Securities Law & Instruments


Subsection 74(1) of the Securities Act (Ontario) -- relief from the dealer registration requirement in section 25(1) -- applicant is a not-for-profit issuer -- applicant sells bonds to facilitate the provision of mortgages to churches and other religious organizations -- relief granted on strict terms and conditions including an investment limit and subject to a sunset clause -- relief granted based on the particular facts and circumstances of the application -- decision should not necessarily be viewed as a precedent for other not-for-profit issuers in Ontario or in other jurisdictions.

November 13, 2013

(the Jurisdiction)


(the Filer)



The Ontario Securities Commission (the Commission) has received an application from the Filer for a decision under the securities legislation of the Jurisdiction (the Legislation) that the Filer be exempt from the registration requirement of the Legislation in respect of the distribution by the Filer of debt securities of its own issue (the Requested Exemptive Relief).


This decision is based on the following facts represented by the Filer:

1. The Filer is a non-share corporation and is a "charitable organization" for purposes of the Income Tax Act (Canada). The head office of the Filer is located in Ontario.

2. The Filer is restricted in the business it may carry on and the powers it may exercise to engaging exclusively in educational, charitable or religious activities. The Filer was established for the purpose of giving financial aid, including by way of mortgage financing, to Canadian evangelical Christian churches, camps, nursing homes and schools and similar institutions.

3. The Filer is primarily engaged in providing mortgage financing for Canadian Christian evangelical organizations that may otherwise be unable to obtain such financing from commercial lenders.

4. The business of the FiIer is overseen by its board of directors and the day to day management is under the direction of the Executive Director, who is independent from the board.

5. The Filer was established in 1952 and has been distributing its own debt securities substantially in accordance with the representations in this order for over 60 years.

6. In order to raise the funds to advance by way of mortgages, the Filer issues bonds in reliance on the prospectus exemption found in section 2.38 of National Instrument 45-106 Prospectus and Registration Exemptions (NI 45-106), which provides an exemption for not for profit issuers distributing their own securities subject to certain conditions. In connection with such distributions, the Filer is, and will be, in compliance with the conditions contained in section 2.38 of NI 45-106.

7. The bonds are sold to Canadian Christians and sales are not limited to accredited investors as defined in NI 45-106. Investments are accepted in any amount and generally range between $50,000 to $100,000. The bonds are demand variable rate bonds.

8. In a typical year, the Filer issues bonds in an aggregate principal amount of approximately $2.5 million to between 20 t0 30 purchasers.

9. As of June 30, 2013 there were bonds outstanding in the aggregate principal amount of $28.2 million.

10. There is no active advertising or solicitation of bond purchases. No commission or other remuneration is paid in connection with the sale of the bonds. Purchasers of the bonds learn about the distribution program through word of mouth.

11. The Filer delivers to prospective purchasers an Information Memorandum which describes the bonds and the risks related to the purchase of them. The Information Memorandum provides investors with a right of rescission as well as a right of action for misrepresentation.

12. Prior to the coming into force of section 8.5 of NI 45-106, the Filer was able to distribute its securities and be exempt from the registration requirement in reliance on section 3.38 of NI 45-106, which provided for a dealer registration exemption corresponding to the prospectus exemption in section 2.38.The registration exemption previously available under section 3.38 of NI 45-106 no longer applies.

13. The Filer may be considered to be engaging in the business of trading in securities and as such would be required to register as a dealer.

14. The Filer undertakes not to rely on section 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) to passport this decision into another Canadian jurisdiction without the prior written consent of the regulator or securities regulatory authority in that jurisdiction.


The Commission is satisfied that the test contained in the Legislation for the Commission to make the decision has been met.

The decision of the Commission under the Legislation is that the Requested Exemptive Relief is granted, on the following conditions:

(a) The Filer continues to be in compliance with the conditions to rely on the prospectus exemption in section 2.38 of NI 45-106, namely:

i. the Filer is organized exclusively for educational, benevolent, fraternal, charitable or religious purposes and not for profit;

ii. no part of the net earnings of the Filer benefit any security holder of the Filer;

iii. no commission or other remuneration is paid to any person in connection with the sale of securities of the Filer;

(b) The proceeds from the sale of debt securities of the Filer are used only to provide mortgage financing to Canadian evangelical Christian churches, camps, nursing homes, schools or similar institutions, and not to individuals;

(c) In any fiscal year of the Filer, administrative and general expenses, not including legal and audit expenses, are limited to no more than 0.65% of the total principal amount of bonds outstanding as at the end of such fiscal year;

(d) The Filer, each year, files its audited financial statements with the Commission within 90 days of the Filer's year end;

(e) The Filer does not engage in any advertising or promotional activity with respect to the distribution of its debt securities including by providing such information on the Filer's public website.

(f) An investor may not purchase any debt securities of the Filer if as a result of the purchase the investor would own debt securities of the Filer with an aggregate principal amount exceeding $50,000;

(g) An investor does not borrow to purchase debt securities of the Filer and the purchaser acknowledges that in the subscription agreement for debt securities;

(h) An investor executes and delivers to the Filer a risk acknowledgement statement in the form set out in Appendix A to this decision and that statement is included on the front page of the subscription agreement;

(i) The Filer delivers an information statement to prospective purchasers of debt securities which describes the debt securities and the risks associated with purchasing the debt securities and contains a contractual right of rescission and a right of action for misrepresentation;

It is further the decision of the Commission that the Requested Exemptive Relief shall expire on the date that is the earlier of:

(a) five years from the date of this decision; or

(b) the date on which the Commission publishes, and makes effective, rules or policies with respect to distributions of securities by not-for-profit issuers.

DATED: November 13 , 2013

"Mary Condon"
"James Turner"
Ontario Securities Commission
Ontario Securities Commission


Appendix A

Risk Acknowledgement

I acknowledge that:

• This is a risky investment and I am investing entirely at my own risk.

• I could lose all the money I invest.

• I am not borrowing to invest in these securities.

• No securities regulatory authority or regulator has evaluated or endorsed the merits of these securities or the disclosure in the Information Memorandum.

• The person selling me these securities is not registered with a securities regulatory authority or regulator and will not assess whether this investment is suitable for me.

• Under securities laws, I will not be able to sell these securities except in very limited circumstances. I may never be able to sell these securities.

• The securities are expressed to be redeemable, but I may only be able to redeem them in limited circumstances.

• No one other than Stewards Canada has any obligation to repay my investment in these securities.

Signature of Purchaser
Print name of Purchaser