Relief from the prospectus requirement in connection with the use of electronic roadshow materials -- cross-border offering of securities -- compliance with U.S. offering rules leads to non-compliance with Canadian regime -- relief required as use of electronic roadshow materials constitutes a distribution requiring compliance with prospectus requirements -- relief granted from section 53 of the Securities Act (Ontario) in connection with a cross-border offering -- decision subject to conditions.
Applicable Legislative Provisions
Securities Act, R.S.O. 1990, c. S.5, as am., ss. 53, 74.
National Policy 47-201 Trading Securities Using the Internet and Other Electronic Means, s. 2.7.
July 15, 2011
IN THE MATTER OF
THE SECURITIES ACT
R.S.O. 1990, CHAPTER S.5, AS AMENDED
IN THE MATTER OF
SQI DIAGNOSTICS INC.
UPON the application of SQI Diagnostics Inc. (the Filer) to the Ontario Securities Commission (the Commission) for a ruling pursuant to subsection 74(1) of the Act that the posting of certain electronic roadshow materials on one or more commercial services such as www.retailroadshow.com and/or www.netroadshow.com during the "waiting period" will not be subject to section 53 of the Act (the Order Sought);
AND UPON considering the application and the recommendation of the staff of the Commission;
AND UPON the Filer having represented to the Commission as follows:
1. The predecessor to the Filer, Emblem Capital Inc., was incorporated on September 11, 2003 under the Canada Business Corporations Act and filed articles of amendment to change its name to "SQI Diagnostics Inc." on April 20, 2007.
2. The principal office of the Filer is located at 36 Meteor Drive, Toronto, ON M9W 1A4.
3. The Filer has filed a preliminary short form base PREP prospectus (the Preliminary Prospectus) in respect of an offering of common shares (the Offered Shares) by the Filer (the Offering).
4. Contemporaneously with the filing of the Preliminary Prospectus, the Filer also has filed a registration statement on Form F-10 (the Form F-10) under the United States Securities Act of 1933, as amended (the 1933 Act), with the United States Securities and Exchange Commission (the SEC) in respect of the Offering.
5. The Filer intends to use electronic roadshow materials (the Website Materials) to promote the Offering, as is now typical for initial public offerings in the United States.
6. Compliance with U.S. securities laws for typical initial public offerings (that is, offerings by an issuer not already subject to SEC reporting requirements), requires either making the Website Materials available in a manner that affords unrestricted access to the public, or filing the Website Materials on the SEC's Electronic Data-Gathering Analysis and Retrieval System (known by its acronym, EDGAR), which will have the same effect of affording unrestricted access. We understand that, in practice, making documents available "without restriction" means that no restrictions on access or viewing may be imposed, both with respect to persons inside and outside of the United States.
7. The Filer and its underwriters wish to carry out the Offerings in a manner that is "typical" for public offerings in the United States by posting the Website Materials on an internet-based commercial service such as www.retailroadshow.com or www.netroadshow.com, without password or other access restrictions.
8. Applicable securities laws in Ontario do not permit the Website Materials to be made generally available to the public without restriction during the waiting period. Thus, absent relief, the Filer could not conduct the Offering in the United States in the typical manner and comply with Ontario securities laws unless the Order Sought is granted.
9. The Website Materials will contain a statement informing readers that the Website Materials do not contain all of the information in the Preliminary Prospectus, including any amendment thereto, or the final prospectus (the Final Prospectus), and that prospective purchasers of the Offered Shares should review all of such documents, in addition to the Website Materials, for complete information regarding the Offered Shares.
10. The Filer will include a hyperlink in the Website Materials to the documents referred to in paragraph 9, if and when such documents are filed.
11. The Website Materials will be fair and balanced.
12. The Filer will state in the Website Materials, any amendment to the Preliminary Prospectus and in the Final Prospectus that, in connection with the information contained in the Website Materials posted on one or more commercial sites, such as such as www.retailroadshow.com and/or www.netroadshow.com, purchasers of the Offered Shares in Ontario will have a contractual right of action for any misrepresentation in the Website Materials against the Filer and the Canadian underwriters who sign the Final Prospectus.
13. At least one underwriter that signs the Preliminary Prospectus, any amendment to the Preliminary Prospectus and the Final Prospectus will be registered in Ontario.
14. Ontario purchasers will only be able to purchase the Offered Shares through an underwriter that is registered in Ontario, unless an exemption from the dealer registration requirement is available.
15. The Filer acknowledges that the Order Sought relates only to the posting of Website Materials on one or more commercial services, such as www.retailroadshow.com and/or www.netroadshow.com, and not in respect of the Preliminary Prospectus, including any amendments, or the Final Prospectus.
16. The Filer is not in default of any of its obligations under applicable securities legislation.
AND UPON the Commission being satisfied that to do so would not be prejudicial to the public interest;
IT IS RULED, pursuant to subsection 74(1) of the Act, that the Order Sought is granted so long as:
a) Each amendment to the Preliminary Prospectus after the date of this order, the Final Prospectus, and any amendment thereto, state that purchasers of the Offered Shares in Ontario in which the Final Prospectus is filed and a receipt therefor is issued will have a contractual right of action for any misrepresentation in the Website Materials against the Filer and the Canadian underwriters who sign the Final Prospectus substantially in the following form:
We [may make/have made] available certain materials describing the offering (the "Website Materials") on the website of one or more commercial services such as www.retailroadshow.com or www.netroadshow.com under the heading "SQI Diagnostics Inc." during the period prior to obtaining a final receipt for the final MJDS prospectus relating to this offering (the "Final Prospectus") from the securities regulatory authority in Ontario. In order to give purchasers in Ontario the same unrestricted access to the Website Materials as provided to U.S. purchasers, we have applied for and obtained, in a decision dated July •, 2011, exemptive relief from the securities regulatory authority in Ontario. Pursuant to the terms of that exemptive relief, we and the Canadian underwriter have agreed that, in the event that the Website Materials contained any untrue statement of a material fact or omitted to state a material fact required to be stated or necessary in order to make any statement therein not misleading in the light of the circumstances in which it was made (a "misrepresentation"), a purchaser resident in Ontario who purchases the shares offered hereby pursuant to the Final Prospectus during the period of distribution shall have, without regard to whether the purchaser relied on the misrepresentation, rights against us and the Canadian underwriter with respect to such misrepresentation as are equivalent to the rights under section 130 of the Securities Act (Ontario) subject to the defences, limitations and other terms thereof, as if such misrepresentation were contained in the Final Prospectus.
b) The Website Materials will not include information that compares the Filer to one or more other issuers (Comparables) unless the Comparables are also included in the Preliminary Prospectus, including any amendments thereto, and the Final Prospectus.
DATED at Toronto, this 15th day of July 2011