Securities Law & Instruments



Subsection 74(1) of the Securities Act (Ontario) – interim 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 – interim relief granted on strict terms and conditions including an investment limit and subject to a sunset clause – interim relief granted based on the particular facts and circumstances of the applicant – decision should not be viewed as a precedent for other not-for-profit issuers in Ontario or in other jurisdictions.


Applicable Legislative Provisions


Securities Act (Ontario), R.S.O. 1990, c. S.5, ss. 25, 74.


December 21, 2018





(the Jurisdiction)






(the Filer)






On November 13, 2013, the Filer was granted Ontario-only, time-limited exemptive relief from the dealer registration requirement of the securities legislation of the Jurisdiction (the Legislation) in respect of the distribution by the Filer of debt securities of its own issue (the Previous Decision). The relief expired on November 13, 2018. The Filer and staff of the Ontario Securities Commission (the Commission) are currently engaged in discussions about (i) the registration of the Filer as a dealer in the category of restricted dealer with tailored terms and conditions, and (ii) the prospectus exemptions under which the Filer may distribute its debt securities.


The Commission has received an application from the Filer for an interim decision under the Legislation that the Filer be exempt from the dealer registration requirement of the Legislation in respect of the distribution by the Filer of debt securities of its own issue until March 31, 2019 (the Requested Exemptive Relief). The purpose of the Requested Exemptive Relief is to provide time-limited relief to facilitate the on going discussions and to enable the Filer to distribute debt securities on substantially the same terms and conditions as the Previous Decision.


This decision should not be considered a precedent.




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 believes that it is, and will be, in compliance with the conditions contained in section 2.38 of NI 45-106. Staff of the Commission are discussing with the Filer whether it may rely on this prospectus exemption. Compliance with prospectus exemptions rests with the Filer.


7.             The bonds are sold to Canadian Christians and sales are not limited to accredited investors as defined in NI 45-106. Prior to the Previous Decision, investments were accepted in any amount and generally ranged between $50,000 to $100,000. Pursuant to the terms and conditions of the Previous Decision, an investor may not purchase any debt securities of the Filer if, as a result of the purchase, the investor would own debt securites of the Filer with an aggregate principal amount exceeding $50,000. 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 25 to 40 purchasers.


9.             As of June 30, 2018 there were bonds outstanding in the aggregate principal amount of $26.1 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 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;


(b)           In any fiscal year of the Filer, administrative and general expenses, not including legal and audit expenses, are limited to no more than 0.85% of the total principal amount of bonds outstanding as at the end of such fiscal year;


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


(d)           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.


(e)           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;


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


(g)           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;


(h)           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; and


(i)            The Filer only distributes debt securities of the Filer in Ontario (and, accordingly, the Filer does not distribute these debt securities in any other jurisdiction of Canada).


It is further the decision of the Commission that the Requested Exemptive Relief shall expire on March 31, 2019.


DATED: December 21, 2018


“Grant Vingoe”


Ontario Securities Commission


“Deborah Leckman”


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.


________________                                                                           ________________________

Date                                                                                                       Signature of Purchaser



                                                                                                                Print name of Purchaser