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.
September 30, 2016
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 on December 17, 2015 (the December 2015 Amending Decision, and collectively with the Original Decision, the March 2014 Amending Decision, and the June 2015 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 September 30, 2016.
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. 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. The Filer retained a consultant and has implemented the Compliance Plan.
10. The Filer is now seeking registration as an exempt market dealer. Once the Filer is registered as an exempt market dealer, it will no longer be registered as a restricted dealer and will not rely on the relief granted in the Previous Decision.
11. The Filer wishes for the relief granted in the Previous Decision to be extended to March 31, 2017 in order for the Filer to complete the registration process as an exempt market dealer (the Requested Interim Relief).
12. The Filer is not in default of securities legislation in any province or territory in Canada.
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.
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 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.
This Decision shall expire on the earlier of:
(a) the date of registration of the Filer as an exempt market dealer with the Commission; and
(b) March 31, 2017.
This Decision may be amended by the Director from time to time upon prior written notice to the Filer.