Lexpert US Guides

34 | LEXPERT • June 2014 | www.lexpert.ca « FUND REGULATION obligations under Canadian and/or non-Canadian anti-terror and anti-money laundering laws, including the potential for information to be disclosed to relevant authorities, should be disclosed. " e Canadian off ering memorandum must not include: • Exchange listing representation. A statement in an off ering memorandum to the eff ect that a security will be listed on, or that an application has been or will be made to list the security on, any stock exchange, without consent from the securities regulator in that prov- ince. At the time of writing, a proposed amendment is considering whether this restriction is required in certain circumstances. • A misrepresentation (which includes an omission to state a material fact). Permitted Activities at Roadshows When marketing activities in connection with a private place- ment of a non-Canadian investment fund in Canada are conducted at a roadshow: • Information not contained in the wrapped off ering document should not be conveyed to prospective purchasers; • Any Internet or electronic roadshow should be password restricted such that potential investors must fi rst view the Canadian wrapper; and • As a precaution to avoid marketing to investors not eligible for a prospectus exemption, only accredited investors should be invited. Proposed amendments in Ontario at the time of writing could add specifi c guidance for a seller of securities to ensure that marketing materials be fair, balanced and not misleading, among other criteria. ONGOING FEE AND FILING REQUIREMENTS A non-Canadian fund and/or manager has the following ongoing re- quirements during and/or a er marketing and sale activities in Canada: • Additional Registration Obligation in Ontario. If raising capital in Ontario, an investment fund structured as a limited partnership and its general partner may be required to extra-provincially register with the provincial government, requiring a fee of several hundred dollars, and potentially triggering tax return fi ling obligations for the general partner. • Mandatory Sales Report Filing. Within 10 days of each sale of securities to a Canadian investor, a sales report must be fi led with the off ering documents to the securities regulator in the province of the purchaser. Although the fi ling is confi dential, freedom of informa- tion laws could require the securities regulator to disclose the sales report and/or the off ering document. » While this sales report collects basic information about each purchaser, for certain types of funds the report for sales in British Columbia could require information about fund insiders and promoters, unless sales are made to " permitted clients." » At the time of writing, certain provinces, including Ontario, have proposed a much more detailed trade report for "investment funds" (as defi ned under Canadian law, see section on Registration as an Investment Fund Manager above for more details on what funds may be included) including: structure, type of fund, names of direc- tors and executive offi cers of the fund and manager, net asset value of the fund and principal service providers (e.g., custodian). » Along with this sales report, a fee is payable for prospectus exempt sales in an amount varying by province: either a variable fee in British Columbia, Alberta and Québec (of up to 0.03 percent of the off ering size) or a fl at fee in the other provinces (of up to C$500 per report, regardless of aggregate sales). • Participation Fee in Ontario. An annual participation fee is pay- able for registered fi rms as well as for fi rms relying on an exemption from registration. " is fee is based on "gross revenue" derived from capital market activities in Ontario, subject to a minimum fee. • Suppression of Terrorism Reporting. » A fi rm relying on the international dealer or advisor exemption must fi le a monthly Suppression of Terrorism and UN Sanctions Report. " e report requires disclosure of data regarding a fi rm's dealings with a prescribed list of "designated persons." It requires that a fi rm review the list of designated persons against its list of Canadian clients, and if it has had no such dealings, to sign a certifi cate to that eff ect. » A fi rm registered in Canada must, in addition to the monthly fi ling above but only to the extent of its Canadian capital raising, obtain and retain identifi cation of each Canadian client and report to the Financial Transactions Reports Analysis Centre of Canada any "suspicious transaction" related to terror fi nancing or money laundering. » Tim Baron is a partner specializing in transactions in debt fi nance, asset management and derivatives. He has assisted with the establishment of numerous alternative investment funds and regularly advises fi nancial intermediaries, pension funds and other institutional investors and corporations with respect to over-the- counter derivatives. Tim acts for lenders and borrowers on project fi nance and syndicated and asset-based lending facilities and has advised numerous contractors, sponsors and lenders on the fi nancing of public-private infrastructure projects. Timothy Baron Davies Ward Phillips & Vineberg LLP Tel: (416) 863-5539 Fax: (416) 863-0871 tbaron@dwpv.com

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