Notice and Final Rule: OSC Rule - 44-801 - Implementing National Instrument 44-101 - Short Form Prospectus Distributions

ONTARIO SECURITIES COMMISSION RULE 44-801
IMPLEMENTING NATIONAL INSTRUMENT 44-101
SHORT FORM PROSPECTUS DISTRIBUTIONS

On February 6, 2001, the Commission approved Ontario Securities CommissionRule 44-801 Implementing National Instrument 44-101 Short Form ProspectusDistributions (the "Rule"). The Rule was most recently published forcomment on December 17,1999 at (1999) 22 OSCB (POP Supp 2) 129.

The Rule was sent to the Minister on February 9, 2001. The Rule is beingpublished in Chapter 5 of the Bulletin

 

NOTICE OF RULE 44-801
IMPLEMENTING NATIONAL INSTRUMENT 44-101
SHORT FORM PROSPECTUS DISTRIBUTIONS

Notice of Rule

The Commission has, under section 143 of the Securities Act (Ontario) (the "Act"), made Rule 44-801 Implementing National Instrument 44-101 Short FormProspectus Distributions as a Rule under the Act.

The Rule and the material required by the Act to be delivered to the Minister of Finance were delivered on February 9, 2001. If the Minister does not approve the Rule, reject the Rule or return it to the Commission for further consideration by April 10, 2001, the Rule will come into force on April 25, 2001. If the Minister approves the Rule, it will come into force 15 days after it is so approved.

Substance and Purpose of Rule

On February 20, 1998 the Ontario Securities Commission published proposed Rule 44-801 Implementing the Prompt Offering Qualification System Under National Instrument 44-101 (the "Proposed Implementing Rule"). The Proposed Implementing Rule was republished for comment on July 23, 1999 and December 17, 1999. Although minor changes were made to the Proposed Implementing Rule over that period, no comments were received in respect of the Proposed Implementing Rule. The Rule is substantially in the form of the Proposed Implementing Rule published on December 17, 1999.

On December 22, 2000 the Canadian Securities Administrators published National Instrument 44-101 Short Form Prospectus Distributions and Forms 44-101F1, F2 and F3 (collectively, "NI 44-101") in its final form. NI 44-101 came into force on December 31, 2000.

Rule 44-801 is a local Ontario rule implementing NI 44-101 in Ontario. This Rule contains exemptions from certain provisions of the Act and rules made under that Act that are necessary in order to implement NI 44-101.
Summary of Rule

Section 1.1 provides that short form preliminary prospectuses and short form prospectuses certified and prepared in accordance with NI 44-101 will be treated as prospectuses and preliminary prospectuses under the Act.

Section 2 contains specific exemptions from the Act and the rules made under the Act. Subsection 1.2(1) provides that the statutory ten day waiting period set out in subsection 65(1) of the Act will not prohibit the Director from issuing receipts for (final) short form prospectuses in accordance with the abridged timetable typically required by issuers filing under NI 44-101. Similar relief had previously been available to issuers using the Prompt Offering Qualification System (the "POP System") in Ontario.

Because NI 44-101 was designed to provide a substantially complete code for the preparation and filing of short form prospectuses, subsections 1.2(2) and (3) ensure that the provisions of National Instrument 41-101 Prospectus Disclosure Requirements and Commission Rule 41-501 General Prospectus Requirements do not apply to short form prospectuses. An exception, however, is provided in section 1.2(4) of the Rule by allowing section 13.9 of Rule 41-501 (which, among other things, prohibits the Director from issuing a receipt for an amended prospectus in the situations set out in subsection 61(2) of the Act) to apply to the issuance of receipts for short form prospectuses.

Subsection 1.2(5) provides an exemption from the concurrent mailing requirements contained in section 79 of the Act where the filing of annual financial statements by an issuer is required under NI 44-101. Similar relief had previously been provided to issuers using the POP System in Ontario.

Interim Measures

Issuers intending to file a short form preliminary prospectus or a short form prospectus in accordance with NI 44-101 prior to the effective date of the Rule are advised to apply to the Commission for relief similar to that otherwise provided by the Rule. Applications for such exemptive relief need not be formal in nature, and may be made by way of e-mail or incorporated into the covering letter that accompanies the filing of the preliminary short form prospectus. Such applications should specifically request relief from the provisions of subsection 65(1) and section 79 of the Act and include a request that the relevant application fee be waived. Issuers or counsel who have questions as to the foregoing are encouraged to contact staff of the Corporate Finance Branch for further information.

Authority for Rule

Paragraph 143(1)16 of the Act authorizes the Commission to make rules varying the application of the Act to establish procedures for or requirements in respect of the preparation and filing of preliminary prospectuses and prospectuses and the issuing of receipts therefor that facilitate or expedite the distribution of securities or the issuing of the receipts, including, inter alia, requirements in respect of distribution of securities by means of a prospectus incorporating other documents by reference. Paragraph 143(1)21 of the Act authorizes the Commission to prescribe the circumstances in which the Director must refuse to issue a receipt for a prospectus and prohibiting the Director from issuing a receipt in those circumstances.

Rule

The text of the Rule follows.

February 6, 2001.

 

ONTARIO SECURITIES COMMISSION RULES
RULE 44-801
IMPLEMENTING NATIONAL INSTRUMENT 44-101
SHORT FORM PROSPECTUS DISTRIBUTIONS

1.1 Short Form of Prospectus for Purposes of Section 63 of the Act

A preliminary short form prospectus and a short form prospectus prepared and certified in accordance with National Instrument 44-101 is a short form of preliminary prospectus and a short form of prospectus in the prescribed form, respectively, for the purposes of section 63 of the Act.

1.2 Exemption from Certain Requirements of the Act and Rules

(1) Despite subsection 65(1) of the Act, the waiting period between the issuance by the Director of a receipt for a preliminary short form prospectus or an amendment to a preliminary short form prospectus and the issuance by the Director of a receipt for a short form prospectus may be less than ten days.

(2) National Instrument 41-101 Prospectus Disclosure Requirements does not apply to a preliminary short form prospectus or a short form prospectus certified, filed and receipted in accordance with National Instrument 44-101.

(3) Subject to subsection (4), Rule 41-501 General Prospectus Requirements does not apply to a preliminary short form prospectus or a short form prospectus certified, filed and receipted in accordance with National Instrument 44-101.

(4) Notwithstanding subsection (3) and section 11.6 of National Instrument 44-101, the provisions of subsection 13.9 of Rule 41-501 General Prospectus Requirements shall apply to a preliminary short form prospectus or a short form prospectus certified, filed and receipted in accordance with National Instrument 44-101.

(5) Section 79 of the Act does not apply insofar as it requires issuers to send financial statements filed under section 78 of the Act to each holder of its securities concurrently with their filing, if

(a) the issuer files those financial statements earlier than 140 days from the end of its last financial year because it is required to do so by National Instrument 44-101; and

(b) the financial statements are sent within the time period specified in the Act for filing.