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OSC Reduces Regulatory Burden for International Capital Markets Participants

February 22, 2021

On February 18, 2021, the Ontario Securities Commission (OSC) issued Ontario Instrument 33-507 Exemption from Underwriting Conflicts Disclosure Requirements (Interim Class Order) (Ontario Instrument). The Ontario Instrument provides blanket exemptive relief from the underwriter conflicts disclosure requirements of National Instrument 33-105 Underwriting Conflicts (Underwriter Conflicts Rule) for private placement distributions of eligible foreign securities to permitted clients, on an interim basis. Accordingly, the only Canadian disclosure required for “Regulation S only” global offerings of eligible foreign securities to Ontario permitted clients is the standard “wrapper exemption” notice paragraph relating to Canadian statutory rights of action. The requirement to complete and file an exempt distribution report on Form 45-106F1, and pay the related filing fee within 10 days of closing, continues to apply.

In addition, last December, the OSC proposed new rules to alleviate regulatory burdens faced by non-Canadian futures dealers and advisers seeking to trade futures contracts listed on non-Canadian exchanges with Ontario institutional clients. Proposed OSC Rule 32-506 Exemptions for International Dealers, Advisers and Sub-Advisers (New Futures Rules) under the Commodity Futures Act (Ontario) would codify the discretionary relief that the OSC has routinely granted to non-Canadian futures dealers and advisers to permit them to trade in or advise on non-Canadian futures for Ontario institutional clients.


The Underwriter Conflicts Rule applies to distributions of securities made into Canada, including global offerings where only a small portion of the total offering is sold to Canadians on a private placement basis. The Ontario Instrument provides for an exemption from “connected issuer” and/or “related issuer” conflicts disclosures by dealers selling into Canada in the case of private placements of “eligible foreign securities” to “permitted clients”.

An “eligible foreign security” generally is a security distributed in a global offering by a non-Canadian issuer (in respect of jurisdiction of formation, head office location and residency of its executive officers and directors) that is not a reporting issuer in Canada. “Permitted clients” include all institutional investors and certain other investors.

The Underwriter Conflicts Rule does not currently include an exemption from its disclosure requirements for “Regulation S only” offerings, i.e., global offerings that exclude the United States. Several large Canadian institutional investors have advised OSC Staff that this has caused them to be excluded from attractive global offerings. The Ontario Instrument addresses this issue.

The Ontario Instrument came into effect on February 18, 2021 and will cease to be effective on the earlier of the following: (a) 18 months after February 18, 2021, unless extended by the OSC, and (b) the effective date of an amendment to the Underwriter Conflicts Rule that addresses substantially the same subject matter as the Ontario Instrument.

The disclosure requirements of the Underwriter Conflicts Rule will continue to apply to Regulation S only offerings of eligible foreign securities to investors in other Canadian provinces/territories unless similar blanket relief is enacted by their regulators or the Underwriter Conflicts Rule is amended. ASC Blanket Order 45-514 and BC Instrument 51-512 provide relief in Alberta and British Columbia that is similar to the Ontario Instrument.


The New Futures Rules would establish a regime for regulated, non-Canadian futures dealers and advisers to trade in and advise on non-Canadian futures contracts for Ontario clients that satisfy the definition of a “CFA permitted client.” A “CFA permitted client” is substantially the same as a “permitted client,” as defined in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations (NI 31-103), except for certain minor, generally futures specific, modifications. The exemptions provided by the New Futures Rules are substantially similar to the “international dealer” and “international adviser” registration exemptions for trading non-Canadian securities with Canadian permitted clients in NI 31-103.

The New Futures Rules do not provide a transition period for market participants currently relying on exemptive relief decisions. Therefore, non-Canadian dealers and advisers currently trading in or advising on non-Canadian futures for Ontario clients should note that, once the New Futures Rules come into effect, they will need to take the steps required (if any) to rely on the new exemptions.

The OSC states, in the release detailing the proposed New Futures Rules, that it has not included a transition period because it believes the exemptions in the New Futures Rules are generally more permissive than the exemptions contained in existing exemptive relief decisions. The OSC invites any market participant that is concerned that it may be prejudiced by the coming into force of the New Futures Rules and consequent expiry of its existing exemptive relief to contact OSC staff.

For further information, please contact:

Tim Phillips                   416-863-3842
Stacy McLean               416-863-4325
Ralph Lindzon              416-863-2535
Jennifer Maxwell         +44-20-7429-3558
Jill Davis                        416-863-3076

or any other member of our Capital Markets group.