BC tightens the 'Northwest Exemption'
British Columbia tightens restrictions on the ‘Northwest Exemption’
The British Columbia Securities Commission (BCSC) has announced new conditions restricting the availability of the Northwest Exemption set out in BC Instrument 32-513 - Registration Exemption for Trades in Connection with Certain Prospectus-Exempt Distributions.
Effective April 16, 2012 the Northwest Exemption in BC will no longer be available to any individual who: 1) is a current or former securities registrant, or 2) who provides any "financial services” to the investor (this second restriction is already in place in other Northwest Exemption jurisdictions).
These are additions to the existing restrictions in all Northwest Exemption jurisdictions which include: no suitability advice to purchasers, a mandated risk disclosure form, and no access to investor assets.
A new expanded definition of "financial services” has also been introduced which means individuals will also be excluded from provision of the following financial services: 1) a mortgage broker, 2) insurance or related services, or 3) financial planning (which includes tax, personal or financial planning).
The Northwest Exemption is only available when using one of four categories of prospectus exempt trades under NI 45-106: accredited investor; minimum amount; friends, family and close business associates; and the offering memorandum exemption.
These changes tighten the restrictions in BC on those in the business of trading securities and currently exempt from the requirement to register as an EMD. The BCSC expects many market participants will now have to obtain registration as an EMD in order to continue their business.