CSA Staff Notice 45-325: Filing Requirement and Fee Payable for Exempt Distributions involving Fully Managed Accounts

1 CSA Staff Notice 45-325 Filing Requirement and Fee Payable for Exempt Distributions involving Fully Managed Accounts February 7, 2019 Purpose This notice is intended to clarify when Form 45-106F1 Report of Exempt Distribution (Form 45-106F1) of Regulation 45-106 respecting Prospectus Exemptions (Regulation 45-106) is required to be filed, and fees paid, for exempt distributions involving fully managed accounts. Background In 2016, the Canadian Securities Administrators (the CSA) introduced a streamlined and harmonized version of Form 45-106F1 as part of an effort to reduce the compliance burden for issuers and underwriters distributing securities under prospectus exemptions, while ensuring Form 45-106F1 continues to provide securities regulators with the necessary information to facilitate more effective regulatory oversight of the exempt market and improve analysis for policy development purposes. Among other changes made, the reporting of exempt distributions involving fully managed accounts was simplified to reduce regulatory burden on issuers and underwriters. In all jurisdictions, Form 45-106F1 only requires issuers and underwriters to provide information on the trust company, trust corporation or registered adviser who had purchased securities on behalf of a fully managed account in item 7 and Schedule 1 and no longer requires information about the beneficial owners of the fully managed account. While Form 45-106F1 has been harmonized, the requirement to file and pay filing fees for Form 45-106F1 continues to be governed by the securities legislation of each CSA jurisdiction. Reporting requirement for exempt distributions involving fully managed accounts Issuers and underwriters who rely on the accredited investor prospectus exemption (the AI Exemption) in section 2.3 of Regulation 45-106 to distribute securities are required to file a Form 45-106F1 within a prescribed timeframe.1 An accredited investor includes: • a trust company or trust corporation registered or authorized to carry on business under the Trust and Loan Companies Act (Canada) or under comparable legislation in a jurisdiction of Canada or a foreign jurisdiction, acting on behalf of a fully managed account managed by the trust company or trust corporation; 2 and 1 In Ontario, the accredited investor exemption is set out under subsection 73.3(2) of the Securities Act (Ontario). 2 See paragraph (p) of the definition of “accredited investor” in section 1.1 of Regulation 45-106.

2 • a person acting on behalf of a fully managed account managed by that person, if that person is registered or authorized to carry on business as an adviser or the equivalent under the securities legislation of a jurisdiction of Canada or a foreign issuer.3 Section 2.3(2) of Regulation 45-106 states that for the purpose of the AI Exemption, a trust company or trust corporation described in paragraph (p) of the definition of “accredited investor” in section 1.1 of Regulation 45-106 is deemed to be purchasing as principal. Similarly, section 2.3(4) of Regulation 45-106 states that for the purpose of the AI Exemption, a person described in paragraph (q) of the definition of “accredited investor” in section 1.1 of Regulation 45-106 is deemed to be purchasing as principal. Instruction 4 of Form 45-106F1 requires issuers and underwriters to provide information on the trust company, trust corporation or registered adviser who had purchased securities on behalf of a fully managed account and not the beneficial owners of the fully managed account. Filing and Fee Requirements In accordance with Instruction 1 of Form 45-106F1, if a distribution is made in more than one jurisdiction of Canada, the issuer may complete a single Form 45-106F1 and file it in each jurisdiction of Canada in which the distribution occurs. In order to determine the fee payable in each jurisdiction, please refer to Annex A. In each jurisdiction other than Manitoba, Québec and Saskatchewan, the requirement to file Form 45-106F1 in respect of a distribution involving a fully managed account is based on the location of the trust company, trust corporation or registered adviser deemed to be purchasing the securities as principal in accordance with section 2.3(2) or 2.3(4) of Regulation 45-106, as applicable. The requirement to pay a fee in these jurisdictions is triggered by the requirement to file Form 45-106F1. Accordingly, there is no requirement to file Form 45-106F1 or to pay a fee in these jurisdictions based on the location of the beneficial owner of a fully managed account. In Manitoba and Québec, the requirements to file Form 45-106F1 and pay fees are based on the location of the beneficial owner of a fully managed account. A Form 45-106F1 is not required to be filed in these jurisdictions if only the trust company, trust corporation or registered adviser who had purchased securities on behalf of a fully managed account is located in the jurisdiction and there are no beneficial owners in the jurisdiction. Because Form 45-106F1 does not require issuers to provide information on the beneficial owners of fully managed accounts, the regulators in these jurisdictions require that issuers file an accompanying letter with the Form 45-106F1 stating the gross value of securities distributed to beneficial owners located in those jurisdictions. In Saskatchewan, the requirement to file Form 45-106F1 and pay a fee is based on the location of the distribution. This could mean that the form should be filed in Saskatchewan if the trust company, trust corporation or registered adviser who had purchased securities on behalf of a fully managed account and/or the beneficial owner of a fully managed account is located in Saskatchewan. The Financial and Consumer Affairs Authority of Saskatchewan has issued blanket relief to waive the filing requirements in respect of a distribution to the beneficial owner of a fully managed account where the trust company, trust corporation or registered adviser who had purchased securities on behalf of a fully managed account is not located in Saskatchewan. As no filing will be required in these cases, no fee is triggered. 3 See paragraph (q) of the definition of “accredited investor” in section 1.1 of Regulation 45-106.

3 Questions Please refer your questions to any of the following: Gabriel Chénard Senior Policy Analyst, Investment Funds Autorité des marchés financiers 514 395-0337 ext : 4482 gabriel.chenard@lautorite.qc.ca Jo-Anne Matear Manager, Corporate Finance Branch Ontario Securities Commission 416 593-2323 jmatear@osc.gov.on.ca Kristina Beauclair Analyst, Corporate Finance Autorité des marchés financiers 514 395-0337 ext: 4397 kristina.beauclair@lautorite.qc.ca Yan Kiu Chan Legal Counsel, Corporate Finance Branch Ontario Securities Commission 416 204-8971 ychan@osc.gov.on.ca Frederick Gerra Senior Legal Counsel, Investment Funds and Structured Products Branch Ontario Securities Commission 416 204-4956 fgerra@osc.gov.on.ca Kevin Yang Senior Research Analyst, Strategy and Operations Branch Ontario Securities Commission 416 204-8983 kyang@osc.gov.on.ca Gloria Tsang Senior Legal Counsel, Compliance and Registrant Regulation Branch Ontario Securities Commission 416 593-8263 gtsang@osc.gov.on.ca Leslie Rose Senior Legal Counsel, Corporate Finance British Columbia Securities Commission 604 899-6654 lrose@bcsc.bc.ca Sonne Udemgba Deputy Director, Legal, Securities Division, Financial and Consumer Affairs Authority of Saskatchewan 306 787-5879 sonne.udemgba@gov.sk.ca Jody-Ann Edman Assistant Manager, Financial Reporting British Columbia Securities Commission 604 899-6698 jedman@bcsc.bc.ca Victoria Steeves Senior Legal Counsel, Corporate Finance British Columbia Securities Commission 604 899-6791 vsteeves@bcsc.bc.ca Wayne Bridgeman Deputy Director, Corporate Finance Manitoba Securities Commission 204 945-4905 wayne.bridgeman@gov.mb.ca

4 Steven Weimer Team Lead, Compliance, Data & Risk Alberta Securities Commission 403 355-9035 steven.weimer@asc.ca Jack Jiang Securities Analyst, Corporate Finance Nova Scotia Securities Commission 902 424-7059 jack.jiang@novascotia.ca Renée Dyer Superintendent of Securities Office of the Superintendent of Securities Service NL 709 729-4909 ReneeDyer@gov.nl.ca Thomas Hall Superintendent of Securities Department of Justice Government of the Northwest Territories 867 767-9305 tom_hall@gov.nt.ca Ella-Jane Loomis Senior Legal Counsel, Securities Financial and Consumer Services Commission (New Brunswick) 506 453-6591 ella-jane.loomis@fcnb.ca Steven Dowling Acting Director Superintendent of Securities Government of Prince Edward Island 902 368-4551 sddowling@gov.pe.ca Rhonda Horte Securities Officer Office of the Yukon Superintendent of Securities 867 667-5466 rhonda.horte@gov.yk.ca Jeff Mason Superintendent of Securities Department of Justice Government of Nunavut 867 975-6591 jmason@gov.nu.ca

5 Annex A – Fee payable in each jurisdiction How to determine the fee payable in each jurisdiction o In Alberta: Please refer to Alberta Securities Commission Rule 13-501 Fees sec.11. o In British Columbia: Please refer to Securities Regulation, B.C. Reg. 196/97, sec. 22, item 16(1). o In Manitoba: Please refer to s.1(2)(z), Schedule A, of the Securities Regulation 491/88R. o In New Brunswick: Please refer to sections 2.5 and 2.19 of Local Rule 11-501. o In Newfoundland and Labrador: Please refer to section 7(2) of the fee schedule approved by s. 143 of the Securities Act. o In Nova Scotia: Please refer to section 24, Appendix A, of Rule 11-508. o In Northwest Territories: Please refer to Securities Fees Regulations R-066-2008 as amended, Schedule, Paragraph 1(p). o In Nunavut: Please refer to Local Rule 31-504, Schedule A, Item (p). o In Ontario: Please refer to Ontario Securities Commission Rule 13-502 Fees, Appendix C, Row B2. o In Prince Edward Island: Please refer to the Schedule to the Securities Act. o In Québec: Please refer to section 267(4) of Securities Regulation, CQLR, chapter V-1.1, r. 50. Fees are payable on the gross value of the securities distributed to beneficial owners located in Quebec. o In Saskatchewan: Please refer to Appendix A - Table 1, s. 4(c) of The Securities Regulations. o In Yukon: Please refer to Securities Fee Regulation, (O.I.C. 2009/66), Schedule 1, para. 1(p).