the stated
business of the issuer. In addition, the exceptional business reasons would be expected to be
assessed with regard to the interests of the issuer and its investors.
-8-
Issuers must ensure that prospective purchasers are provided accurate and complete information
with respect to how the issuer intends to use the available funds.
9.
Omitting key terms of material agreements
Item 2.7 of the F2 requires issuers to disclose the key terms of all material agreements: (a) to
which the issuer is a party as at the date of the OM, or (b) with related parties.
Issuers often omitted key terms of material agreements, especially those with related parties
including:
•
the form and amounts of compensation being paid by the issuer to a related party and a
description of the goods, services, or other value being received in return.
•
the cost of the assets to the related party and the cost of the assets to the issuer for
transactions involving the purchase of assets by, or sale of assets to, the issuer from a
related party. For transactions that result in a significant difference between the two costs,
the issuer will likely need to explain the difference in the OM to enable a prospective
purchaser to make an informed investment decision. If the transaction results in the
acquisition of a “business,” the issuer may also need to include financial statements for
the acquisition in accordance with the provisions under item C of the Instructions.
Also, issuers sometimes neglected to disclose key terms of an agreement if the agreement was
disclosed in the notes to the financial statements or attached in its entirety to the OM. Including
an agreement as an attachment to the OM, or making a statement that a copy of the agreement is
available upon request, is not a substitute for disclosing a summary of the key terms of the
material agreements as required under item 2.7 of the F2.
10. Omitting compensation disclosure
We have observed cases where the OM did not clearly or completely disclose compensation paid
to directors, officers, and promoters, particularly indirect compensation paid through a related
party.
Issuers must disclose, in the table under item 3.1 of the F2, compensation paid in the most
recently completed financial year and anticipated to be paid in the current financial year to a
director, officer, promoter and/or principal holder. This includes compensation paid, directly or
indirectly, by the issuer or by a related party if the issuer receives a direct benefit from such
compensation paid (see item A.7 of the Instructions). Compensation includes any form of
remuneration, such as cash, shares, and options.
It is Staff’s view that an issuer receives a direct benefit for all compensation paid on the issuer’s
behalf, whether that compensation is paid by the issuer or a related party. An issuer may also
receive a direct benefit from compensation paid by a related party that was not paid on the
issuer’s behalf.
-9-
It is also Staff’s view that compensation must be disclosed whether or not the compensation was
(or will be) immediately received by the director, officer, promoter, or principal holder. For
example, issuers should include compensation paid and anticipated to be paid to an individual’s
professional corporation or holding company, whether or not such compensation was (or is)
anticipated to be “paid out” to the individual.
While other requirements of the F2 may result in such forms of compensation being disclosed
elsewhere in the OM (such as under material agreements or in the notes to the financial
statements as a related party transaction), issuers must also disclose the total amount of the
compensation in the table required under item 3.1 of the F2. Including a footnote reference in the
table and then disclosing the amount of the compensation in those footnotes that should be
disclosed directly in the table does not meet the requirements.
11. Inadequately disclosing management experience
Staff have reviewed certain OMs where the disclosure of management experience is overly
promotional in nature or is generic and insufficient for a prospective purchaser to evaluate
management’s background and ability to operate the issuer’s business. Item 3.2 of the F2
requires the disclosure of the principal occupations of the directors and executive officers over
the past five years, including a description of any relevant experience in a business similar to that
of the issuer. To enable a prospective purchaser to make an informed investment decision, an
issuer should ensure the description of the directors’ and officers’ previous experience and
occupations is accurate, relevant and clearly described, rather than simply listing prior
occupations held by the respective individuals or including a general statement such as “has over
15 years of real estate experience.” Such disclosure could be misleading without further
explanation, depending on the nature of the experience.
12. Disseminating material forward-looking information not included in the OM
We have observed some issuers relying on the OM exemption and disseminating material
forward-looking information that was not included in the OM. For example, some issuers are
providing information about expected returns to prospective purchasers without disclosing
information about those expected returns in the OM.
Item A.12 of the Instructions prohibits issuers from disseminating any material forward-looking
information during the course of a distribution of securities, unless that material forward-looking
information is set out in the OM and thus certified by the certificate of the OM. Further, item
B.14 of the Instructions states that material forward-looking information included in an OM
(regardless of item A.12 of the Instructions) must comply with sections 4A.2 and 4A.3 of NI 51-
102 Continuous Disclosure Obligations.
13. Omitting required interim financial reports
Various issuers have filed OMs that omitted the required interim financial reports. In certain
circumstances issuers prepared a new OM with up-to-date information during the fiscal year, but
neglected to include the interim financial reports that became required as a result of the OM’s
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new date. Under item B.5 of the Instructions, an issuer that has completed at least one financial
year must include financial statements for any interim period completed more than 60 days
before the date of the OM.
14. Omitting key elements of financial statements
Financial statements contained in an OM must be a full set of financial statements that comply
with Canadian GAAP applicable to publicly accountable enterprises. We have reviewed various
OMs that did not meet this requirement because the interim financial reports or annual financial
statements omitted one or more of the following key elements:
•
statement of financial position
•
statement of comprehensive income
•
statement of changes in equity
•
statement of cash flows
•
appropriate comparative periods for the above noted statements
•
notes to the financial statements
Issuers must ensure that each set of interim financial reports or annual financial statements
included in the OM complies with Canadian GAAP applicable to publicly accountable
enterprises and is complete.
5
15. Failing to obtain required audits
We have reviewed various OMs that included financial statements that were not audited as
required under item B.9 of the Instructions.
Under item B.9 of the Instruction, issuers that have not completed their first financial year, or
their first financial year-end is less than 120 days before the date of the OM, are required to
include audited financial statements for a period from inception to a date not more than 90 days
before the date of the OM. The requirement to audit these first-year financial statements came
into force on September 28, 2009. However, various issuers continue to include first-year
financial statements in the OM that have not been audited. In addition, issuers that have
completed one or more financial years are required to include audited financial statements for the
most recently completed year. In some instances issuers have not complied with this
requirement.
16. Omitting required audit reports or including non-compliant audit reports
In certain instances issuers neglected to include the audit report for comparative financial
statements when those financial statements had been audited, contrary to the requirements under
item B.9 of the Instructions.
Also, in some circumstances, issuers attached to the financial statements in the OM an auditor’s
report that contained a qualified opinion or that was not prepared in the specified form. Issuers,
5
Except in certain circumstances in New Brunswick - see footnote #6 under item 18 below for more information.
-11-
other than investment funds, are required to include in the OM financial statements that comply
with NI 52-107 Acceptable Accounting Principles and Auditing Standards (NI 52-107). Section
3.3 of NI 52-107 requires the financial statements to be accompanied by an auditor’s report that,
among other things, expresses an unmodified opinion and is in the form specified by Canadian
generally accepted auditing standards (Canadian GAAS) (although, in certain situations, item
D.2 of the Instructions permits a qualification related to inventory). Issuers should also ensure
that the audit report included in the OM complies with the form specified in Canadian Auditing
Standard 700 Forming an Opinion and Reporting on Financial Statements of Canadian GAAS.
17. Inappropriately using a Notice to Reader
In some OMs issuers attached a Notice to Reader to their interim financial reports that included
wording similar to the following:
“Readers are cautioned that these financial statements may not be appropriate for their
purposes.”
This type of statement is not permitted as it is the issuer’s responsibility to ensure that the
financial statements included in the OM comply with the OM requirements and are thereby
appropriate for the purposes of the OM. Although interim financial reports are not generally
required to be audited, they still must comply with the applicable Canadian GAAP. Issuers that
do not have the in-house expertise to prepare financial statements that comply with the
applicable Canadian GAAP may need to obtain assistance from external advisors to do so.
18. Failing to prepare financial statements in accordance with appropriate accounting
principles
We have reviewed financial statements in OMs that reflected a variety of inappropriate
accounting principles including:
•
financial statements that were prepared in accordance with Canadian GAAP applicable to
private enterprises; and
•
financial statements prepared in accordance with Part V of the CICA Handbook instead
of International Financial Reporting Standards (IFRS).
Item B.1 of the Instructions states that all financial statements included in an OM must comply
with NI 52-107, regardless of whether the issuer is a reporting issuer. NI 52-107 generally
requires financial statements to be prepared in accordance with Canadian GAAP applicable to
publicly accountable enterprises. Item B.1 of the Instructions also states that an issuer cannot use
Canadian GAAP applicable to private enterprises, except for preparation of certain acquisition
statements.
6
6
In New Brunswick, certain issuers are exempted from the requirement in NI 52-107 to prepare financial statements
in accordance with Canadian GAAP applicable to publicly accountable enterprises and from complying with item
B.1 of the Instructions, subject to certain conditions. For more information see New Brunswick Blanket Order 52-
502 An Exemption from the Requirement to Include Financial Statements Prepared in Accordance with Canadian
GAAP Applicable to Publicly Accountable Enterprises in Form 45-106F2 Offering Memorandum for Non-
Qualifying Issuers.
-12-
Canadian GAAP applicable to publicly accountable enterprises has transitioned to IFRS for
fiscal years beginning on or after January 1, 2011. As a result, issuers, other than investment
funds (as defined in securities law), must prepare all interim financial reports and annual
financial statements included in an OM for fiscal years beginning on or after January 1, 2011 in
accordance with IFRS.
Investment funds have been provided a three-year deferral of the changeover to IFRS. As a
result, investment funds are currently not required to prepare financial statements included in an
OM in accordance with IFRS until financial years beginning on or after January 1, 2014 (the
Deferral Period). See CSA Staff Notice 81-320 (Revised) Update on International Financial
Reporting Standards for Investment Funds for additional background information on the IFRS
changeover for investment funds that are reporting issuers.
An investment fund intending to use the OM exemption must look to the laws of its home
jurisdiction to determine its financial statement requirements during the Deferral Period. Each
jurisdiction that has the OM exemption will accept financial statements in an OM prepared in
accordance with what is required in the home jurisdiction of the investment fund. Investment
funds are not permitted to use Canadian GAAP applicable to private enterprises when preparing
financial statements for inclusion in an OM.
19. Improperly certifying the OM
We have reviewed OMs that were not properly certified for one of the following reasons:
•
not all the required signatories signed the certificate
•
the signatories did not date the certificate
•
the signatories did not date the certificate the date they signed it
•
the date on the certificate differed from the date on the face page
•
the certificate was not placed in the correct location in the OM
Issuers must date the certificate the date it is signed (see item 13 of the F2) and therefore must
not back-date it.
The
certificate,
which
states:
“This
Offering
Memorandum
does
not
contain
a
misrepresentation,” is required to be true as at the date that the certificate is signed (see section
2.9(13)(a) of NI 45-106). When a signatory certifies this statement he or she is certifying the
contents of the entire OM. Therefore, it is Staff’s view that the signatories should have a
complete version of the OM, including required financial statements, before reviewing and
signing the OM.
Item A.2 of the Instructions states that an issuer must address the items required by the F2 in the
order set out in the F2. As a result, the certificate should be placed after all other items in the
OM. In some instances, issuers have placed the certificate before other items in the OM, such as
the financial statements. The correct placement of the certificate ensures that all disclosure
included in the OM is properly certified.
-13-
Consequences of Failing to Comply with the Requirements
Failing to comply with the Requirements may result in a CSA regulator taking one or more of
the following actions (depending on the nature and extent of the securities law breach):
•
Requiring the issuer to file a revised or amended document
•
Requiring the issuer to prepare and deliver an updated OM to existing purchasers
•
Requiring the issuer to grant rescission rights to certain investors
•
Imposing a cease trade order
•
Taking enforcement action
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Questions
Alberta
Jonathan Taylor
Manager,
CD
Compliance
&
Market
Analysis
Alberta Securities Commission
Direct Line: 403-297-4770
Direct Fax: 403-297-2082
Email: jonathan.taylor@asc.ca
Zafar B. Jaffer
Compliance Counsel
Alberta Securities Commission
Direct Line: 403-297-2074
Direct Fax: 403-297-2082
Email: zafar.jaffer@asc.ca
Steven Weimer
Senior Capital Markets Analyst
Alberta Securities Commission
Direct Line: 403-355-9035
Direct Fax: 403-297-2082
Email: steven.weimer@asc.ca
British Columbia
Larry Wilkins
Senior Compliance Analyst
British Columbia Securities Commission
Direct Line: 604-899-6712
Toll-free across Canada: 1-800-373-6393
Email: lwilkins@bcsc.bc.ca
Scott Pickard
Senior Compliance Officer
British Columbia Securities Commission
Direct Line: 604-899-6720
Toll-free across Canada: 1-800-373-6393
Email: spickard@bcsc.bc.ca
Manitoba
Bob Bouchard
Director and Chief Administration Officer
The Manitoba Securities Commission
Direct Line: 204-945-2555
Fax: 204-945-0330
Email: bob.bouchard@gov.mb.ca
New Brunswick
Susan Powell
Senior Legal Counsel
New Brunswick Securities Commission
Direct Line: 506-643-7697
Direct Fax: 506-658-3059
Email: susan.powell@nbsc-cvmnb.ca
Newfoundland and Labrador
Douglas Connolly
Office of the Superintendent of Securities
Government of Newfoundland and Labrador
Tel: 709-729-5661
Securities Fax: 709-729-6187
Email: connolly@gov.nl.ca
Northwest Territories
Donn MacDougall
Deputy Superintendent of Securities, Legal
& Enforcement
Northwest Territories Securities Office
Direct Line: 867-920-8984
Fax: 867-873-0243
Email: donald_macdougall@gov.nt.ca
Nova Scotia
Kevin Redden
Director, Corporate Finance
Nova Scotia Securities Commission
Direct Line: 902-424-5343
Fax: 902-424-4625
Email: reddenkg@gov.ns.ca
Prince Edward Island
Steve Dowling
General Counsel
Prince Edward Island Securities Office
Direct Line: 902-368-4551
Fax: 902-368-5283
Email: sddowling@gov.pe.ca
Quebec
Patrick Théorêt
Manager, Corporate Finance
Autorité des marchés financiers
Tel: 514-395-0337, ext. 4381
Fax: 514-873-6155
Email: patrick.theoret@lautorite.qc.ca
Valérie Dufour
Analyst, Corporate Finance
Autorité des marchés financiers
Tel: 514-395-0337, ext. 4389
Fax: 514-873-6155
Email: valerie.dufour@lautorite.qc.ca
Saskatchewan
Ian McIntosh
Deputy Director - Corporate Finance
Saskatchewan Financial Services Commission
Direct Line: 306-787-5867
Fax: 306-787-5899
Email: ian.mcintosh@gov.sk.ca
Yukon
Helena Hrubesova
Securities Officer
Yukon Securities Office
Direct Line: 867-667-5466
Fax: 867-393-6251
Email: helena.hrubesova@gov.yk.ca
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