Notice and Final Policy (effective June 27, 2001): OSC Policy - 12-602 - Deeming an Issuer from Certain Other Canadian Jurisdictions to be a Reporting Issuer in Ontario

NOTICE OF ONTARIO SECURITIES COMMISSION POLICY 12-602

DEEMING A REPORTING ISSUER IN CERTAIN OTHER CANADIAN JURISDICTIONS

TO BE A REPORTING ISSUER IN ONTARIO

 

Notice of Policy

The Ontario Securities Commission (the "Commission") has, under Section 143.8 of the Securities Act (the "Act"), adopted Policy 12-602 Deeming a Reporting Issuer in Certain other Canadian Jurisdictions to be a Reporting Issuer in Ontario (the "Policy"). The Policy is effective June 27, 2001.

Background

On March 9, 2001 the Commission published the Policy for comment (the "Draft Policy"). During the comment period, which ended on May 9, 2001, the Commission received two comment letters. One was from Canadian Venture Exchange Inc. ("CDNX") and one was from the British Columbia law firm of Farris, Vaughan, Wills & Murphy ("Farris, Vaughan"). The comments provided by CDNX and Farris, Vaughan have been considered by the Commission and the final version of the Policy published with this Notice reflects the decision of the Commission with respect to the comments.

Capitalized terms used in this Notice are as defined in the Policy, unless otherwise indicated.

Substance and Purpose of the Policy

The purpose of the Policy is to provide information about the procedure for making an application under section 83.1(1) of the Act and to inform all interested parties of the circumstances in which the Commission would generally grant an order under section 83.1(1) of the Act to certain issuers. The Policy deals primarily with issuers listed on CDNX, other than issuers that are designated as Capital Pool Company ("CPC") issuers until such time as proposed OSC Policy 41-601 - Capital Pool Companies is adopted as a policy in Ontario by the Commission, and issuers who have been reporting issuers or reporting issuer equivalents in one or more of British Columbia, Alberta, Saskatchewan, Manitoba, Quebec or Nova Scotia for at least 12 months.

Summary of Changes

The Commission has made changes to the Draft Policy to respond to the comments received from CDNX and Farris, Vaughan and to reflect staff's experience with administering the Draft Policy. The changes made were not material and the Commission is not republishing the Policy for comment.

Comments received from CDNX and Farris, Vaughan

(i) CDNX commented that, with respect to the requirement in Part 4 of the Draft Policy that a letter of "good standing" from CDNX accompany an application made under section 83.1(1), CDNX expects to be in a position, upon the implementation of the Policy, to be able to provide a good standing letter for a CDNX issuer confirming that such issuer has not been suspended or delisted by CDNX pursuant to CDNX Policy 2.9 - Trading Halts, Suspensions and Delistings.

Commission's Response

The information which CDNX proposes to put in a good standing letter is available on the CDNX website on a current basis and therefore the Commission is of the view that the good standing letter proposed by CDNX is not necessary. The Policy has been revised to delete the requirement for a good standing letter from CDNX.

(ii) CDNX commented that the position taken in the Draft Policy with respect to applications made under section 83.1(1) by CPC issuers is inconsistent with the Exemption Order granted by the Commission effective December 5, 2000 and specifically Schedule I of that Exemption Order which deals with the significant connection rules (i.e. the requirement that a CDNX listed issuer that has a significant connection to Ontario must make an application to the OSC to be deemed to be a reporting issuer). CDNX stated that it was its understanding that the significant connection rules were to apply to all CDNX listed issuers, including CPC issuers.

Farris, Vaughan's comment also pertained to the position taken in the Draft Policy with respect to applications made under section 83.1(1) by CPC issuers. Farris, Vaughan felt that it was not necessary to require a CPC issuer to wait 12 months after its Qualifying Transaction (as defined in CDNX Policy 2.4 - Capital Pool Companies) since the information circular which a CPC issuer must prepare under the CDNX rules in order to complete its Qualifying Transaction contains prospectus like disclosure and is reviewed by CDNX.

Commission's Response:

The Policy has been revised by removing the statement that a CPC issuer must wait for 12 months following its Qualifying Transaction to be deemed to be a reporting issuer and by adding the statement that the Policy does not apply to CDNX listed issuers who are designated as CPC issuers until such time as proposed OSC Policy 41-601 - Capital Pool Companies is adopted as a policy in Ontario by the Commission. The Policy will, however, apply to any CDNX listed issuer that began as a CPC issuer but has completed a Qualifying Transaction and is no longer designated as a CPC issuer by CDNX.

Changes made to address issues encountered in administering the Draft Policy

The Draft Policy states that an application under section 83.1(1) should include a number of items including particulars of penalties or sanctions imposed on the issuer and/or certain related parties. The Policy has been revised to expand this requirement to include particulars of known ongoing or recently concluded investigations or proceedings by a Canadian securities regulatory authority or that would be likely to be considered important to a reasonable investor making an investment decision and particulars of cease trade or similar orders and bankruptcy and insolvency proceedings relating to the issuer and/or certain related parties. These requirements are consistent with the general prospectus requirements.

 

PART 1 - APPLICATION

1.1 The procedures set forth in this Policy Statement apply to applications made to the Ontario Securities Commission (the "Commission") under section 83.1(1) of the Securities Act (Ontario) (the "Act") for an order deeming an issuer to be a reporting issuer for purposes of Ontario securities law (a "Deeming Order") where the applicant issuer is a reporting issuer in certain other Canadian jurisdictions.

1.2 Notwithstanding section 1.1 of this Policy Statement, sections 1.3 and 1.4 of Part 1 and Parts 4 and 5 of this Policy Statement apply to all applications made under section 83.1(1) of the Act.

1.3 The procedures set forth in OSC Policy 2.1 - Applications to the Ontario Securities Commission, or any successor instrument, apply to all applications made under section 83.1(1) of the Act except to the extent modified by this Policy Statement.

1.4 Notwithstanding anything contained in this Policy Statement, the Commission retains its discretion to act in the public interest with respect to its consideration of all applications made under section 83.1(1) of the Act.

1.5 Notwithstanding anything contained in this Policy Statement, this Policy Statement does not apply to applications under section 83.1(1) of the Act by issuers who are designated as Capital Pool Company issuers by Canadian Venture Exchange Inc. ("CDNX") until such time as proposed OSC Policy 41-601 - Capital Pool Companies is adopted as a policy in Ontario by the Commission.

PART 2 - CDNX-LISTED ISSUERS

2.1 Unless it is otherwise prejudicial to the public interest to do so, upon application under section 83.1(1) of the Act, a Deeming Order will generally be granted by the Commission to an issuer whose securities are listed and posted for trading on CDNX if:

(1) the issuer is in good standing in all jurisdictions in which it is a reporting issuer or a reporting issuer equivalent; and

(2) the issuer is in good standing under the rules, regulations and policies of CDNX.

2.2 In order to independently assess the "good standing" referred to in subsection 2.1(1), staff may review the applicant issuer's continuous disclosure record and request that any deficiencies in that record be addressed prior to any recommendation under section 83.1(1) of the Act being made.

PART 3 - NON-CDNX LISTED ISSUERS

3.1 Unless it is otherwise prejudicial to the public interest to do so, upon application under section 83.1(1) of the Act, a Deeming Order will generally be granted by the Commission to an issuer who is a reporting issuer in British Columbia, Alberta, Saskatchewan, Quebec or Nova Scotia or is a reporting issuer equivalent in Manitoba (the "Relevant Jurisdictions") and whose securities are not listed on CDNX if:

(1) the issuer has been a reporting issuer or a reporting issuer equivalent, as applicable, in one or more Relevant Jurisdictions for at least 12 months prior to the date of the application; and

(2) the issuer is in good standing in all jurisdictions in which it is a reporting issuer or a reporting issuer equivalent.

3.2 In order to independently assess the "good standing" referred to in subsection 3.1(2), staff may review the applicant issuer's continuous disclosure record and request that any deficiencies in that record be addressed prior to any recommendation under section 83.1(1) of the Act being made.

PART 4 - APPLICATION PROCEDURE

4.1 An application made under section 83.1(1) of the Act should include:

(1) if applicable, particulars of the jurisdictions in which the issuer is a reporting issuer or a reporting issuer equivalent and the date the issuer became a reporting issuer in each such jurisdiction;

(2) if applicable, particulars of the stock exchanges or trading or quotation systems on which the issuer's securities are traded or quoted;

(3) particulars of any penalties or sanctions imposed against the issuer by a court relating to Canadian securities legislation or by a Canadian securities regulatory authority and the grounds on which they were imposed or the terms of the settlement agreement and the circumstances that gave rise to the settlement agreement;

(4) particulars of any penalties or sanctions imposed and the grounds on which they were imposed or the terms of the settlement agreement and the circumstances that gave rise to the settlement agreement, if a director or officer of the issuer, or a shareholder holding sufficient securities of the issuer to affect materially the control of the issuer has (i) been subject to any penalties or sanctions imposed by a court relating to Canadian securities legislation or by a Canadian securities regulatory authority or has entered into a settlement agreement with a Canadian securities regulatory authority, or (ii) been subject to any other penalties or sanctions imposed by a court or regulatory body that would be likely to be considered important to a reasonable investor making an investment decision;

(5) particulars of:

(i) any known ongoing or concluded investigations by:

(a) a Canadian securities regulatory authority; or

(b) a court or regulatory body, other than a Canadian securities regulatory authority, that would be likely to be considered important to a reasonable investor making an investment decision; and

(ii) any bankruptcy or insolvency proceedings, or other proceedings, arrangements or compromises with creditors, or the appointment of a receiver, receiver manager or trustee, within the 10 years before the date of the application;

relating to the issuer, a director or officer of the issuer, or a shareholder holding sufficient securities of the issuer to affect materially the control of the issuer;

(6) particulars of:

(i) any cease trade or similar orders, or orders that denied access to any exemptions under Ontario securities law, for a period of more than 30 consecutive days, within the 10 years before the date of the application; and

(ii) any bankruptcy or insolvency proceedings, or other proceedings, arrangements or compromises with creditors, or the appointment of a receiver, receiver manager or trustee, within the 10 years before the date of the application;

relating to any other issuer which a director or officer of the issuer making the application, or a shareholder holding sufficient securities of such issuer to affect materially the control of such issuer, was a director or officer of at the time of such event;

(7) a certificate of no default, dated within 10 days of the date of the application, from the securities regulatory authority in each jurisdiction in which the issuer is a reporting issuer or a reporting issuer equivalent;

(8) for security check purposes, a completed Authorization of Indirect Collection of Personal Information in the form attached hereto as Appendix A for each director, executive officer and promoter, if any, and each director and executive officer of the promoter, if any, of the issuer; and

(9) the filing fee prescribed under Schedule I to the Regulation made under the Act.

PART 5 - SEDAR

5.1 Immediately upon receipt of a Deeming Order, the issuer will be expected to amend its SEDAR Profile to indicate that it is a reporting issuer in Ontario.

 

The attached Schedule 1 contains information concerning the name, position with or relationship to the applicant, name and address of employer, if other than the applicant, residential address, passport number and date of issuance, date and place of birth and citizenship of each director, executive officer, promoter, if any, and each director and executive officer of the promoter, if any, of the applicant named below (the "Issuer"). The Issuer hereby confirms that each person or company listed on Schedule 1

(a) has been notified by the Issuer

(i) of the Issuer's delivery to the Commission of the information pertaining to the person or company as set out in Schedule 1,

(ii) that such information is being collected indirectly by the Commission under the authority granted to it under the Securities Act (Ontario),

(iii) that such information is being collected for the purpose of enabling the Commission to discharge its obligations under the provisions of the Securities Act (Ontario) that permits the Commission to refuse to grant an order deeming an issuer to be a reporting issuer for the purposes of Ontario securities law where it would be prejudicial to the public interest, and

(iv) that the title, business address and business telephone number of the public official who can answer questions about the Commission's indirect collection of the information is:

Administrative Assistant to the Director of Corporate Finance
Ontario Securities Commission
20 Queen Street West
Suite 1903, Box 55
Toronto, Ontario M5H 3S8
(416) 597-0681

(b) has authorized the indirect collection of the information by the Commission.

Date: ________________________

_____________________________

Name of Issuer

Per:__________________________

______________________________

Name

______________________________

Official Capacity


(Please print the name of the individual whose signature appears in the official capacity)

Schedule 1 Personal Information to Appendix A
Authorization of Indirect Collection of Personal Information

[Name of Issuer]

Name and Position with or Relationship to Issuer	Name and Address of Employer, if other than issuer	Residential Address [If Residential Address is outside North America provide Passport No. and Date of Issuance]	Date and Place of Birth	Citizenship