CANADA Law and Practice Contributed by: Darin Renton, Jill Winton, Amy Chao and Irena Ninkovic, Stikeman Elliott LLP
sponsor solicits or contacts directly any purchaser or prospective purchaser in connection with the offering of the fund’s securities. Some non-resident alternative funds opt to distribute their securities directly to investors who qualify as per - mitted clients or accredited investors, without engag - ing a registered dealer, on the basis that the fund’s business is non-securities-related and its capital- raising activities are occasional and uncompensated, such that the business trigger for dealer registration is not met; please refer to 4.1 Types of Investors in Alternative Funds . Disclosure and Filing Requirements Canadian securities laws do not require a specific dis - closure document or prescribed content for marketing materials used in private placements. Best practices for marketing are set out in regulatory notices of the CSA and the OSC, including CSA Staff Notice: 31-325 Marketing Practices of Portfolio Managers and OSC Staff Notice: 33-729 Marketing Practices of Invest - ment Counsel/Portfolio Managers. Public funds are subject to sales communication rules under NI 81-102 and National Instrument 81-105 Mutual Fund Sales Practices. There is no obligation for marketing docu - ments of alternative funds offered by way of a pri - vate placement to be registered with or approved by Canadian securities regulators. Certain Jurisdictions require a copy of the OM to be delivered to, or filed with, the applicable securities regulator within ten days of the distribution. See 2.3 Disclosure/Reporting Requirements and 4.1 Types of Investors in Alterna- tive Funds for certain prescribed disclosure and statu - tory rights of action applicable to an OM provided to a Canadian investor in certain Jurisdictions. Canada’s Anti-Spam Law In addition to the requirements described above, Canada’s Anti-Spam Law (CASL) imposes significant limitations on marketing activities that involve sending commercial electronic messages (CEMs) to recipients in Canada. Under CASL, a CEM is defined as an elec - tronic message intended to encourage participation in a commercial activity, based on its content, hyperlinks to websites or databases, or the contact information it contains. An electronic message encompasses, but is not limited to, email and other forms of elec -
tronic messaging and social media communication, including text, audio, voice or image messages. Con - sequently, the law regulates not only direct solicita - tions but also a wide array of advertising, marketing and general promotional activities. Subject to certain exemptions, the primary impact of CASL is to require consent from the recipient of a CEM prior to sending a CEM to a recipient located in Canada. 4.5 High Net Worth or Retail Investors Prospectus-qualified liquid alts were designed by the CSA to provide retail investors with access to alternative investment strategies in a manner similar to conventional retail mutual funds; see 1.1 General Overview of Jurisdiction . Retail access to alterna - tive investment funds under prospectus exemptions is very limited. Only two provinces offer retail inves - tors unfettered access to investment funds under the OM exemption that requires the distribution of a pre - scribed form of offering memorandum, among other conditions. In several other Canadian jurisdictions, the OM exemption is restricted to prospectus quali - fied mutual funds and restrictive investment limits on investors other than “accredited investors”. The price of all securities purchased under the OM exemption in the past 12 months cannot exceed the following: • CAD10,000 (retail); • CAD30,000 (eligible investors); or • greater than CAD30,000 but not more than CAD100,000 for eligible investors that receive advice from a portfolio manager, investment dealer or exempt market dealer. In Ontario, New Brunswick and Quebec, investment funds cannot use the OM exemption, so the OM exemption is not attractive for alternative investment fund distributions. Privately placed alternative investment funds are widely available to high net worth investors under the accredited investor exemption, including through the facilities of Fundserv Inc. Non-resident investment funds are provided efficient access to permitted cli - ents through a series of international exemptions addressing dealer, adviser and commodity futures
69 CHAMBERS.COM
Powered by FlippingBook