Prospectus (Federal Credit Unions) Regulations (SOR/2012-265)

Distribution of Securities — General

Prospectus

Marginal note:Contents

• 1 (1) The information to be disclosed before a distribution of securities of a federal credit union must be set out in a prospectus and must include the contents that are required for a prospectus under the legislation set out in column 2 of the schedule for the relevant jurisdiction set out in column 1.

• Marginal note:Procedures

  (2) The disclosure must be made in accordance with the procedures for disclosure by prospectus that are required under the legislation set out in column 2 of the schedule for the relevant jurisdiction set out in column 1.

• Marginal note:Form

  (3) The information to be disclosed must be in the form that is required for a prospectus under the legislation set out in column 2 of the schedule for the relevant jurisdiction set out in column 1.

Marginal note:Other requirements

2 In addition to the requirements set out in section 1, a prospectus filed under any legislation set out in column 2 of the schedule must comply with any other requirements that are set out in that legislation.

Exemption

Marginal note:Exemption from provincial requirements

3 A person that has been exempted under the legislation set out in column 2 of the schedule for the relevant jurisdiction set out in column 1, or by the relevant provincial regulator, from any prospectus requirements under that legislation is also exempt from those requirements for the purposes of sections 1 and 2.

Distribution of Securities — Individual Members

Application

Marginal note:Exemption from requirement to provide prospectus

4 A federal credit union that is exempt under section 3 from the requirement to provide a prospectus must comply with the requirements set out in sections 5 to 9 in respect of a distribution of its securities to any of its members who are individuals, other than an issuance of shares as a dividend or patronage allocation under subsection 79(1) of the Bank Act.

Disclosure

Marginal note:Manner

5 Any disclosure that is required to be made by a federal credit union under these Regulations must be made in language that is clear and simple and in a manner that is not misleading.

Marginal note:Written disclosure before distribution

• 6 (1) Before a federal credit union enters into an agreement with one of its members respecting the distribution of its securities, it must provide that member with a disclosure document containing

  • (a) on the first page, prominently displayed,

    • (i) the statement “No official of the Government of Canada has considered the merits of the matters addressed in this disclosure”,

    • (ii) a statement indicating that the securities are not eligible for deposit insurance coverage by the Canada Deposit Insurance Corporation,

    • (iii) a statement indicating that the agreement is not binding on the member if the federal credit union receives written notice of the member’s intention not to be bound by the agreement not later than the second business day after the day on which the federal credit union provided the information required by this section, and

    • (iv) a statement indicating that the security is not transferrable, except to another member;

  • (b) the name, date of incorporation, and head office address of the federal credit union;

  • (c) the name, municipality of residence and principal occupation of each of the federal credit union’s directors and senior officers, and the title of each senior officer;

  • (d) the name and location of each transfer agent;

  • (e) a brief description of the attributes of the securities being distributed;

  • (f) a description of the risks associated with the securities being distributed;

  • (g) a description of any business that the federal credit union or its subsidiaries, if any, carry on or intend to carry on;

  • (h) details of the capital structure of the federal credit union;

  • (i) details of the use to which the proceeds from the sale of the securities will be put;

  • (j) details of any securities ranking ahead of the securities being distributed;

  • (k) a description of any action, suit or other proceeding to which the federal credit union is a party;

  • (l) a description of any material interest of a director, officer or employee of the federal credit union or any of its subsidiaries in the operations of the federal credit union, generally, or in the securities being distributed, including

    • (i) details of any options to purchase securities of the federal credit union that are held by a director or officer, and the name of any director or officer who holds such options, and

    • (ii) details of any options to purchase securities of the federal credit union that are held by an employee who is not a director or an officer, without naming the employee;

  • (m) a description of every material contract entered into within the two-year period before the date of the distribution;

  • (n) a description of the risk factors associated with the federal credit union;

  • (o) an explanation of any substantial variations in the operating results of the federal credit union within the five-year period before the date of the distribution;

  • (p) the amount of any dividends or patronage allocations paid, or distributions made, by the federal credit union within the five-year period before the date of the distribution;

  • (q) the amount of any undeclared dividends on any shares with cumulative dividend rights;

  • (r) the name and address of the federal credit union’s auditor and a statement indicating that copies of the federal credit union’s most recent interim and annual financial statements are available upon the member’s request;

  • (s) details of the method of distributing the securities and of any commission payable or discount allowable on the distribution;

  • (t) any other material fact; and

  • (u) a statement indicating that the disclosure document constitutes full, true and plain disclosure of all material facts relating to the securities proposed to be distributed.

• Marginal note:Disclosure deemed provided

  (2) If the document is sent by mail, the federal credit union is deemed to have provided it five business days after the postmark date.

Marginal note:Oral disclosure before distribution

• 7 (1) Before a federal credit union enters into an agreement with one of its members respecting the distribution of its securities, it must provide the member with the information referred to in subparagraphs 6(1)(a)(ii) and (iii) and paragraphs 6(1)(e) and (i) orally, by means of a person who is knowledgeable about the terms and conditions of the security.

• Marginal note:Exception — agreements by electronic means

  (2) If an agreement referred to in subsection (1) is entered into by electronic means, the federal credit union is not required to comply with that subsection, but it must, before entering into the agreement, provide the member with the telephone number of a person who is knowledgeable about the terms and conditions of the security.

Marginal note:Other disclosure

8 The document referred to in section 6 must also be disclosed by a federal credit union

• (a) on each of its websites through which products or services are offered in Canada; and

• (b) in written format to be sent to any person who requests it.

Marginal note:Advertisements — required content

• 9 (1) In each of its advertisements for its securities, a federal credit union must disclose how the public may obtain information about the securities and must state that the securities are not eligible for deposit insurance coverage by the Canada Deposit Insurance Corporation.

• Marginal note:Market performance

  (2) A federal credit union that uses past market performance in an advertisement for a security must represent that performance fairly, must base any hypothetical examples used in the advertisement on realistic assumptions that are disclosed in the advertisement and must state in the advertisement that past market performance is not an indicator of future market performance.

Coming into Force

Marginal note:S.C. 2012, c. 5

Footnote ^*10 These Regulations come into force on the day on which section 10 of the Financial System Review Act comes into force.

• Return to footnote ^*[Note: Regulations in force December 19, 2012, see SI/2012-99.]