OSC Staff Notice: 91-701 - Debt-Like Derivative Securities

OSC Staff Notice: 91-701 - Debt-Like Derivative Securities

OSC Notice



The Commission staff, by this notice, is withdrawing its notice on Debt-like DerivativeSecurities issued July 5, 1991 ((1991), 14 OSCB 3316, Carswell, 1995, p. 1420). Thatnotice stated, among other things, that issuers proposing to distribute certain debt-likesecurities should not rely upon the prospectus exemption contained in clause 72(1)(a)[now 73(1)(a)] of the Securities Act (the "Act") as it relates to the issue of securitiesdescribed in clause 35(2)(1) of the Act without the prior approval of the Director,Corporate Finance.

Staff is aware that there has been some confusion in the market concerning theavailability of the exemption described above to debt-like derivatives. For instance, staffhas received, on occasion, inconsistent legal opinions from practitioners with respectto substantially similar transactions. In order to attempt to address this confusion, aTask Force consisting of an industry representative, legal practitioners, a member of theCommission and Commission staff has been formed to review the regulation of debt-likederivatives in Ontario. The members of the Task Force are Kirby C. Gavelin, RBCDominion Securities Inc.; Stephen R. Ashbourne, Blake, Cassels & Graydon; Philip J.Henderson, Stikeman, Elliott; Paul M. Moore, Tory, Tory, DesLauriers & Binnington;Robert P. Wildeboer, Wildeboer Rand Thomson Apps; and John A. Geller, SusanWolburgh Jenah, Tanis J. MacLaren, Margo L. Paul and M. Cecilia Williams of theOntario Securities Commission.

The Task Force is expected to make written recommendations to the Commission andthe Canadian Securities Administrators concerning the regulation of debt-likederivatives. It is anticipated that these recommendations will be published for commentto inform any further policy development in this area.

Whether the prospectus exemption described above is available for distributions ofdebt-like derivatives depends upon the nature and structure of the instruments proposedto be issued. Staff encourages persons contemplating a distribution of debt-likederivatives to confer with staff before proceeding with the distribution in reliance uponthe above-noted exemption.

Questions or comments concerning this notice should be provided to:

Susan Wolburgh Jenah
Manager, Issuer and Intermediary Regulation
Market Operations
(416) 593-8245

June 21, 1996