Multilateral Instrument 11-102 Passport System and National Policy 11-203 Process for Exemptive Relief applications in Multiple Jurisdictions -- the Filer requests relief from the requirements under section 3.2 of National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards that financial statements be prepared in accordance with Canadian GAAP applicable to publicly accountable enterprises in order to permit the Filer, who is not an SEC issuer, to prepare its financial statements and financial statements of its significant equity investee in accordance with U.S. GAAP -- Filer requests to have conditions in existing decision replaced with revised conditions -- exiting decision revoked -- requested relief granted.
Applicable Legislative Provisions
National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards, s. 5.1.
Securities Act,R.S.O. 1990, c. S.5, as am., s. 144.
June 9, 2014
IN THE MATTER OF THE SECURITIES LEGISLATION OF ONTARIO (the Jurisdiction) AND IN THE MATTER OF THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS IN MULTIPLE JURISDICTIONS AND IN THE MATTER OF GWR GLOBAL WATER RESOURCES CORP. (the Filer)
The principal regulator in the Jurisdiction has received an application from the Filer for a decision under the securities legislation of the Jurisdiction (the Legislation) exempting the Filer from the requirements under section 3.2 of National Instrument 52-107 -- Acceptable Accounting Principles and Auditing Standards (NI 52-107) that its financial statements and the financial statements of its significant equity investee, Global Water Resources, Inc. (GWRI) (a) be prepared in accordance with Canadian GAAP applicable to publicly accountable enterprises and (b) disclose an unreserved statement of compliance with IFRS in the case of annual financial statements and an unreserved statement of compliance with IAS 34 in the case of an interim financial report (the Exemption Sought). The Filer previously obtained exemptive relief under the Legislation from the principal regulator in a decision dated July 28, 2011 (Re GWR Global Water Resources Corp., (2011) 34 OSCB 8399), which permits the Filer to prepare its financial statements and the financial statements of its significant equity investee, GWRI, in accordance with U.S. GAAP for their financial years that begin on or after January 1, 2012 but before January 1, 2015 (the Existing Relief).
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):
(a) the Ontario Securities Commission is the principal regulator for this application;
(b) the Filer has provided notice that section 4.7(1) of Multilateral Instrument 11-102 -- Passport System (MI 11-102) is intended to be relied upon in British Columbia, Alberta, Saskatchewan, Manitoba, Québec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, Northwest Territories, Yukon and Nunavut (the Passport Jurisdictions); and
(c) the decision of the principal regulator automatically results in an equivalent decision in the Passport Jurisdictions.
In this decision:
(a) unless otherwise defined herein, terms defined in National Instrument 14-101 Definitions, MI 11-102 or NI 52-107 have the same meaning if used herein; and
(b) "activities subject to rate regulation" has the meaning ascribed in Part V of the Handbook at the date hereof.
This decision is based on the following facts represented by the Filer:
1. The Filer is a corporation incorporated under the Business Corporations Act (British Columbia) whose only business is to hold shares of GWRI and actively participate in the management, business and operations of GWRI through its representation on the board of, and shared management with, GWRI. The registered office of the Filer is located in Vancouver, British Columbia.
2. The Filer is a reporting issuer or equivalent in the Jurisdiction and each of the Passport Jurisdictions.
3. The Filer currently prepares its financial statements and the financial statements of its significant equity investee, GWRI, in accordance with U.S. GAAP as permitted by the Existing Relief.
4. The Filer is not an SEC issuer.
5. The Filer is not in default of any requirement of securities laws in any jurisdiction in Canada.
6. The Filer owns an approximate 48.1% interest in GWRI, a Delaware corporation with a registered office in Phoenix, Arizona. GWRI is a foreign issuer. GWRI is not a reporting issuer or an SEC issuer.
7. The Filer has undertaken to the Ontario Securities Commission and to the securities regulatory authorities in each of the provinces and territories of Canada that for so long as GWRI represents a significant asset of the Filer and is not consolidated into the financial statements of the Filer, the Filer will provide its shareholders with separate audited annual consolidated financial statements and interim consolidated financial statements for GWRI, prepared in accordance with U.S. GAAP (together with a reconciliation to Canadian GAAP) or as would be required for GWRI under NI 52-107.
8. The Filer and GWRI each have activities subject to rate regulation.
9. Were the Filer and GWRI SEC issuers, they would be permitted by section 3.7 of NI 52-107 to file their financial statements prepared in accordance with U.S. GAAP, which accords treatment of activities subject to rate regulation similar to that under Canadian GAAP -- Part V of the Handbook.
10. The Existing Relief will expire not later than January 1, 2015.
11. The International Accounting Standards Board (IASB) continues to work on a project focusing on accounting specific to rate-regulated activities. It is not yet known when this project will be completed or whether IFRS will include a specific standard that is mandatory for entities with rate-regulated activities.
The principal regulator is satisfied that the decision satisfies the test set out in the Legislation for the principal regulator to make the decision.
The decision of the principal regulator under the legislation is that:
(a) the Existing Relief is revoked;
(b) the Exemption Sought is granted to the Filer in respect of the Filer's financial statements and the financial statements of its significant equity investee, GWRI, in each case required to be filed on or after the date of this order, provided that the Filer prepares those financial statements in accordance with U.S. GAAP; and
(c) the Exemption Sought will terminate in respect of the Filer on the earliest of the following:
(i) January 1, 2019;
(ii) if the Filer or GWRI, as applicable, cease to have activities subject to rate regulation, the first day of the financial year of the Filer or GWRI, respectively, that commences after the Filer or GWRI, respectively, ceases to have activities subject to rate regulation; and
(iii) the effective date prescribed by the IASB for the mandatory application of a standard within IFRS specific to entities with rate-regulated activities.