On August 25, 2015, the participating provinces and territory in the Cooperative Capital Markets Regulatory System achieved an important milestone towards implementation of the system by publishing a revised consultation draft of the uniform provincial and territorial capital markets act (now known as the Capital Markets Act), along with the drafts of the initial regulations proposed for adoption by the participating provinces and territory under the draft uniform act. These materials have been published for a 120-day public comment period.
This article is part of Gowlings' Guide to the Proposed Initial Regulations and related materials. In this segment of our guide, we discuss the proposed initial regulations relating to issuers listed or quoted on certain market places. You can view other sections of the guide here.
The participating provinces and territories are proposing to require issuers with connections to the participating provinces and territories, and whose securities are listed or quoted on a market place outside of Canada (a "listed or quoted issuer") to file certain information with the new chief regulator. This is set out in section 3 of CMRA Regulation 51-501 Disclosure and Proxies and is based on New Brunswick Local Rule 51-504 New Brunswick Corporations Listed or Quoted on Certain Marketplaces. The adoption of these requirements will represent a change in British Columbia and Ontario.
Section 3 of CMRA Regulation 51-501 will require a listed or quoted issuer to file within ten days after the listing or quotation:
(i) the full name of the listed or quoted issuer and the address and telephone number of its registered office;
(ii) the name of the market place outside Canada on which the securities are listed or quoted; and
(iii) a copy of any documents that were required to be filed in furtherance of the listing or quotation on the market place.
Reporting issuers will be exempted from these reporting requirements.
Rationale behind NB Rule 51-504
NB Rule 51-504 was introduced in response to a number of companies with no real connection to New Brunswick incorporating in the province (by taking advantage of the New Brunswick Business Corporations Act, which has no director residency requirements), setting up their head offices in New Brunswick, and then proceeding to list their shares on lower tier exchanges using fraudulent documentation, while giving the impression that these companies are legitimate because they are incorporated in Canada and listed on an exchange.
As there are currently no other reporting requirements for these types of issuers, the new requirements are intended to give the new regulatory authority the ability to oversee these issuers and track their capital raising efforts.
How does section 3 of CMRA Regulation 51-501 differ from NB Rule 51-504?
Section 3 of CMRA Regulation 51-501 adopts NB Rule 51-504, largely, in its current form as of March 2, 2015. The only noteworthy change that has been proposed is an expansion of the definition of "listed or quoted issuer".
Right now, NB Rule 51-504 applies only to corporations whose securities are listed or quoted on market places outside New Brunswick and are either corporations (a) under the New Brunswick Business Corporations Act or (b) under the Canada Business Corporations Act with a registered office in New Brunswick. In contrast, under the new regulation, all issuers having a class of securities listed or quoted on a market place outside of Canada and that are either (a) corporations, partnerships or trusts formed, continued or governed in a participating province or territory, or (b) Canada Business Corporations Act corporations with a registered office in a participating province or territory, will be subject to the new requirements.
In addition, an issuer that meets the expanded definition of "listed or quoted issuer" will become a market participant under the draft uniform act and subject to capital market laws with respect to record-keeping and compliance reviews.
What are the implications for British Columbia and Ontario?
Even though this will be a new requirement outside of New Brunswick, it is not expected to negatively impact bona-fide market participants in the other jurisdictions. The requirements are not onerous. There are no associated filing fees or ongoing requirements. The filing with the chief regulator is a one-time filing of information that would typically be prepared by an issuer in connection with its listing or quotation.
If you would like to discuss these regulations and how they will apply to your business, or if you wish to be added to our email distribution list for related publications, please contact Tal Cyngiser* or any of the following lawyers:
*Tal Cyngiser, an Associate in our Toronto office, was seconded to the Canadian Securities Transition Office (CSTO) for over a year, working extensively with the participating provinces and their securities commissions on the drafts of the initial regulations.
To view our full guide, click here.