What must be included? – Securities Regulation

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  1. Creating the Preliminary Prospectus: What must be included

See Form 41-101F1 or 44-101F1 for short-form, OSC rule 45-501. Long-Form Prospectus: very open ended including all “material facts” (fact that sig affects market price/ value).

• List of factors that it must include are on p. 112 of the text or look at ToC for 41-101F1. Includes 1) # and types of securities offered under prospectus, 2) method of distrib, 3) use of proceeds of issuance, 4) name and structure of corp, 5) description of issuer’s business, 5) financial statements of issuer

Preliminary prospectus provides specific items of disclosure and “full, true and plain disclosure of all material facts”. Need to file it (s. 54(1)), and then you will get a receipt for it (s. 55)

Section 54 of the OSA – Preliminary Prospectus Requirements (And Excluded Info)

  • (1) Preliminary prospectus: A preliminary prospectus shall substantially comply with the requirements of Ontario securities law respecting the form and content of a prospectus, except that the report or reports of the auditor or accountant required by the regulations need not be included.
  • (2) Idem: A preliminary prospectus may exclude information with respect to the price to the underwriter and offering price of any securities and other matters dependent upon or relating to such prices.

o **Also note s.60: Statement of rights – every prospectus shall contain a statement of rights given to a purchaser by s.71 and 130

Section 55: Receipt for Preliminary Prospectus: The Director shall issue a receipt for a preliminary prospectus forthwith upon the filing thereof.

Section 54(2): a preliminary prospectus is exactly the same as a final except it can omit the price and what the underwriters get paid and any matters dependent on price

• It need not contain information about the offering price or anything else relating to or dependent on the price (things like price, maturity date, interest rate, dividend amt, etc. are often not included ^ things affected by market conditions that may change b/w filing of prelim and filing of final prospectus)

National Instrument 41-101 (Form 41-101F1): General Prospectus Requirements

Policy: Can Exclude Pricing Information because: (1) It’s NOT FINAL, you’re not selling securities pursuant to it; (2) Gives underwriters an opportunity to assess the market for demand so that they can price it properly

Section Description Page
Item 1.1: Required Statement (Lies) Both prelim and final prospectus (in SA is the phrase prelim, not final, is just prospectus) must contain on the outside front cover a statement that says, no securities commission or regulatory authority has in any way passed upon the merits of this offer.

Is actually kind of a lie (b/c sec comm will have looked at it), but…

POLICY: Letting public know that no securities commission has blessed this (but not completely true, but want to make sure that no one’s buying this based on comfort that a securities commission has reviewed it).







Every preliminary prospectus must have a statement printed in red ink and in italics at the top, front cover, saying that this is a PRELIMINARY prospectus, Information is incomplete, and no one can buy securities from this doc until a final receipt is obtained

This is removed in final prospectus


*Remember that preliminary is NOT a draft document! ^Liability + credibility

  • Can be held liable for it (even though you can’t sell sec under it)
  • If it’s wrong ^ have to make amendments to it (when you say it was wrong, people lose faith in you, you lose credibility (don’t get a 2nd chance to make a 1st impression)
  • Therefore, do not treat the document causally
  1. Certification Process

• When all parties are done preparing this prelim prospectus, identified all risk/explained business, put in red
herring, hasn’t passed upon merits, financial forecast, complied with law, certification process begins…


Section Description Page
37.2 AND 58(1) of OSA: Issuer Certificate **ALSO NOTE CORRESPONDING 58(1) OF OSA

Every preliminary prospectus shall contain a statement signed by the CFO, CEO, and two other directors, certifying that the prelim prospectus constitutes full, plain and true disclosure of all material facts. (the instrument says “except in Ontario. but have OSA to cover it)

Issuer has an obligation to be RIGHT (they have more access to information) Notes:

At the end of EVERY prelim and final prospectus, statement that certifies by these people that foreaoina in document constitutes full disclosure, and they sign it (have to do so via securities act regulations)

Item 37.3 …**ALSO NOTE CORRESPONDING 59(1) OF OSA 1124
AND 59(1) of OSA: Underwrite r Certificate Underwriter certifies: To the best of their knowledge, information and belief, the document constitutes full, true and plain disclosure of all material facts relating to the securities being offered.

They have an obligation to be careful/ responsible, but NOT an obligation to be right!!


Additional protection for investor, that the underwriter feels comfortable saying that (directors, officers, lawyers, underwriters all have to be comfortable signing this) ^

should show that they ’ve done their due diligence

Notes: Why different requirement for UWs?

  • b/c company ought to know everything about itself ^ feeds perfectly into investor protection but also need capital markets that work ^ if underwriters are liable for ANY misrep for prospectus for any co they’re involved in they are not going to play ^ wouldn’t have efficient capital market
  • Have to put some bumper guard on the underwriter’s liability (to the best of their knowledge/belief, not that it IS true)
  • Defences: have obligation to be responsible/careful, but not an obligation to be right (company has an obligation to be RIGHT (directors are personally liable)
  • Difference is b/c it’s practical, balances is the best regulators can achieve b/w investor protection and efficient capital markets

Why certify? ^ b/c of liability for misrepresentation

  • Under s. 130(1) of the OSA: if there is a misrepresentation in that prospectus (omission or misstatement) ^ the company has STRICT liability
  • For Issuer: Only defence is that purchaser purchased with knowledge of the misrep. Doesn’t matter if they intended to make a mistake, were careful, if there’s a misrep in that doc you didn’t know about and onus is on company to show that you know about it (almost impossible), then they’re liable. Underwriter has a due diligence defence

o Huge obligation. But just $. If Innocent misrep and one of them has to lose money, it ought to be the company over you. More culpable than you are.

  1. Filing with Administrator & Obtaining a Receipt for Prelim

First receive a preliminary receipt (if comply with all requirements -s.54; then per s.55- Director SHALL issue receipt), then delivery the prelim to those who have expressed interest in buying (solicited or not) per s.66 of OSA

  1. Preliminary Receipt:
  2. Complete prelim (certified, signed, red herring)
  3. File with Administrator along with supporting docs
  4. Administrator gives receipt for the prelim if there has been substantial compliance with filing requirements of the OSA and regulations
  5. Section 54: prelim must be in compliance with all requirements of ON Securities law, respecting form/content, and
  6. Section 55: Director SHALL issue receipt if doc is in substantial compliance (very little discretion with giving receipt for prelim as long as it appears to have all the things required)
  7. waiting period begins + delivery

a. It is only upon the receiving of a receipt for a final prospectus that the actual sales of securities can begin

  1. Delivery of Prelim to those who have expressed interest in buying (solicited or not)
  • You must deliver the preliminary prospectus to all those who have expressed an interest in purchasing (whether you’ve solicited their interest or not – so even if unsolicited)

Section 66 of the OSA – Distribution of Preliminary Prospectus

  • S.66: Any dealer distributing a security to which section 65 applies shall, in addition to the requirements of clause 65 (2) (c), send a copy of the preliminary prospectus to each prospective purchaser who, without solicitation, indicates an interest in purchasing the security and requests a copy of such preliminary prospectus.

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