OSC Staff Notice: 43-702 - Review Time Frames for "Equity Line" Short Form Prospectuses

ONTARIOSECURITIES COMMISSION STAFF NOTICE 43-702

REVIEWTIME FRAMES FOR "EQUITY LINE" SHORT FORM PROSPECTUSES

Commission staff wish toadvise that, where an issuer that is eligible to use the short formprospectus system files a preliminary short form prospectus relatingto the distribution of securities in connection with an "equity line"financing (as described below), such prospectus will generally be reviewedwithin the time periods applicable to a long form prospectus.

In recent months, a numberof prospectuses have been filed with the Commission which relate tothe distribution of securities in connection with an "equity line" financingarrangement. Under an equity line arrangement, the issuer typicallyenters into an agreement with one or more purchasers which providesthat, over a certain term, the issuer may from time to time requirethe purchasers to subscribe for a certain number of securities of theissuer, usually at a discount from the then market price. From the perspectiveof the issuer, a line of equity secures access to a readily availablesource of funds and serves a similar function to a line of credit. Fromthe perspective of the purchasers, a line of equity permits the purchasersthe opportunity to purchase securities of the issuer at a discount,and allows for a repayment of capital through the resale of the securitiesinto the secondary market.

Equity-line financings representa relatively novel form of financing in Canada and raise a number ofimportant policy issues relating to the appropriate treatment of suchofferings under existing securities law. These issues are currentlybeing considered by the Canadian Securities Administrators (the "CSA").In the meantime, pending the outcome of such consideration, staff willcontinue to review such offerings in consultation with the other CSAjurisdictions on a case-by-case basis. Staff are of the view, however,that the time periods ordinarily prescribed for the review of shortform prospectuses do not permit sufficient time for adequate reviewof such offerings.

Accordingly, staff wishto advise that, in accordance with the principles of review outlinedin Section 5.3 of National Policy 43-201 -- Mutual Reliance Review Systemfor Prospectuses and Annual Information Forms, a preliminary short formprospectus relating to the distribution of securities in connectionwith an equity line financing will generally be reviewed within thetime periods applicable to a long form prospectus. Issuers who are uncertainas to whether securities which they propose to issue would be consideredas being part of an equity line financing are advised to consult staff.

Reference:

Iva Vranic
Manager, Corporate Finance
Tel.: (416) 593-8115
[email protected]

Margo Paul
Manager, Corporate Finance
Tel.: (416) 593-8136
[email protected]

Paul Hayward
Legal Counsel, Corporate Finance
Tel.: (416) 593-3657
[email protected]