Multilateral Instrument 45-106

Multilateral Instrument 45-106
Name	Multilateral Instrument 45-106
Type	Statutory instrument
Jurisdiction	Canada
Enacted by	Canadian provincial and territorial securities regulators

Multilateral Instrument 45-106 is a securities regulation adopted to harmonize prospectus exemptions across Canadian provincial and territorial regulators. It standardizes exemptions used by issuers, dealers, and investors in capital-raising transactions involving Ontario Securities Commission, British Columbia Securities Commission, Alberta Securities Commission, Quebec Autorité des marchés financiers, and other Canadian regulatory bodies. The instrument interacts with federal and provincial statutes including influences from the Securities Act (Ontario), Securities Act (Alberta), Securities Act (British Columbia), and regulatory frameworks shaped by institutions such as the Investment Industry Regulatory Organization of Canada and the Canadian Securities Administrators.

Overview

The instrument creates a uniform set of prospectus exemptions and dealer registration relief that align practices among regulators like the Nova Scotia Securities Commission, Manitoba Securities Commission, Saskatchewan Financial and Consumer Affairs Authority, and the New Brunswick Financial and Consumer Services Commission. It replaces or consolidates earlier provincial orders and exemptions informed by decisions from tribunals such as the Ontario Court of Appeal and policy guidance from entities including the Canadian Investor Protection Fund, Bank of Canada, and Office of the Superintendent of Financial Institutions. The measure affects issuers ranging from small venture issuers listed on marketplaces like the TSX Venture Exchange to large issuers on the Toronto Stock Exchange.

Background and Development

Development drew on consultations among the Canadian Securities Administrators, provincial ministers, and market participants including law firms that represented parties before the Supreme Court of Canada and appellate bodies. Preceding instruments and policy efforts referenced precedents from regulatory reforms in jurisdictions like the United Kingdom Financial Conduct Authority and the U.S. Securities and Exchange Commission. Stakeholders such as the Canadian Chamber of Commerce, Business Development Bank of Canada, and industry associations including the Canadian Venture Capital Association contributed commentary. The instrument reflects negotiation among provincial regulators such as the Prince Edward Island Office of the Superintendent of Securities and the Nunavut Legal Registries, and was informed by administrative law principles seen in rulings from courts like the Federal Court of Canada.

Key Provisions

Core provisions codify harmonized prospectus exemptions including accredited investor, family, friends and business associates, and offering memorandum exemptions used by issuers interacting with dealers and registrants like entities supervised by the Investment Industry Regulatory Organization of Canada. The instrument specifies filing obligations, disclosure requirements, and dealer registration relief comparable to rules under the Securities Act (Quebec) and instruments administered by the Autorité des marchés financiers. It addresses eligibility tests similar to standards in discussions involving institutions such as the Royal Bank of Canada, Bank of Montreal, and legal precedent from cases adjudicated in the Ontario Superior Court of Justice. The instrument also sets forms and notice requirements used in coordination with trade reporting infrastructure like the Canadian Depository for Securities.

Jurisdictional Application and Participating Provinces

Adoption and implementation timelines differed among participants including Ontario, British Columbia, Alberta, Quebec, Nova Scotia, Manitoba, Saskatchewan, New Brunswick, Prince Edward Island, Newfoundland and Labrador, Northwest Territories, Yukon, and Nunavut. The measure required provincial rule-making processes and coordination akin to multilateral cooperation seen in arrangements between the Council of the Federation members and provincial agencies such as the Ontario Securities Commission. Some provinces issued companion policy statements drawing on administrative frameworks used by entities like the Alberta Securities Commission and the British Columbia Securities Commission.

Compliance and Enforcement

Enforcement mechanisms rely on provincial securities regulators empowered under statutes such as the Securities Act (Ontario), with administrative sanctions, cease trade orders, and disciplinary proceedings paralleling actions taken by tribunals like the Ontario Securities Commission Tribunal. Regulators coordinate investigations with bodies including the Royal Canadian Mounted Police when criminal matters arise, and may seek remedies in courts including the Court of Queen's Bench of Alberta and the Court of King’s Bench of Manitoba. Compliance expectations intersect with obligations overseen by self-regulatory organizations such as the Investment Industry Regulatory Organization of Canada and market surveillance conducted by exchanges like the Toronto Stock Exchange.

Impact on Capital Markets and Market Participants

The instrument affected capital formation for issuers ranging from venture-stage companies listed on the TSX Venture Exchange to public companies on the Toronto Stock Exchange, and influenced fundraising practices used by institutional investors such as pension funds including the Canada Pension Plan Investment Board and asset managers like RBC Global Asset Management. Market intermediaries including broker-dealers and exempt market dealers adjusted practices consistent with policies of the Canadian Securities Administrators and enforcement priorities of provincial commissions. Analysts compared effects to regulatory harmonization trends seen in the European Securities and Markets Authority and the U.S. Securities and Exchange Commission rulemaking, noting impacts on cross-provincial capital flows and secondary trading liquidity.

Criticisms and Legal Challenges

Critiques emerged from advocacy groups, law firms, and market participants including the Canadian Federation of Independent Business and the Canadian Venture Capital Association regarding complexity, clarity of exemptions, and administrative burden. Legal challenges invoked administrative law principles litigated in courts like the Federal Court of Appeal and the Supreme Court of Canada over interpretation and application of exemptions. Commentators compared disputes to jurisprudence from cases involving regulatory instruments overseen by bodies such as the Ontario Securities Commission and noted calls for further reform by stakeholders including provincial ministers and legislative committees in assemblies such as the Legislative Assembly of Ontario.

Category:Canadian securities regulation