|
When
raising capital in Canada companies rely on
three main exemptions from the registration and prospectus requirements of
the securities act and regulations: (1) the friends, family and business
associate exemption, (2) the accredited investor exemption; and (3) the
offering memorandum exemption. Not all jurisdictions in Canada recognize
all three of these exemptions. Ontario for instance only recognizes the
accredited investor exemption in this trio.
Over the last year the British Columbia
Securities Commission (“Commission”)
has stepped up its investigation of private issuers using exemptions in
National Instrument 45-106 Prospectus and Registration Exemptions
from the prospectus and registration requirements of the Securities Act in
BC. The normal course of an investigation is to issue an
order of
production to the company who issued the securities and a polite
letter
and questionnaire to the investors identified in the Schedule “A” of the
Form 45-106F1 filed by the issuer. As a result of these recent
investigations a number of sanctions and notice of hearings have been
issued:
-
William Dorn Beattie, Solara Technologies Inc.
03/26/2010
-
Fine Water Inc. and Alan Geoffrey With 04/07/2010
-
Solara Technologies Inc. and William Dorn Beattie 06/23/2010
-
Notice
of Hearing: VerifySmart Corp., Verified Transactions Corp., Daniel
Scammell and Casper de Beer 11/24/2010
-
Notice of Hearing: John Arthur Roche McLoughlin, MCL Ventures Inc., Blue
Lighthouse Ltd. and Robert Douglas Collins 11/24/2010
-
Notice of Hearing: Photo Violation Technologies Corp., Frederick
Lawrence Marlatt, also known as Frederick Lawrence Mitschele, Michael
Wallace Minor, and Michael Garfield Timothy Minor, also known as Tim
Minor
-
James Richard Elliott 05/29/2008
What did these issuers do wrong? More
importantly, how can you avoid an escalation from an order of production
to a full on hearing and sanctions being issued?
In this three part series, I will set out
the definition and rules of the close personal friend exemption, the
accredited investor exemption and the offering memorandum exemption. I
will also suggest steps you must and can take to meet your obligation to
confirm a particular exemption may be relied upon by you when issuing
securities.
|
