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JUNE 2014 SECURITIES
Anti-Corruption Enforcement Expands: Canadian Executive Sentenced to 3 Years in Prison BD&P’s Anti-Corruption & Bribery Practice AreaMultilateral CSA Notice 45-313: Prospectus Exemption for Distributions to Existing Security HoldersOSC Recently Proposed Prospectus Exemptions
on record
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SECURITIES, EDITOR-IN-CHIEFTed [email protected] 403-260-0298
SECURITIES, MANAGING EDITORRhonda G. [email protected] 403-260-0268
GENERAL NOTICEOn Record is published by BD&P to provide our clients with timely information as a value-added service. The articles contained here should not be considered as legal advice due to their general nature. Please contact the authors, or other members of our Securities team directly for more detailed information or specific professional advice.
On Record Contents:
1 Anti-Corruption Enforcement Expands: Canadian Executive Sentenced to 3 Years in Prison
2 BD&P’s Anti-Corruption & Bribery Practice Area
3 Multilateral CSA Notice 45-313: Prospectus Exemption for Distributions to Existing Security Holders
4 OSC Recently Proposed Prospectus Exemptions
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Securities LawyersAbougoush, Syd S. [email protected] ..........403-260-0399Allford, R. Bruce [email protected] ..........403-260-0247Bacsalmasi, Nicole [email protected] ..........403-260-0253Borich, Brian W. [email protected] ..........403-260-0346Brown, Edward (Ted) [email protected] ..........403-260-0298Brown, Jessica [email protected] ..........403-260-0137Chetner, Stephen J. [email protected] ..........403-260-0265Clark, Kelsey C. [email protected] ..........403-260-0172Cohen, C. Steven [email protected] ..........403-260-0103Cox, Lindsay [email protected] ..........403-260-0192Davidson, Fred D. [email protected] ..........403-260-5718Doelman, Peter [email protected] ..........403-260-0110Fridhandler, q.c., Daryl S. [email protected] ..........403-260-0113Gangl, Shannon M. [email protected] ..........403-260-0279Goldman, Alyson F. [email protected] ..........403-260-0258Grant, Matt [email protected] ..........403-260-0280Greenfield, Keith A. [email protected] ..........403-260-0309Hoeppner, Jacob [email protected] ..........403-806-7874Holden, Brandon [email protected] ..........403-260-0190Inkster, Bronwyn [email protected] ..........403-260-9470Kearl, Scott D. [email protected] ..........403-260-0395Kidd, James L. [email protected] ..........403-260-0181MacKenzie, Grant A. [email protected] ..........403-260-9466Mann, Ravina [email protected] ..........403-260-0390Maslechko, William S. [email protected] ..........403-260-0377Oke, Jeff T. [email protected] ..........403-260-0116Peters, q.c., John A. [email protected] ..........403-260-5748Pettie, q.c., Alan T. [email protected] ..........403-260-0127Reid, Jay P. [email protected] ..........403-260-0340Sandrelli, Michael D. [email protected] ..........403-260-0115Tetley, P.L. (Lonny) [email protected] ..........403-260-0141Twa, q.c., Allan R. [email protected] ..........403-260-0221Welsh, Sylvie [email protected] ..........403-260-0166Zawalsky, Grant A. [email protected] ..........403-260-0376
Securities Litigation LawyersBatty, Trevor A. [email protected] ..........403-260-0263Beke, Paul A. [email protected] ..........403-260-0216
Chiswell, Paul [email protected] ..........403-260-0201Crump Barry R. [email protected] ..........403-260-0352de Groot, David [email protected] ..........403-260-0167Donaldson, Michael J. [email protected] ..........403-260-0228Hannan, Kelly [email protected] ..........403-260-0126Joyce, Emily [email protected] ..........403-260-0198Luu, Joanne [email protected] ..........403-806-7826McDonald, q.c., Daniel J. [email protected] ..........403-260-5724McDonald, Trevor R. [email protected] ..........403-260-0378McGillivray, q.c., Douglas A. [email protected] ..........403-260-0349Sharpe, Jeff E. [email protected] ..........403-260-0176Sunter, Andrew [email protected] ..........403-260-0283Turnbull, Jocelyn [email protected] ..........403-260-0264Varzari, Jennifer [email protected] ..........403-260-0287Vogeli, L. Grant [email protected] ..........403-260-0171Wray, Shannon L. [email protected] ..........403-260-0245
Tax LawyersBourque, Michel H. [email protected] ..........403-260-0191Brussa, John A [email protected] ..........403-260-0131DiGregorio, Heather R. [email protected] ..........403-260-0341Flatters, Michael J. [email protected] ..........403-260-0107Fortin, Jeff (Tax Advisor) [email protected] ..........403-260-0315Holden, Brandon [email protected] ..........403-260-0190Lamb, Kirk W. [email protected] ..........403-260-5739McCarthy, Elizabeth (Liz) [email protected] ..........403-260-0230McMullen, Denise Dunn [email protected] ..........403-260-0361Ross, David W. [email protected] ..........403-260-0296
Anti-Corruption & Bribery LawyersAlcock, Craig O. [email protected] ..........403-260-0120Clark, Kelsey C. [email protected] ..........403-260-0172Jensen, Justin [email protected] ..........403-260-0358Martz, Robert [email protected] ..........403-260-0393Sanche, John [email protected] ..........403-260-0310Selnes, Jonathan [email protected] ..........403-260-0360Smith, q.c., Richard B. [email protected] ..........403-260-0255Teetaert, Melanie [email protected] ..........403-260-0384
PAGE 1SECURITIES
Anti-Corruption Enforcement Expands:
Canadian Executive Sentenced to 3 Years in Prison
By Robert Martz
On Friday, May 23, 2014, an Ottawa judge sentenced the first executive convicted under the Corruption of Foreign Public Officials Act (“CFPOA”). Ottawa businessman, Nazir Karigar, was sentenced to three years in federal prison following his conviction for attempting to bribe Air India officials to secure a multi-million dollar security technology contract for CryptoMetrics Canada. The judge took into consideration Mr. Karigar’s co-operation with authorities, his age and the fact that the bribery scheme was unsuccessful as mitigating factors in imposing a three-year sentence. The sentence was imposed under the old version of the CFPOA, which only allowed for a maximum sentence of five years. Amendments to CFPOA now allow a Court to impose sentences of up to fourteen years.
The significant prison sentence and the fact that Mr. Karigar was convicted for merely offering a bribe (no money ever actually changed hands) reinforce comments made by Canadian law enforcement officials that they are adopting an aggressive approach to enforcing CFPOA violations. The sentence is particularly noteworthy in that, by comparison, the average sentence in the United States for violations of its Foreign Corrupt Practices Act is only two years.
Perhaps most importantly, this will set the benchmark for sentencing going forward under the CFPOA. In the future we can expect enforcement authorities to use this sentence as the starting point in plea agreements for CFPOA violations.
PAGE 2SECURITIES
What We DoIncreasingly, Canadian authorities are vigorously pursuing companies for suspected violations of Canada’s Corruption of Foreign Public Officials Act (CFPOA). Any company found to have violated the Act faces significant criminal and civil penalties for any violations and there is the additional risk of significant reputational damage from accusations of corruption or bribery. International trends have favoured tougher legislation as well, such that Canadian companies may also face scrutiny abroad under the American Foreign Corrupt Practices Act and the U.K. Bribery Act.
In the face of realistic potential exposure to civil and criminal liability for rule violations, it is crucial that Canadian companies receive clear, practical advice on these anti-corruption and anti-bribery regimes. Companies need to know how to implement and enforce robust and effective anti-corruption policies and programs, how to conduct the necessary due diligence on corruption and bribery matters when entering into transactions with companies operating in foreign jurisdictions and how to deal with incidents of corruption or bribery if they arise.
BD&P’s Anti-Corruption & Bribery Team is skilled in assisting clients navigate an increasingly complex and evolving area. We have counseled companies with operations throughout the world in creating and implementing practical anti-corruption policies and in conducting corruption and bribery due diligence in mergers and acquisitions. BD&P’s lawyers recognize the business aspects of anti-corruption programs and adopt a practical and business-minded approach to ensuring compliance with anti-corruption regimes world-wide.
Significant Areas of Service• Carrying out risk assessments, including review of clients’ existing policies and procedures• Developing practical and effective anti-corruption policies• Implementing anti-corruption policies• Providing comprehensive training and education for directors, management teams and employees• Conducting corruption and bribery due diligence in mergers and acquisitions• Conducting internal investigations when allegations of bribery or corruption arise• Providing clients with crisis management advice, including that related to the risk of reputational damage in the face of a breach
or suspected breach of anti-corruption legislation• Advising clients faced with external investigations or litigation
Visit BD&P’s website www.bdplaw.com/anti-corruption-bribery/ for further information on this Practice Area and the lawyers on the Team.
BD&P’s Anti-Corruption & Bribery Practice Area
On March 13, 2014, the securities regulatory authorities in all Canadian jurisdictions, except Ontario and Newfoundland and Labrador, (the “Participating Jurisdictions”) published Multilateral CSA Notice 45-313 – Prospectus Exemption for Distributions to Existing Security Holders (the “Notice”). The Notice sets out a new prospectus exemption that, with certain stipulations, allows issuers listed on the Toronto Stock Exchange (“TSX”), the TSX Venture Exchange (“TSXV”) and the Canadian Securities Exchange (“CSE”) to raise funds through private placement distributions of securities to their existing security holders (the “Exemption”).
The Exemption aims to facilitate raising capital for listed issuers and to encourage participation of retail investors in private placements, while maintaining an appropriate level of investor protection.
The Exemption permits listed issuers to issue listed securities to their existing security holders provided several conditions are met. The key conditions include:• the issuer must have a class of equity securities listed on the TSX ,
TSXV, or CSE;• the private placement can consist only of a class of equity securities
listed on the TSX, TSXV or CSE, or units consisting of the listed security and a warrant to acquire the listed security;
• the issuer must make the private placement available to all existing security holders that hold the same type of listed security;
• unless the investor has obtained advice regarding the suitability of the investment from a registered investment dealer, each investor is restricted to a maximum investment of $15,000 per issuer under the Exemption in a 12 month period;
• the issuer must have filed all timely and periodic disclosure documents as required under applicable securities laws;
• the issuer must issue a news release disclosing the proposed private placement, the maximum and minimum amounts of the private placement and details of the use of proceeds;
• each investor must confirm in writing to the issuer that, as at the record date, the investor held the type of listed security offered under the exemption;
• an investor must be provided with certain rights of action in the event of a misrepresentation in the issuer’s continuous disclosure record; and
• although an offering document is not required, if an issuer voluntarily provides one, the issuer must file the offering document with the securities regulatory authorities and an investor will have certain rights of action in the event of a misrepresentation in the offering document.
There are additional items in the Exemption which should be noted. The “record date” is the date that is at least one day prior to the “announcement date”, which is the day that an issuer issues an offering news release. Securities acquired under the Exemption will be subject to resale restrictions pursuant to applicable securities laws, which includes a 4-month restricted period from the date of the distribution. Additionally, issuers will be required to file a report of exempt distribution with the securities regulatory authorities within 10 days after each distribution under the Exemption.
The Exemption became effective in the Participating Jurisdictions on March 13, 2014. Please CLICK HERE for full text of CSA Notice.
SECURITIESPAGE 3
Multilateral CSA Notice 45-313: Prospectus Exemption for Distributions to Existing Security HoldersBy Jessica Brown and Shanlee von Vegesack, Student-at-Law
On March 20, 2014, the Ontario Securities Commission (“OSC”) published four new proposed prospectus exemptions for a 90-day comment period, including an exemption for existing security holders similar to the one adopted in most other provinces discussed in the previous article. The additional three prospectus exemptions proposed by the OSC include:
Offering Memorandum ExemptionThe proposed offering memorandum exemption (the “OM Exemption”) is based on the existing offering memorandum exemption currently found in section 2.9(2) of National Instrument 45-106 – Prospectus and Registration Exemptions (“NI 45-106”), which is not currently available in Ontario. The proposed OM Exemption would impose limits for individual investors, namely $30,000 for eligible investors and $10,000 for non-eligible investors but would not place limits on the size or frequency of offerings an issuer could make. Additionally, individual investors would be required to sign a risk acknowledgement form prior to or at the time of purchase of a security in reliance on this exemption. Alberta, Quebec, New Brunswick and Saskatchewan are also proposing to amend their offering memorandum exemption to align with Ontario’s proposal.
Family, Friends and Business Associates ExemptionThe proposed family, friends and business associates exemption (the “FFBA Exemption”) is based on the existing family, friends and business associates exemption currently found in section 2.5(1) of NI 45-106, which is not currently available in Ontario. No limit has been proposed on the size of an offering made under the proposed FFBA Exemption but only certain types of securities may be distributed pursuant to the proposed FFBA Exemption.
Further guidance on the meaning of close personal friend and close business associate would be provided and the onus of establishing the existence of such relationships would be on the issuer.
Individual investors would be required to sign a risk acknowledgement form prior to or at the time of purchasing a security in reliance on the proposed FFBA Exemption. In connection with the proposed implementation of the FFBA Exemption, the OSC is also proposing to repeal the existing founder, control person and family exemption in section 2.7 of NI 45-106.
Crowdfunding Exemption Under the proposed crowdfunding exemption (the “Crowdfunding Exemption”), both reporting and non-reporting issuers and their affiliates would be able to raise up to $1.5 million per year. Investors would also be limited to investing no more than $2,500 in a single investment, and no more than $10,000 per year under the exemption. However, the proposed Crowdfunding Exemption would not be available to investment funds or real estate issuers that are not reporting issuers. Further, it would not be available in relation to novel or complex
securities. Corresponding requirements for crowdfunding portals have also been proposed.
Manitoba, New Brunswick, Nova Scotia, Quebec and Saskatchewan, have also published a proposed start-up crowdfunding exemption (the “Start-Up Crowdfunding Exemption”) for both reporting issuers and non-reporting issuers with similar requirements. These regulators have proposed a different and less onerous exemption specifically for start-up companies that would target very early stage companies that are non-reporting issuers. This exemption is similar to that which is currently available in Saskatchewan. Under the proposed Start-Up Crowdfunding Exemption, non-reporting issuers would be limited to raising no more than $150,000 per offering and investors would not be able to invest more than $1,500 in a single investment. Additionally, the exemption would be subject to less onerous compliance requirements. British Columbia has also published for comment its own start-up exemption proposal applicable to non-reporting issuers with similar investment limits.
Comments on these exemption proposals are requested by June 18, 2014. Please CLICK HERE for full details on proposed exemptions.
SECURITIES
OSC Recently Proposed Prospectus ExemptionsBy Jessica Brown and Shanlee von Vegesack, Student-at-Law
PAGE 4
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