Sample Cover Letter & Questionnaire
Sent to Investors by Securities Regulators
(posted March 24, 2011)

PDF Version
 

One of the ways these securities regulators oversee what is happening in these markets is to sample whether issuers are using the exemptions appropriately by conducting a more thorough review of exempt filings.  Essentially they are conducting a compliance investigation.  As part of this process securities regulators first gather information by (1) sending out a cover letter and questionnaire to investors; and (2) presenting issuers with an order for production.  Responses from investors to the securities regulator is voluntary at this stage.  Issuers are compelled by law to respond to the securities regulator within the time frame provided. 

Attached is a sample cover letter and questionnaire sent out by the BC Securities Commission to investors.  Letters from other jurisdictions are similarly worded.  The registration and prospectus exemption referred to in the letter and questionnaire may change to reflect what exemptions a particular issuer actually relied upon in their offering.  The contact information for investors is supplied to the securities regulators in Schedule A to the Form 45-106F1 Report of Exempt Distribution filed by the issuer.

SAMPLE COVER LETTER TO INVESTORS SENT BY SECURITIES REGULATORS

[Logo & Header of British Columbia Securities Commission]

[Date]

[Investor Name]
[Street Address]
[City, Province, Postal Code]

Dear [Investor Name]:

The B.C. Securities Commission is the independent provincial government agency responsible for regulating trading in securities.

Most companies are required to file documents with us when they distribute securities. As part of our routine compliance process, the documents filed by a company in which you recently invested [Company Name] have been selected for review.

We would like to know a little bit about your understanding of this investment and invite you to complete the enclosed survey.

I would be please to answer any questions you have about the survey, by email skraushaar@bcsc.bc.ca or phone 604-899-6733.

Please forward the completed questionnaire to my attention by mail (in the enclosed envelope), fax (604-889-6581), or email (skraushaar@bcsc.bc.ca).

Please return your completed Investor Questionnaire by [Day of Week, Closing Date].

Yours truly,

Shelley Kraushaar
Compliance Administrator
Corporate Finance Division

/SLK

Enclosure (Investor Questionnaire)
 

SAMPLE INVESTOR QUESTIONNAIRE SENT BY SECURITIES REGULATORS

If yes, who did you pay, and what was their relationship to [Issuer]?

  5.

 How, where and from whom did you initially hear about [Issuer]?

 6.

 Do any of the following statements apply to you? (check the ones that applies)

 ¨

 You, either alone or with your spouse, beneficially own, directly or indirectly, $1 million in financial assets (meaning cash and marketable securities, but not including any real estate) net of any related liabilities.

 ¨

 Your net income before taxes exceeded $200,000 in each of the two most recent years, and you reasonably expect to exceed that net income level in the current year.

 ¨

 You alone (or through a company that you own), or with your spouse, have net assets of at least $5,000,000.

 ¨

 You are, or have been, registered under the Securities Act to sell securities or provide investment advice.

 ¨

 None of the above statements apply to me.

 7.

 Before you invested in [Issuer], did anyone ever ask you any questions about your finances, similar to the ones set out in Question #6 above?

 ¨  Yes

 ¨  No

 ¨ Not sure

Alixe B. Cormick
Venture Law Corporation
618 - 688 West Hastings Street
Vancouver, B.C.
V6B 1P1
Phone: 604-659-9188
Fax: 604-659-9178
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