Selling securities in Ontario
The Ontario Securities Commission (OSC) regulates companies that offer securities for sale to the public in Ontario. Any company that wants to offer its securities to the public in Ontario must prepare a detailed disclosure document known as a prospectus or must qualify for a prospectus exemption.
A prospectus includes specific, detailed disclosures about a company, its business, and the securities being offered. According to Ontario’s Securities Act, it must provide “full, true, and plain disclosure of all material facts relating to the securities issued or proposed to be distributed.”
Types of prospectuses
Companies use different types of prospectuses to sell their securities, depending on their stage of development and the nature of the offering. The main types are:
- long-form prospectus
- short-form prospectus
- shelf prospectus
- post-receipt pricing prospectus
In certain cases, securities may be offered without a prospectus. Such offerings are sometimes referred to as private placements or exempt distributions. Most exemptions from the prospectus requirement are set out in National Instrument 45-106 Prospectus and Registration Exemptions.
Prospectus submission and review process
The OSC reviews prospectus filings to ensure compliance with Ontario securities law. The basic stages of the review process should be read before filing a prospectus:
The issuer determines in which jurisdiction to file the prospectus and identifies the principal regulator. In Ontario, the principal regulator is the OSC.
The issuer can make a “pre-file” application to the OSC and the OSC can provide an interpretation of securities legislation as it relates to the specific filing.
The issuer can apply for a “confidential pre-file review” of a prospectus.
The issuer files the preliminary prospectus with the OSC.
The OSC reviews this preliminary prospectus, issues comments, and tries to clear any concerns with the issuer to prepare for the final prospectus.
The issuer files its final prospectus.
The OSC reviews the final prospectus and supporting materials.
The OSC issues a final receipt, allowing the issuer to begin selling securities related to the prospectus.
The first step of any prospectus filing is to determine the appropriate principal regulator. In general, issuers file with the regulator of the jurisdiction in which their head office is located. If the regulator identified is not in a “specified jurisdiction” (meaning one of British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Québec, New Brunswick, or Nova Scotia), the issuer files with the regulator in the “specified jurisdiction” with which issuer has the most significant connection.
National Policy 11-202 Process for Prospectus Reviews in Multiple Jurisdictions provides full details on determining the principal regulator and the process for filing and reviewing prospectuses in multiple jurisdictions within Canada.
Before filing a preliminary prospectus, an issuer may want to obtain a pre-filing interpretation or a waiver. This allows an issuer to consult with OSC staff regarding the interpretation of securities legislation to a specific issue of the proposed offering.
An issuer may also file a prospectus for a full review on a confidential pre-file basis.
Preliminary prospectus phase
Companies that plan to offer securities in Ontario typically begin by filing a preliminary prospectus with the OSC. If all filing requirements are met, we will issue a receipt for the preliminary prospectus.
The OSC then reviews the preliminary prospectus and may provide comments to the company. Through our prospectus review process, we obtain a sound understanding of the company, its industry, and other relevant information including how it makes money and the key risks facing the business. We focus on material issues and our analysis will consider and balance investor protection and market efficiency.
Once all comments are resolved to the satisfaction of the OSC, the company typically files a final prospectus with the OSC.
Final prospectus phase
When a company files a prospectus in Ontario, the OSC conducts a final review of the prospectus and other documents filed. Once this review is complete to the satisfaction of the OSC, a final receipt is issued for a final prospectus. The prospectus can then be used to offer and sell securities to the public.
Securities legislation prohibits the OSC from issuing a receipt for a final prospectus if it would be prejudicial to the public interest or if any of the receipt refusal grounds exist as enumerated in subsection 61(2) of Ontario’s Securities Act.
The Multijurisdictional Disclosure System (MJDS) outlines requirements for cross-border offerings. Learn more about cross-border offerings.
There are exceptions that may allow companies to offer securities without a prospectus. These prospectus exemptions can help a company raise money without the time and expense of preparing a prospectus.