National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Dual application for Exemptive Relief Applications -- Exemption from the prospectus requirement for a federally regulated credit union to distribute membership shares to prospective customers -- Filer is a federal credit union subject to a comprehensive scheme of regulation and supervision as a Schedule 1 bank under the Bank Act (Canada) -- in order to provide savings deposit services to customers, the customers must become members of the credit union by acquiring a set number of membership shares -- Filer cannot rely on existing provincial credit union exemption under local securities legislation -- Exemptive relief is analogous to existing exemption available to provincial credit unions under local securities legislation.
Applicable Legislative Provisions
Securities Act, R.S.O. 1990, c.S.5, as am. ss. 53, 73.1(6) and 74(1).
July 11, 2018
IN THE MATTER OF THE SECURITIES LEGISLATION OF BRITISH COLUMBIA AND ONTARIO (the Jurisdictions) and IN THE MATTER OF THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS IN MULTIPLE JURISDICTIONS AND IN THE MATTER OF COAST CAPITAL SAVINGS CREDIT UNION (the Filer)
1 The securities regulatory authority or regulator in each of the Jurisdictions (Decision Maker) has received an application from the Filer for a decision under the securities legislation of the Jurisdictions (the Legislation) that grants the Filer an exemption (the Exemption Sought) from the prospectus requirement for the distribution of the Filer's Class A Equity Shares to prospective members of the Filer, which exemption would be available to the Filer after its continuance as a federal credit union under the Bank Act (the Bank Act).
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a dual application):
(a) the British Columbia 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 by the Filer in Alberta, Saskatchewan, Manitoba, Québec, Nova Scotia, New Brunswick, Prince Edward Island, Newfoundland and Labrador, the Northwest Territories, Yukon and Nunavut; and
(c) this decision is the decision of the principal regulator and evidences the decision of the securities regulatory authority or regulator in Ontario.
2 Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.
3 This decision is based on the following facts represented by the Filer:
1. the Filer is a credit union incorporated under the Credit Union Incorporation Act (British Columbia) and its head office is located in Surrey, British Columbia;
2. the Filer is not in default under applicable securities legislation in any jurisdiction of Canada;
3. the Filer is a member-owned financial cooperative with a business focused on day-to-day banking, investments and personal and business lending in the Province of British Columbia;
4. historically, credit unions in Canada have been incorporated and regulated provincially with their operations limited to the territory of the incorporating province;
5. currently the Filer relies on the exemption from the prospectus requirement set out in BC Instrument 45-531 Exemptions for shares or deposits of a credit union in order to distribute its membership shares; the term "credit union" is defined in the Interpretation Act (British Columbia) to mean a credit union authorized to carry on business under the Financial Institutions Act (British Columbia);
6. securities legislation in Ontario and other jurisdictions of Canada contain local exemptions from the prospectus requirement that are only available to credit unions organized and regulated under the legislation of that jurisdiction;
7. in 2010, the Government of Canada enacted legislation under the Bank Act allowing credit unions to continue federally and operate nationally;
8. the federal credit union provisions of the Bank Act enable a provincially organized credit union, such as the Filer, to continue as a federal credit union under the Bank Act and operate nationally under the supervision and oversight of the Office of the Superintendent of Financial Institutions, the federal financial institutions regulator;
9. under the Bank Act, a federal credit union, like provincial credit unions, must be organized and carry on business on a cooperative basis and provide financial services primarily to its members; ownership of membership shares is a requirement for membership in a federal credit union;
10. the Filer wishes to continue as a federal credit union under the Bank Act in order to have the ability to conduct its operations throughout Canada;
11. upon continuance to the federal jurisdiction, the Filer will change its name to "Coast Capital Savings Federal Credit Union";
12. upon continuance, the Filer will be a Schedule I bank under the Bank Act;
13. the Filer's capital structure includes Class A Equity Shares (Membership Shares); a holder of Membership Shares that holds the requisite Membership Shares may become a member of the Filer; each member is entitled to one vote on a resolution at a general meeting of the Filer; upon a liquidation, dissolution or winding up of the Filer, holders of Membership Shares are, subject to the prior rights of Class P Non-Equity Securities and all other classes of Equity Shares (other than Class D Equity Securities), entitled to (a) share rateably with holders of Class D Equity Shares in the value of the Filer's gross common equity tier 1 capital; and (b) the remaining property of the Filer; dividends are payable on the Membership Shares at the discretion of the board of the Filer and are non-cumulative;
14. ownership of Membership Shares is a membership requirement before the Filer can provide services to potential customers and are issued only at the start of the customer relationship in order for the customer to become a member of the Filer; members are issued five Membership Shares for an issue price to be determined by the board of the Filer (currently $1 per Membership Share); and
15. after continuance as a federal credit union under the Bank Act, the Filer will no longer be able to rely on the exemptions from the prospectus requirement set out in Canadian securities legislation available to provincially organized credit unions.
4 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.
The decision of the Decision Makers under the Legislation is that the Exemption Sought is granted provided that the Filer continues as a federal credit union under the Bank Act and remains regulated as a federal credit union by the Office of the Superintendent of Financial Institutions.