– *updated February 14, 2022 –
The British Columbia, Alberta, Ontario and Saskatchewan securities regulators are all very proactive in their approach to overseeing the exempt private placement securities market involving their home jurisdictions.
One way these securities regulators oversee what is happening in these markets is to sample whether issuers are using the exemptions appropriately by conducting a more thorough review of exempt filings. Essentially, they are conducting a private placement investigation into an issuer’s compliance with applicable securities rules. As part of this process, securities regulators first gather information by (1) sending out a cover letter and questionnaire to investors; and (2) presenting issuers with an order for production. Responses from investors to the securities regulator are voluntary at this stage. Issuers required by law to respond to the securities regulator within the time frame provided.
Attached is a sample cover letter and questionnaire sent out by the BC Securities Commission to investors. Letters from other jurisdictions are similar. The registration and prospectus exemption referred to in the letter and questionnaire may change to reflect what exemptions a particular issuer actually relied upon in their offering. Securities regulators use the information issuers provide in Schedule “A” to the Form 45-106F1 – Report of Exempt Distribution to contact investors.
Sample Cover Letter to Investors Sent by Securities Regulators
[Logo & Header of British Columbia Securities Commission][spacer height=”20px”] [Date][spacer height=”20px”] [Investor Name][spacer height=”5px”] [Street Address][spacer height=”5px”] [City, Province, Postal Code][spacer height=”20px”]Dear [Investor Name]:[spacer height=”20px”]
The B.C. Securities Commission is the independent provincial government agency responsible for regulating trading in securities.
Most companies are required to file documents with us when they distribute securities. As part of our routine compliance process, the documents filed by a company in which you recently invested [Company Name] have been selected for review.
We would like to know a little bit about your understanding of this investment and invite you to complete the enclosed survey.
I would be please to answer any questions you have about the survey, by email skraushaar@bcsc.bc.ca or phone 604-899-6733.
Please forward the completed questionnaire to my attention by mail (in the enclosed envelope), fax (604-889-6581), or email (skraushaar@bcsc.bc.ca).
Please return your completed Investor Questionnaire by [Day of Week, Closing Date].
Yours truly,
[Name of Compliance Administrator] Compliance Administrator
Corporate Finance Division
________
Enclosure (Investor Questionnaire)
Sample Investor Questionnaire Sent by Securities Regulators
INVESTOR QUESTIONNAIRE
Investment in [Company Name] ([Issuer])
Please answer the following questions to be the best of your knowledge.(If necessary, provide additional comments on a separate sheet)
1. [Company Name] provided the following contact information to you: [Investor Name] [Street Address] [City, Province, Postal Code] Phone Number: [Number] Is this correct ¨ Yes ¨ No If the information is not correct or missing, please provide the updated information below: 2. Can we contact you by email in the future, if necessary? ¨
Yes Your email address is: ¨
No 3. [Company Name] reported that on [Filing Date] you purchased [Number of Securities] [Type of Securities] for
$[Amount].Is this correct? ¨ Yes ¨ No ¨ Not sure 4. Did you pay any commissions or other fees to purchase your securities [Issuer]? ¨ Yes ¨ No ¨ Not sure
***
[Logo & Header of British Columbia Securities Commission] If yes, who did you pay, and what was their relationship to [Issuer]? 5. How, where and from whom did you initially hear about [Issuer]? 6. Do any of the following statements apply to you? (check the ones that applies) ¨ You, either alone or with your spouse, beneficially own, directly or indirectly, $1 million in financial assets (meaning cash and
marketable securities, but not including any real estate) net of any related liabilities.¨ Your net income before taxes exceeded $200,000 in each of the two most recent years, and you reasonably expect to exceed that net
income level in the current year.¨ You alone (or through a company that you own), or with your spouse, have net assets of at least $5,000,000. ¨ You are, or have been, registered under the Securities Act to sell securities or provide investment advice. ¨ None of the above statements apply to me. 7. Before you invested in [Issuer], did anyone ever ask you any questions about your finances, similar to the ones set out in Question
#6 above?¨ Yes ¨ No ¨ Not sure
***
[Logo & Header of British Columbia Securities Commission] If yes, who was this person, and what was their relationship to [Issuer]? 8. Before you invested in [Issuer], did you receive and documents relating to [Issuer] and the investment? ¨ Yes (Please describe briefly below) ¨ No Have you made any other investments in [Issuer]? ¨ Yes ¨ No 9. Do you have any comments regarding your experience when you invested in [Issuer]? Signature: Date
***
[Logo & Header of British Columbia Securities Commission] If you are signing on behalf of a corporation, please: Print your name: Explain your relationship to the corporation:
***
[Logo & Header of British Columbia Securities Commission]
If you are signing on behalf of a corporation, please:
Print your name:
Explain your relationship to the corporation: