Proposed Rule: OSC Rule - 72-501 - Prospectus Exemption for First Trade in Certain Securities Over a Market Outside Ontario

Proposed Rule: OSC Rule - 72-501 - Prospectus Exemption for First Trade in Certain Securities Over a Market Outside Ontario

Request for Comment OSC Rule

 



ONTARIO SECURITIES COMMISSION RULE

RULE 72-501 - PROSPECTUS EXEMPTION FOR
FIRST TRADE OVER A MARKET OUTSIDE ONTARIO

PART 1 DEFINITIONS

1.1 Definitions - In this Rule

"convertible restricted security" means a restricted security that entitles or requires the holder to acquire an underlying restricted security;

"restricted security" means

(i) a security acquired in a distribution exempt under the Act or the regulations from section 53 of the Act; or

(ii) a security acquired under a provision in a rule that prohibits a trade of the security except on certain conditions;2 and

"underlying restricted security" means a restricted security that is issued or transferred in accordance with the terms of a convertible restricted security.

PART 2 PROSPECTUS EXEMPTIONS

2.1 Restricted Securities - Section 53 of the Act does not apply to the first trade in a restricted security if

(a) at the time of the acquisition by the seller of the restricted security, the issuer of the restricted security was not a reporting issuer;

(b) at the time of the acquisition by the seller of the restricted security, after giving effect to the issue of the restricted security and any other securities of theclass or series of which the restricted security is a part that were issued at the same time as or as part of the same distribution3 as the restricted security,

(i) persons or companies whose last address as shown on the books of the issuer was in Ontario and who held securities of the class or series of which therestricted security is a part

(A) did not hold more than 10 percent of the outstanding securities of the class or series, and

(B) did not represent in number more than 10 percent of the total number of holders of securities of the class or series; or

(ii) persons or companies who were in Ontario and who beneficially owned securities of the class or series of which the restricted security is a part

(A) did not beneficially own more than 10 percent of the outstanding securities of the class or series, and

(B) did not represent in number more than 10 percent of the total number of holders of securities of the class or series; and

(c) the first trade is executed

(i) through the facilities of a stock exchange outside Ontario;

(ii) on the Nasdaq Stock Market;

(iii) on The Stock Exchange Automated Quotation System of the London Stock Exchange Limited; or

(iv) in the Eurobond Market, as regulated by the International Securities Market Association.

2.2 Underlying Restricted Securities - Section 53 of the Act does not apply to the first trade in an underlying restricted security if

(a) the conditions in paragraphs 2.1(a) and (b) would have been satisfied for the underlying restricted security at the time of the acquisition of the convertiblerestricted security that entitled or required the holder to acquire the underlying restricted security; and

(b) the condition in paragraph 2.1(c) is satisfied.