MYM Nutraceuticals Inc. and GMP Securities L.P.
Headnote
National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions – Application for exemptive relief to permit issuer and underwriters, acting as agents for the issuer, to enter into equity distribution agreements to make "at the market" (ATM) distributions of common shares over the facilities of a marketplace in Canada – ATM distributions to be made pursuant to shelf prospectus procedures in Part 9 of NI 44-102 Shelf Distributions – issuer will issue a press release and file agreements on SEDAR – application for relief from prospectus delivery requirement – delivery of prospectus not practicable in circumstances of an ATM distribution – relief from prospectus delivery requirement has effect of removing two-day right of withdrawal and remedies of rescission or damages for non-delivery of the prospectus – application for relief from certain prospectus form requirements – relief granted to permit modified forward-looking certificate language – relief granted on terms and conditions set out in decision document – decision will terminate 25 months after the issuance of a receipt for the shelf prospectus. Decision and application also held in confidence by decision makers until the earlier of the entering into of an equity distribution agreement, waiver of confidentiality or 90 days from the date of the decision.
Applicable Legislative Provisions
Securities Act, R.S.O. 1990, c. S.5, as am, ss. 71, 147.
Applicable Ontario Rules
National Instrument 44-101 Short Form Prospectus Distributions, s. 8.1 and Item 20 of Form 44-101F1.
National Instrument 44-102 Shelf Distributions,s. 6.7, Part 9, s 11.1, s. 2.2 of Part 2 of Appendix A.
National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions.
October 5, 2018
IN THE MATTER OF
THE SECURITIES LEGISLATION OF
BRITISH COLUMBIA AND ONTARIO
(the Jurisdictions)
AND
IN THE MATTER OF
THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS
IN MULTIPLE JURISDICTIONS
AND
IN THE MATTER OF
MYM NUTRACEUTICALS INC.
(the Issuer)
AND
GMP SECURITIES L.P.
(the Agent and, together with the Issuer, the Filers)
DECISION
Background
1 The securities regulatory authority or regulator in each of the Jurisdictions (the Decision Maker) has received an application (the Application) from the Filers for a decision under the securities legislation of the Jurisdictions (the Legislation) for the following relief (the Exemption Sought):
(a) that the requirement that a dealer, not acting as agent of the purchaser who receives an order or subscription for a security offered in a distribution to which the prospectus requirement applies, send or deliver to the purchaser or its agent the latest prospectus (including the applicable prospectus supplement) and any amendment to the prospectus (the Prospectus Delivery Requirement) does not apply to the Agent or any other registered investment dealer acting on behalf of the Agent as a selling agent (a Selling Agent) in connection with the at-the-market distribution of common shares of the Issuer (the ATM Distribution) as defined in National Instrument 44-102 Shelf Distributions (NI 44-102) made by the Issuer pursuant to one or more substantially identical equity distribution agreements (an Equity Distribution Agreement) to be entered into between the Filers;
(b) that the requirements (collectively, the Prospectus Form Requirements) to include in the statements specified in items 2 and 3 of 5.5 of NI 44-102 in a base shelf prospectus to be filed in respect of an ATM Distribution, and the requirements to include in a prospectus supplement each of the following:
(i) a forward-looking issuer certificate in the form specified in section 2.1 of Appendix A to NI 44-102;
(ii) a forward-looking agent’s certificate in the form specified in section 2.2 of Appendix A to NI 44-102; and
(iii) a statement respecting purchasers' statutory rights of withdrawal and remedies for rescission or damages in substantially the form prescribed by Item 20 of Form 44-101F1 Short Form Prospectus,
do not apply to a prospectus of the Issuer (including the applicable prospectus supplement(s)), to be filed in respect of the sale of common shares of the Issuer (the Common Shares) pursuant to ATM Distributions.
The Decision Makers have also received a request from the Filers for a decision that the Application and this decision (the Confidential Material) be kept confidential and not made public until the earliest of (i) the date on which the Issuer and the Agent enter into the Equity Distribution Agreement, (ii) the date on which the Filers advise the Decision Makers that there is no longer any need for the Confidential Material to remain confidential; and (iii) the date that is 90 days after the date of this decision (the Confidentiality Relief).
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a dual application):
(a) the British Columbia Securities Commission is the principal regulator for this Application;
(b) the Filers have provided notice that section 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in Alberta, Manitoba, Saskatchewan, New Brunswick, Nova Scotia, Prince Edward Island and Newfoundland and Labrador; and
(c) the decision is the decision of the principal regulator and evidences the decision of the securities regulatory authority or regulator in Ontario.
Interpretation
2 Terms defined in National Instrument 14-101 Definitions or MI 11-102 have the same meanings if used in this decision, unless otherwise defined herein.
Representations
3 This decision is based on the following facts represented by the Filers:
MYM Nutraceuticals Inc.
1. the Issuer is a company established under the laws of the Province of British Columbia; the head office of the Issuer is located in Vancouver, British Columbia;
2. the Issuer is currently a reporting issuer or the equivalent under the securities legislation of British Columbia, Alberta and Ontario and is not in default of any requirements under applicable securities legislation in any of the jurisdictions of Canada, except that it has not filed a business acquisition report in respect of the acquisition of the brand and assets from HempMed, a Toronto based developer and marketer of hemp-based cannabidiol extracts and oil-infused nutraceutical products on April 11, 2017 (the HempMed Business)
3. Item 11.1(1)6(b) of NI 44-101F1 requires an issuer to incorporate by reference a business acquisition report filed by the issuer under Part 8 of NI 51-102 for acquisitions completed since the beginning of the financial year in respect of which the issuer’s current AIF is filed unless the issuer incorporated at least 9 months of the acquired business into the issuer’s current annual financial statements;
4. the Issuer has filed its audited financial statements for the year-ended May 31, 2018 that include more than nine months of the financial results of the HempMed Business, therefore a business acquisition report for the acquisition of the HempMed Business is not required to be incorporated by reference in any future prospectus of the Issuer;
5. the Common Shares are listed on the Canadian Securities Exchange (CSE), quoted on the OTCQX Best Market and quoted on the Open Market of the Frankfurt Stock Exchange;
GMP Securities L.P.
6. the Agent is a limited partnership established under the laws of Manitoba;
7. the Agent is registered as an investment dealer under the Legislation of each of the Jurisdictions, and is a member of the Investment Industry Regulatory Organization of Canada;
8. the Agent is not in default of securities legislation in any jurisdiction of Canada;
Proposed ATM Distribution
9. subject to mutual agreement on terms and conditions, the Filers propose to enter into Equity Distribution Agreements for the purpose of one or more ATM Distributions involving the periodic sale of Common Shares by the Issuer through the Agent, as agent, under the shelf prospectus procedures prescribed by Part 9 of NI 44-102;
10. prior to making an ATM Distribution, the Issuer will have filed in each province of Canada other than Quebec: (i) a final short form base shelf prospectus (the Shelf Prospectus) providing for distribution from time to time of securities of the Issuer, including Common Shares; and (ii) a prospectus supplement describing the terms of the ATM Distribution, including the Equity Distribution Agreements, and otherwise supplementing the disclosure in the Shelf Prospectus (the Prospectus Supplement and, together with the Shelf Prospectus as supplemented or amended and including any documents incorporated by reference therein, the Prospectus);
11. the Issuer will include in the Shelf Prospectus a forward-looking certificate of the Issuer in the form prescribed by section 1.1 of Appendix A to NI 44-102;
12. upon entering into the Equity Distribution Agreement, the Issuer will immediately:
(a) issue and file a news release pursuant to section 3.2 of NI 44-102 announcing that the Equity Distribution Agreement has been entered into by the Issuer and indicating that the Shelf Prospectus and the Prospectus Supplement have been filed on SEDAR and specifying where and how purchasers may obtain copies of each; and
(b) file the Equity Distribution Agreement on SEDAR;
13. under the proposed Equity Distribution Agreements the Issuer may conduct one or more ATM Distributions subject to the 10% limitation set out in subsection 9.1(1) of NI 44-102;
14. the Issuer will conduct ATM Distributions through the Agent, as agent, directly, or through another registered investment dealer acting on behalf of the Agent as a Selling Agent through the facilities of the CSE or any other "marketplace" (as defined in National Instrument 21-101 Marketplace Operation) in Canada (each, a Canadian Marketplace);
15. the Agent will act as the sole agent on behalf of the Issuer in connection with an ATM Distribution on the CSE or any other Canadian Marketplace, and will be the sole entity paid an agency fee or commission by the Issuer in connection with such sales; the Agent will sign an agent's certificate in the Prospectus Supplement filed on SEDAR;
16. the Agent will effect ATM Distributions on Canadian Marketplaces, either itself or through a Selling Agent; if the sales are effected through a Selling Agent, the Selling Agent will be paid a customary seller's commission for effecting the trades on behalf of the Agent; a purchaser's rights and remedies under the Legislation against the Agent, as an agent for an ATM Distribution, will not be affected by a decision to effect the sale directly or through a Selling Agent;
17. the aggregate number of Common Shares sold on one or more Canadian Marketplaces pursuant to an ATM Distribution on any trading day will not exceed 25% of the trading volume of the Common Shares on all Canadian Marketplaces on that day;
18. the Equity Distribution Agreement will provide that, at the time of each sale of Common Shares pursuant to an ATM Distribution, the Issuer will represent to the Agent that the Prospectus, including the documents incorporated by reference therein and as supplemented by any subsequent amendment or supplement to the Prospectus contains full, true and plain disclosure of all material facts relating to the Issuer and the Common Shares being distributed; the Issuer would therefore be unable to initiate sales pursuant to an ATM Distribution when it is in possession of undisclosed information that would constitute a material fact or a material change in respect of the Common Shares or the Issuer;
19. if, after the Issuer delivers a sell notice to the Agent directing the agent to sell Common Shares on the Issuer’s behalf pursuant to the Equity Distribution Agreement (a Sell Notice), the sale of the Common Shares specified in the notice, taking into consideration prior sales, would constitute a material fact or material change, the Issuer would be required to suspend sales under the Equity Distribution Agreement until either: (i) it has filed a material change report or amended the Prospectus, or (ii) circumstances have changed so that the sales would no longer constitute a material fact or a material change;
20. in determining whether the sale of Common Shares specified in a Sell Notice would constitute a material fact or a material change, the Issuer will take into account a number of factors, including, without limitation: (i) the parameters of the Sell Notice, including the number of Common Shares proposed to be sold and any price or timing restrictions that the Issuer may impose with respect to the particular ATM Distribution; (ii) the percentage of the outstanding Common Shares that the number of Common Shares proposed to be sold pursuant to the Sell Notice represents; (iii) sales under earlier Sell Notices; (iv) trading volume and volatility of the Common Shares; (v) recent developments in the business, affairs and capital structure of the Issuer; and (vi) prevailing market conditions generally;
21. the Agent will monitor closely the market's reaction to trades made on any Marketplace in Canada pursuant to the ATM Distribution in order to evaluate the likely market impact of future trades; the Agent has experience and expertise in managing sell orders to limit downward pressure on the price of the securities being sold; if the Agent has concerns as to whether a particular sell order placed by the Issuer may have a significant effect on the market price of the Common Shares, the Agent will recommend against effecting the trade at that time; it is in the interest of both the Issuer and the Agent to minimize the market impact of sales under the ATM Distribution;
Disclosure of Sales in Monthly Report and Interim Report
22. within seven calendar days after the end of each calendar month in which the Issuer sells Common Shares under an ATM Distribution, the Issuer will file on SEDAR a report disclosing the number and average selling price of the Common Shares distributed through a Marketplace in Canada pursuant to an ATM Distribution, as well as commissions and gross and net proceeds;
23. furthermore, the Issuer will disclose in the Issuer's annual and interim financial statements and related management discussion and analysis filed on SEDAR in respect of that financial period, the number and average selling price of the Common Shares distributed pursuant to the ATM Distribution during that annual or interim period, as well as commissions and gross and net proceeds;
Prospectus Delivery Requirement
24. pursuant to the Prospectus Delivery Requirement, a dealer effecting a trade of securities offered under a prospectus is required to deliver a copy of the prospectus (including the applicable prospectus supplement(s) in the case of a base shelf prospectus) to the purchaser within prescribed time limits;
25. delivery of the Prospectus is not practicable in the circumstances of an ATM Distribution as neither the Agent nor any Selling Agent effecting the trade will know the identity of the purchasers;
26. although purchasers under the ATM Distribution would not physically receive a printed prospectus, the Prospectus (together with all documents incorporated by reference therein) will be filed and readily available to all purchasers electronically via SEDAR; in addition, as stated in paragraph 12 above, the Issuer will issue a news release that specifies where and how copies of the Shelf Prospectus and the Prospectus Supplement can be obtained;
27. the liability of an issuer or an agent (or others) for a misrepresentation in a prospectus pursuant to the civil liability provisions of the Legislation will not be affected by the grant of an exemption from the Prospectus Delivery Requirement, because purchasers of securities offered by a prospectus during the period of distribution have a right of action for damages or rescission, without regard to whether the purchaser relied on the misrepresentation or in fact received a copy of the prospectus;
Withdrawal Right and Right of Action for Non-Delivery
28. pursuant to the Legislation, an agreement to purchase securities in respect of a distribution to which the prospectus requirement applies is not binding on the purchaser if a dealer receives, not later than midnight on the second day exclusive of Saturdays, Sundays and holidays, after receipt by the purchaser of the latest prospectus or any amendment to the prospectus, a notice in writing that the purchaser does not intend to be bound by the agreement of purchase (the Withdrawal Right);
29. pursuant to the Legislation, a purchaser of a security to whom a prospectus was required to be sent or delivered in compliance with the Prospectus Delivery Requirements, but was not so sent or delivered, has a right of action for rescission or damages against the dealer who did not comply with the Prospectus Delivery Requirements (the Right of Action for Non-Delivery);
30. neither the Withdrawal Right nor the Right of Action for Non-Delivery is workable in the context of an ATM Distribution because the Prospectus will not be delivered to a purchaser of Common Shares thereunder;
Prospectus Form Requirements
31. to reflect the fact that an ATM Distribution is a continuous distribution, the Prospectus Supplement and any amendment thereto will include the following issuer certificate (with appropriate modifications in respect of the filing of an amendment prescribed by section 2.4 of Appendix A to NI 44-102), such issuer certificate to supersede and replace the issuer certificate in the Shelf Prospectus solely with regard to the ATM Offering:
The short form prospectus, as supplemented by the foregoing, together with the documents incorporated in the prospectus by reference as of the date of a particular distribution of securities offered by the prospectus, will, as of that date, constitute full, true and plain disclosure of all material facts relating to the securities offered by the prospectus and this supplement as required by the securities legislation of each of the provinces of Canada other than Quebec.
32. the Prospectus Supplement and any amendment thereto will include the following agents certificate (with appropriate modifications in respect of the filing of an amendment prescribed by section 2.4 of Appendix A to NI 44-102):
To the best of our knowledge, information and belief, the short form prospectus, as supplemented by the foregoing, together with the documents incorporated in the prospectus by reference as of the date of a particular distribution of securities offered by the prospectus, will, as of that date, constitute full, true and plain disclosure of all material facts relating to the securities offered by the prospectus and this supplement as required by the securities legislation of each of the provinces of Canada other than Quebec.
33. a different statement of purchasers’ rights than that required by the Legislation is necessary in order to allow the Prospectus to accurately reflect the relief granted from the Prospectus Delivery Requirement. Accordingly, the Prospectus Supplement will state the following, with the date reference completed:
Securities legislation in certain of the provinces of Canada provide purchasers with the right to withdraw from an agreement to purchase securities and with remedies for rescission or, in some jurisdictions, revision of the price, or damages if the prospectus, prospectus supplements relating to the securities purchased by a purchaser and any amendment are not delivered to the purchaser, provided that the remedies are exercised by the purchaser within the time limit prescribed by securities legislation. However, purchasers of the Common Shares under an at-the-market distribution by the Issuer will not have any right to withdraw from an agreement to purchase the Common Shares and will not have remedies of rescission or, in some jurisdictions, revision of the price or damages for non-delivery of the prospectus because the prospectus, prospectus supplements relating to the Common Shares purchased by such purchasers and any amendment relating to Common Shares purchased by such purchasers will not be delivered as permitted under a decision dated , 2018 and granted pursuant to National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions.
Securities legislation in certain of the provinces of Canada also provides purchasers with remedies for rescission or, in some jurisdictions, revision of the price, or damages if the prospectus, prospectus supplements relating to the securities purchased by a purchaser and any amendment contain a misrepresentation, provided that the remedies are exercised by the purchaser within the time limit prescribed by securities legislation. Any remedies under securities legislation in the jurisdictions that a purchaser of the Common Shares under an at-the-market distribution by the Issuer may have against the Issuer or the Agent for rescission or, in some jurisdictions, revision of the price, or damages if the prospectus, prospectus supplements relating to the securities purchased by a purchaser or any amendment contain a misrepresentation remain unaffected by the non-delivery of the prospectus and the decision referred to above.
Purchasers should refer to the applicable provisions of the securities legislation and the decision referred to above for the particulars of their rights or consult with a legal advisor.
34. the Prospectus Supplement will disclose that, in respect of ATM Distributions under the Prospectus Supplements, the statement prescribed in paragraph 33 above supersedes and replaces the statement of purchasers' rights contained in the Shelf Prospectus;
35. the statements required by subsections items 2 and 3 of 5.5 of NI 44-102 to be included in the Shelf Prospectus will be qualified by adding the following, ", except in cases where an exemption from such delivery requirements has been obtained."
Decision
4 Each of the Decision Makers is satisfied that the decision meets the test set out in the Legislation for the Decision Maker to make a decision.
The decision of the Decision Makers under the Legislation is that the Exemption Sought is granted, provided that:
(a) the Issuer makes the disclosure described in sections 22, 23, 31, 32, 33, 34 and 35; and
(b) the Issuer complies with the representations in section 2, 10, 11, 12, 13, 14, 17, 18, 19 and 20 and the Agent complies with the representations in sections 7, 8, 13, 14, 15, 16, 17, and 21.
This decision will terminate 25 months after the issuance of the receipt for the Shelf Prospectus.
The further decision of the Decision Makers is that the Confidentiality Relief is granted.
“John Hinze”
Director, Corporate Finance
British Columbia Securities Commission