On 17th September 2020, the Canadian Securities Administrators published the proposed amendments to National Instrument 45-106 Prospectus Exemptions (NI 45-106) relating to real estate activities and collective investment vehicles.

Proposed Amendments:

Issuers that are Collective Investment Vehicles – The Proposed Amendments also include the new defined term “collective investment vehicle”. A collective investment vehicle is defined as an issuer whose primary purpose is to invest money provided by its security holders in a portfolio of securities. This definition would include issuers that hold portfolios of mortgages, other loans, or receivables. To the extent they are permitted to use the OM Exemption, the definition would also include investment funds.

Issuers that are collective investment vehicles would be required to complete new Schedule 2 Additional Disclosure Requirements for an Issuer That is a Collective Investment Vehicle to Form 45-106F2, which includes:

  • A description of the issuer’s investment objectives.
  • Disclosure of penalties, sanctions, bankruptcy, insolvency and criminal or quasi- criminal convictions for persons involved in the selection and management of the investments.
  • Disclosure of information regarding the portfolio.
  • Disclosure regarding the performance of the portfolio.

Issuers Engaged in Real Estate Activities – The Proposed Amendments include the new defined term “real estate activities”. Issuers engaged in real estate activities would be subject to new requirements, including:

Providing an independent appraisal of an interest in real property to the purchaser if

  • the issuer has acquired or proposes to acquire an interest in real property from a related party (Related Party), as that term is defined in NI 45-106,
  • a value for an interest in real property is disclosed in the offering memorandum, or
  • the issuer intends to spend a material amount of the proceeds of the offering on an interest in real property

Completing new Schedule 1 Additional Disclosure Requirements for an Issuer Engaged in Real Estate Activities (Schedule 1) to Form 45-106F2, which includes:

  • Disclosure relevant to issuers that are developing real property, such as a description of the approvals or permissions required, and milestones of the project.
  • Disclosure relevant to issuers that own and operate developed real property, such as the age, condition and occupancy level of the real property.
  • Disclosure of penalties, sanctions, bankruptcy, insolvency and criminal or quasi-criminal convictions for parties other than the issuer, such as a party acting as developer.
  • Disclosure of any purchase and sale history of the issuer’s real property with a Related Party, so investors can better evaluate transactions involving Related Parties.