National Policy 11-203 Process For Exemptive Relief Applications in Multiple Jurisdictions -- Issuer applied for exemption from paragraph 2.2(d) of National Instrument 44-101 Short Form Prospectus Distributions (NI 44-101), which requires an issuer to have current annual financial statements and a current annual information form in order to be eligible to file a short form prospectus -- Issuer had filed a long form prospectus including operating statements and other disclosure in respect of a probable acquisition of oil and gas assets -- Having done so, issuer was similar to issuers that are eligible to rely on subsection 2.7(1) of NI 44-101 -- Relief granted, subject to conditions.
Applicable Legislative Provisions
National Instrument 44-101 Short Form Prospectus Distributions, s. 2.2(d).
Citation: Parallel Energy Trust, Re, 2011 ABASC 425
August 9, 2011
IN THE MATTER OF
THE SECURITIES LEGISLATION OF
ALBERTA AND ONTARIO
IN THE MATTER OF
THE PROCESS FOR EXEMPTIVE RELIEF
APPLICATIONS IN MULTIPLE JURISDICTIONS
IN THE MATTER OF
PARALLEL ENERGY TRUST (THE FILER)
The securities regulatory authority or regulator in each of the Jurisdictions (the Decision Maker) has received an application from the Filer for a decision under the securities legislation of the Jurisdictions (the Legislation) exempting the Filer from Paragraph 2.2(d) of National Instrument 44-101 Short Form Prospectus Distributions (NI 44-101) (the Exemption Sought), which requires the Filer to have a current annual information form (AIF) and current annual financial statements in at least one jurisdiction in which the Filer is a reporting issuer, in order to qualify to file a short form prospectus under NI 44-101 (the AIF and Annual Financial Statement Requirement).
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a dual application):
(a) the Alberta Securities Commission is the principal regulator for this application;
(b) the Filer has provided notice that Subsection 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in British Columbia, Saskatchewan, Manitoba, Québec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador; and
(c) this decision is the decision of the principal regulator and evidences the decision of the securities regulatory authority or regulator in Ontario.
Terms defined in National Instrument 14-101 Definitions, MI 11-102 or NI 44-101 have the same meanings if used in this decision, unless otherwise defined herein.
The decision is based on the following facts represented by the Filer:
1. The Filer is an unincorporated open-ended limited purpose trust established on March 10, 2011 under the laws of the Province of Alberta. The Filer qualifies as a "mutual fund trust" under the Income Tax Act (Canada).
2. The principal and head office of the Filer is located in Calgary, Alberta.
3. The financial year end of the Filer is December 31.
4. The Filer is a reporting issuer in each of the provinces of Canada and, to its knowledge, is not in default of securities legislation in any such jurisdiction in Canada in which it is a reporting issuer.
5. On April 14, 2011, the Filer filed and obtained a receipt for a final long form prospectus (the IPO Prospectus) in connection with its initial public offering of its units (the IPO).
6. The net proceeds of the IPO, plus an advance under a credit facility, were used by the Filer to acquire, through its subsidiaries, an interest in a natural gas property located in the West Panhandle Field in Texas (the Panhandle Interest). As at the date hereof, the Panhandle Interest comprises the principal undertaking of the Filer.
7. Annual and interim financial statements in respect of the Panhandle Interest, as required by Items 32.1, 32.2 and 32.3 of Form 41-101F1 Information Required in a Prospectus, did not exist, and the Filer was granted exemptive relief from such requirements in connection with the IPO.
8. The IPO Prospectus instead included the following information:
(a) audited operating statements presenting sales, royalties, production tax, processing costs and operating expenses (such line items prepared in all material respects using accounting policies that are permitted by IFRS as if those line items were presented as part of a complete set of financial statements) for the years ended December 31 2010, 2009 and 2008 (the Operating Statements);
(b) the disclosure required by Subsection 8.10(3) of National Instrument 51-102 Continuous Disclosure Obligations (NI 51-102), other than the pro forma operating statements contemplated by Subparagraph 8.10(3)(e)(ii) of NI 51-102; and
(c) National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities reporting in the form of Forms 51-101F1 (as at December 31, 2010), 51-101F2 and 51-101F3.
9. Except for not meeting the AIF and Annual Financial Statement Requirement, the Filer would otherwise be qualified to file a prospectus in the form of a short form prospectus pursuant to NI 44-101.
10. The Filer may wish to file a short form prospectus or short form prospectuses under NI 44-101 prior to the point at which it will meet the AIF and Annual Financial Statement Requirement.
11. Under Subsection 2.7(1) of NI 44-101, an issuer that is not exempt from the requirement in the applicable CD rule to file annual financial statements but has not yet been required under the applicable CD rule to file same, and has filed and obtained a receipt for a final prospectus that included the issuer's or each predecessor entity's comparative annual financial statements for its most recently completed financial year or the financial year immediately preceding its most recently completed financial year (together with the auditor's report accompanying those financial statements), is exempt from the AIF and Annual Financial Statement Requirement (the New Reporting Issuer Exemption).
12. The Filer has not been exempted from the requirement of the applicable CD rule to file annual financial statements and the Filer has not yet been required under the applicable CD rule to file same.
13. The Filer does not meet the criteria of the New Reporting Issuer Exemption because the issuer's financial statements included in the IPO Prospectus were not of the issuer's most recently completed financial year or the financial year immediately preceding its most recently completed financial year, and furthermore the Operating Statements and other disclosure were not of a predecessor entity.
Each of the Decision Makers is satisfied that the decision meets the test set out in the Legislation for the Decision Maker to make the decision.
1. The decision of the Decision Makers under the Legislation is that the Exemption Sought is granted, provided that:
(a) the Filer is not exempt from the requirement in the applicable CD rule to file annual financial statements within the prescribed period after its financial year end;
(b) the Filer has not yet been required under the applicable CD rule to file annual financial statements; and
(c) the Filer includes or incorporates by reference in any applicable preliminary prospectus and final prospectus (i) all of the financial statements and operating statements included in the IPO Prospectus, (ii) the information that would otherwise have been required to have been included in a current AIF, and (iii) its Business Acquisition Report filed July 4, 2011 in respect of the Panhandle Interest.