Application by not-for-profit entity (the Filer) for an interim extension order -- Filer operates an online portal bringing together accredited investors with issuers that aim to solve social or environmental challenges -- Filer registered as restricted dealer in Ontario -- previous decision granted Filer relief from certain know-your-client (KYC) and suitability requirements contained in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations (NI 31-103) subject to certain conditions -- interim extension order granted.
Applicable Legislative Provisions
Multilateral Instrument 11-102 Passport System (MI 11-102).
National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations, ss. 13.2(2)(c), 13.3, and Part 15.
December 17, 2015
IN THE MATTER OF THE SECURITIES LEGISLATION OF ONTARIO (the Jurisdiction) AND IN THE MATTER OF MARS VX (the Filer)
The Filer has made an application (the Application) to the Director (the Director) in the Jurisdiction for a decision, pursuant to section 15.1 of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations (NI 31-103), to vary a previous decision under the securities legislation of the Jurisdiction of the regulator made under section 15.1 of NI 31-103 entitled In the Matter of MaRS VX dated June 17, 2013 (the Original Decision) and varied on March 6, 2014 (the March 2014 Amending Decision) and as further varied on June 17, 2015 (the June 2015 Amending Decision, and collectively with the Original Decision and the March 2014 Amending Decision, the Previous Decision) in accordance with the Requested Interim Relief (as described below).
Defined terms contained in National Instrument 14-101 Definitions or in the Previous Decision have the same meaning in this decision unless they are otherwise defined in this decision (the Decision).
This Decision is based on the following facts represented by the Filer:
1. The Filer is a not-for-profit entity and is a wholly owned subsidiary of MaRS Discovery District (MaRS).
2. MaRS is a registered charity and a not-for-profit entity without share capital created by letters patent under the Canada Corporations Act. It carries on its operations without pecuniary gain. Its head office is located in Toronto, Ontario.
3. The Filer's current objective is to facilitate impact investing by bringing together through an online platform (the Platform) accredited investors (as such term is defined in section 1.1 of National Instrument 45-106 Prospectus and Registration Exemptions (NI 45-106) and in subsection 73.3(1) of the Securities Act (Ontario) (the Act)) in Ontario and Quebec and issuers that are social impact issuers and/or environmental impact issuers in Ontario and Quebec aiming to solve social or environmental challenges in these jurisdictions.
4. The Filer is registered as a restricted dealer in Ontario and in Quebec.
5. Under the Previous Decisions, the Filer was granted relief from certain requirements under NI 31-103 that would otherwise be applicable to the Filer in connection with the operation of the Platform, subject to certain terms and conditions specified in the Previous Decision.
6. In the March 2014 Amending Decision, the Filer was also granted relief to amend the Original Decision in order to be able to rely on the passport system described in Multilateral Instrument 11-102 Passport System (MI 11-102) in the province of Quebec, all as described in the March 2014 Amending Decision.
7. A condition in the Previous Decision is that the relief is subject to a sunset clause which expires on December 17, 2015.
8. The Filer carries on a very unique business with a special focus on social impact issuers and environmental impact issuers, and is still in the early stages of development, having operated the Platform for less than two years. Based on a compliance review, Ontario Securities Commission (Commission) staff identified deficiencies and areas for improvement with the Filer's compliance with Ontario securities laws. On July 17, 2015, the Filer consented to terms and conditions imposed by the Director, which included that the Filer retain an independent consultant to prepare and assist the Filer to implement a plan to strengthen their compliance system.
9. Commission staff has approved the compliance plan and the Filer is in the process of implementing the Compliance Plan.
10. The Filer is cooperating with Commission staff to address all deficiencies identified by Commission staff and strengthen its compliance system.
11. The Filer wishes for the relief granted in the Previous Decision to be extended to September 30, 2016 (the Requested Interim Relief).
12. The Filer will continue to implement procedures to ensure that it will not be in default of securities legislation in respect of the registerable activity in which the Filer engages while this Decision is effective.
13. The Filer also wishes to rely on the passport system described in Multilateral Instrument 11-102 Passport System (MI 11-102) in the province of Quebec. Upon the granting of the Requested Interim Relief, the Filer intends to file a notice pursuant to section 4.7(1) of MI 11-102 to passport this Decision into Quebec.
14. This Decision is based on the same representations made by the Filer in the Previous Decision, to the extent not amended by this Decision, and which remain true and complete, except in respect of those deficiencies identified by Commission staff and being addressed in the Compliance Plan and in the terms and conditions that were imposed on the Filer's registration.
The Director is satisfied that the decision meets the test set out in the Legislation for the Director to make the decision.
It is the decision of the Director that the Requested Interim Relief is granted provided that:
1. The Filer complies with all of the registration requirements of an exempt market dealer under the Act and NI 31-103, subject to paragraph 2 below, with the Compliance Plan, and with the terms and conditions imposed by the Director;
2. The Filer is exempt from the know-your-client and suitability requirements in paragraph 13.2(2)(c) and in section 13.3 of NI 31-103 on the basis that the following terms and conditions will apply to investors that have access to the Private Portal:
(a) if the investor is a permitted client that has waived the know-your-client and suitability requirements of paragraph 13.2(2)(c) and section 13.3 of NI 31-103 under subsections 13.2(6) and 13.3(4) of NI 31-103, respectively, there will be no maximum amount that such an investor may subscribe for on the Private Portal;
(b) if the investor is either: (i) an accredited investor that is not a permitted client; or (ii) a permitted client that has not waived the know-your-client and suitability requirements of paragraph 13.2(2)(c) and section 13.3 of NI 31-103, the investor shall be limited to investing a maximum of $25,000 in a single offering on the Private Portal in a calendar year and a maximum of $50,000 in total in all offerings on the Private Portal in a calendar year; and
3. The Filer will continue to abide by the terms and conditions imposed on the Filer's registration.
4. Paragraph 35 of the Previous Decision be deleted and replaced with the following new paragraph:
The Filer will not sell its own securities or the securities of any related issuers.
5. The period of reporting to Commission staff as set out in paragraph 45 of the Previous Decision will be every second month (to be submitted within 10 days of the end of every second month) and paragraphs 45(a) and (e) of the Previous Decision be deleted and replaced by the following new paragraphs (a) and (e):
(a) the investment transactions made in the two-month period by investors that have access to the Private Portal in offerings of issuers on the Private Portal, including the following information for each investor who has invested in an investment transaction:
(i) the name of investor;
(ii) the name of the issuer;
(iii) the date the investment in the issuer was purchased by the investor;
(iv) the type of securities purchased by the investor;
(v) the dollar amount of the investment in the issuer by the investor; and
(vi) the total dollar amount invested by the investor in all offerings on the Private Portal (including the investment transaction(s) reported upon in the two month period) in the calendar year;
(e) all investors who have been granted access to the Private Portal or whose access to the portal has been revoked during the two month period, including for each investor:
(i) the name of the investor;
(ii) the type of accredited investor (e.g., permitted clients (as defined in section 1.1 of NI 31-103) and non-permitted clients, and the clause they are relying on in section 1.1 of NI 45-106 or in subsection 73.3(1) of the Act that qualified them as an accredited investor), along with a reference of the documentation that supports such classification;
(ii) the date the investor was granted access to the Private Portal, if applicable; and
(iv) where the investor was initially granted access but access was subsequently revoked, the date of the revocation and the reason for the denial of access, if applicable.
This Decision shall expire on the earlier of:
(a) September 30, 2016; and
(b) Sixty (60) days after any material changes in the Filer's business, operations or capital.
This Decision may be amended by the Director from time to time upon prior written notice to the Filer.