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An officer’s duty to exercise due diligence: A clarification?
A recent decision of the District Court of New South Wales has clarified the content, nature and extent of an officer’s duty to exercise due diligence.
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Global | Publication | April 2016
Dealers and issuers, including foreign issuers and international dealers, involved in private placement transactions that access the Canadian exempt market should be aware that on June 30, 2016, new rules will come into force regarding the reporting of certain private placements. Currently the Canadian reporting requirements require Form 45-106F1 to be filed in all Canadian jurisdictions except British Columbia, where Form 45-106F6 must be filed.
Effective June 30, 2016, there will be one harmonized form (Form 45-106F1) to be filed with all Canadian securities regulatory authorities in any province or territory of Canada where the distribution of securities occurs in the exempt market in reliance on certain prospectus exemptions. While it is a welcome change that two separate forms will no longer be required, the harmonized form will solicit more information regarding both the investor and the issuer.
In all Canadian jurisdictions other than British Columbia and Ontario, issuers, except certain foreign issuers, will have to file the report on SEDAR.
The purpose of the amended form is stated to be two-fold: first to reduce the compliance burden on issuers and dealers and secondly to provide Canadian regulators with additional information to assist them in regulating the Canadian exempt market. Dealers and issuers should consider what procedures should be introduced to collect and verify such information, recognizing that such information will be required to be certified by an officer or director of the issuer or dealer.
The additional information to be collected includes:
The last two requirements do not apply to Canadian reporting issuers (and their wholly owned subsidiaries, generally issuers listed on a Canadian stock exchange), investment funds, foreign public issuers and their wholly owned subsidiaries (SEC registrants and other issuers who publicly file disclosure in a designated foreign jurisdiction such as the United Kingdom) and issuers distributing eligible foreign securities to permitted clients (i.e., international dealers selling to permitted clients, which are a limited subcategory of accredited investors).
Publication
A recent decision of the District Court of New South Wales has clarified the content, nature and extent of an officer’s duty to exercise due diligence.
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