BCSC releases proposed prospectus exemption

February 14, 2013

Earlier this week, the British Columbia Securities Commission released for comment a proposed new prospectus exemption similar to the offering memorandum exemption found in NI 45-106 Prospectus and Registration Exemptions that would allow issuers (excluding reporting issuers, investment funds, mortgage investment entities and real estate issuers) to raise up to $500,000 without a prospectus. 

Issuers relying on the exemption would only have to provide unaudited financial statements, so long as certain conditions were met. Specifically, issuers would have to include a bold warning on the front page of the offering memorandum and would not be able to distribute complex securities. Further, the exemption would limit investors to investments of no more than $2,000 in any 12-month period. According to the BCSC, the new exemption would address the cost of complying with the OM exemption's financial statement requirements, and would be consistent with the CSA's new OM-form exemption announced in December 2012, with the exception that British Columbia's proposal would require the issuer to identify use of the exemption when filing Form 45-106F6. The CSA's OM-form exemption does not apply to British Columbia or Ontario.

The BCSC is accepting comments on the proposed exemption until April 12, and is specifically asking a number of questions regarding respondents' experience with current exemptions.

As we've discussed in the past, the Canadian Securities Administrators are currently reviewing potential prospectus exemptions, as is the Ontario Securities Commission. Whether British Columbia intends to continue to participate with the CSA's consideration of potential exemptions, or whether it will strike out on its own, remains to be seen.

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