Multilateral Instrument 51-105 Issuers Quoted in the U.S. Over-the-Counter Markets (MI 51-105 or the rule) regulates issuers whose securities are quoted or have received ticker symbols for quotation on the OTC Markets or OTC BB if:
- they have one or more of the significant connections to British Columbia listed in the section three of the rule,
- their securities are not quoted or listed on one of the other North American exchange or quotation system listed in section one of the rule and
- they have not been exempted from the rule by BC Instrument 51-512 Certain Private Placements
The BC Securities Commission has also imposed new conditions of registration for investment dealers that trade in U.S. over-the-counter markets. The Conditions of Registration and Rule for U.S. Over-the-Counter markets page provides details about these conditions.
MI 51-105 designates these issuers as reporting issuers (OTC reporting issuers) under the BC Securities Act, and describes their disclosure obligations, how investors who acquire the issuer's securities in a private placement may re-sell them, restricts their use of certain exemptions in the Act, and provides some transitional relief for reporting obligations.
Please refer to the rule for its specific provisions: Multilateral Instrument 51-105 Issuers Quoted in the U.S. Over-the-Counter Markets. The rule's Companion Policy, 51-105CP explains how the Commission interprets and applies the rule.
MI 51-105 came into force on July 31, 2012.
On July 31, BCI 51-509 Issuers Quoted in the U.S. Over-the-Counter Markets was repealed and MI 51-105 Issuers Quoted in the U.S. Over-the-Counter Markets came into force.
In doing so, we streamlined compliance, improved investor protection, and made related amendments to the forms, companion policy and local instruments and policies. These changes to BCI 51-509 located in MI 51-105 are not significant and are briefly described below.
1. Securities for services
BCI 51-509 restricts an OTC reporting issuer from using the securities for debt prospectus exemption. In MI 51-105, we will permit OTC reporting issuers to use the exemption when issuing shares for services to related parties provided the consideration is reasonable, the debt is bona fide, and the price is at least market price.
2. Use of SEC Form 8-K as a material change report
Under BCI 51-509, an OTC reporting issuer must file a copy of its news release and a material change report. In MI 51-105, we will permit the issuer to file its SEC Form 8-K Current Report instead of a material change report.
3. Resale of seed stock exemptions
In BCI 51-509, we provide an exemption for the resale of seed stock. In MI 51-105, we will add resale exemptions for corporate transactions, including bids, amalgamations, reorganizations and dissolutions.
4. Addition of shorter form of Personal Information Form
BCI 51-509 requires a person to file a personal information form. In MI 51-105, we will permit a person to file a shorter form of personal information form. Specifically, if a person has filed a personal information form with the Commission, the Toronto Stock Exchange or TSX Venture Exchange and the information has not changed, the person may instead file Form 51-105F3B Personal Information Form and Authorization of Indirect Collection, Use and Disclosure of Personal Information.
5. Definition of promotional activities
BCI 51-509 relies on the definition in the Securities Act (British Columbia) of investor relations activities. In MI 51-105, we will include a similar definition of those activities.
6. Alpha Exchange
In MI 51-105, we will indicate that issuers listed on the Alpha Exchange will not be subject to MI 51-105.
Improving Investor Protection
7. Insider reports
In BCI 51-509, insiders of OTC reporting issuers may comply with their obligations to file insider reports by complying with their insider reporting obligations under U.S. federal securities law. However, insiders of some OTC issuers are not required to file insider reports under U.S. federal securities law. In MI 51-105, we will add a provision that requires these insiders to file insider reports in Canada.
8. Certification requirements
In MI 51-105, we will require OTC reporting issuers to file the same certificates as venture issuers for annual and interim filings.
Forms called for in the rule:
- 51-105F1 - Notice - OTC Issuer Ceases to be an OTC Reporting Issuer [F]
- 51-105F2 - Notice of Promotional Activities [F]
- 51-105F3A - Personal Information Form and Authorization of Indirect Collection, Use and Disclosure of Personal Information [F]
- 51-105F3B - Personal Information Form and Authorization of Indirect Collection, Use and Disclosure of Personal Information [F]
- 51-105F4 - Notice - Issuer Ceases to be an OTC Reporting Issuer [F]
Some of the key disclosure rules that apply to OTC reporting issuers:
View the continuous disclosure filing calendar, showing due dates for annual and interim filing requirements.
Here are links to policies that provide guidance to reporting issuers about disclosure obligations generally:
Most instruments that impose disclosure obligations have companion policies that also provide guidance.
Insiders of an OTC reporting issuer have the same obligations as insiders of other reporting issuers. You can learn more about the System for Electronic Disclosure by Insiders (SEDI) and find other information about insider reporting and other responsibilities on our Insiders page.
An OTC reporting issuer that has a class of securities registered under section 12 of the U.S. Securities Exchange Act of 1934 or is required to file reports under section 15(d) of that Act may have exemptions from most continuous disclosure requirements. Insiders of these issuers may have exemptions from insider reporting requirements.
The most common exemptions from continuous disclosure requirements for SEC filers and their insiders are in:
Please refer to Companion Policy 51-105 Issuers Quoted in the U.S. Over-the-Counter Markets for further guidance.
How does an Over-the-counter or bulletin board company become a reporting issuer in BC?
Under MI 51-105 an OTC Markets company or Over-the-counter Bulletin Board company will be a reporting issuer if:
- it has any of the significant connections to British Columbia (through management, investor relations, or the sale of seed shares) set out in section 3 of that rule, and
- its securities are not listed on one of the following exchange or quotation systems:
- TSX-Venture Exchange Inc.,
- TSX Inc.,
- Canadian National Stock Exchange,
- Alpha Exchange Inc.,
- New York Stock Exchange LLC.,
- NYSE Amex LLC., or
- NASDAQ Stock Market LLC.
An OTC quoted or a bulletin board companies that are not designated reporting issuers under MI 51-105 can become reporting issuers by filing a non-offering prospectus with the Commission or applying to the Commission for an order to designate them a reporting issuer in B.C. If the company is already a reporting issuer in another Canadian jurisdiction, it can file a notice to become a public issuer in B.C. See BCP 12-601 and the definition of "reporting issuer" in Section 1 of the Securities Act.
SEDAR is the System for Electronic Document Analysis and Retrieval, the electronic filing system for reporting issuers to file certain documents with the Canadian securities regulatory authorities, including the British Columbia Securities Commission.
If you are a mining issuer, you may wish to refer to additional documents in our Mining section.