The proposed interpretation and approach guidance would apply to certain co-operatives issuing securities through the offering statement required by legislation governing co-operatives in Ontario and receipted by FSRA that the regulator considers to be “high-risk offerings”. Such offerings include those that appear to be intended as an investment vehicle or that use promoters or market the securities to retail investors. Required enhanced disclosure would include matters related to ranking, details of upcoming debt repayments, how the co-op will satisfy financial obligations, and quantification of risks that could impact the operations of the co-op.
Overview of the Council’s Comments:
The CAC supports FSRA’s objectives to promote high standards of business conduct for co-ops and to help investors make more informed investment decisions. Given the breadth of the proposed definition of a “high-risk offering”, and the fact that even other persons who participate economically in a co-op and buy its products and services may benefit from enhanced disclosure found in the offering statement, we query why the enhanced disclosure cannot be made a requirement for all co-op securities offerings. Given the high-risk nature of these securities, we believe it would also be beneficial if prospective purchasers were required to sign a risk acknowledgement statement prior to purchase, similar to Form 45-106F4 Risk Acknowledgement. Going forward, it might be possible to form a working group involving other regulators to discuss some of these issues and a harmonized approach to securities offerings where the legislative framework permits distributions of securities outside the scope of securities legislation and related regulatory requirements.