Co-operatives are required to provide a copy of an Offering Statement to prospective buyers of their securities before any purchase is made. Every Offering Statement is unique and the information contained therein is dependent on the individuality of the business enterprise.
The co-operative sector submits Offering Statements to the Financial Services Commission of Ontario (FSCO) for receipting. The Superintendent of Financial Services may issue a receipt when satisfied the Offering Statement meets the Full, True and Plain disclosure standard.
Investor protection is FSCO’s primary role. The Offering Statement received by an investor must be carefully crafted so that it is credible, clear, concise and easy to read from the investor’s perspective resulting in a Full, True and Plain presentation that fully discloses any risks involved.
Remember, clarification is not for FSCO’s benefit but rather for the benefit of the investor. If Full, True and Plain disclosure is not evident, the Offering Statement will most likely need to be re-submitted.
Submissions to FSCO should be based on the legislation currently in effect, not on proposed or anticipated forthcoming changes.
While the legal requirements for the contents and receipting of Offering Statements are set-out in the Co-operative Corporations Act (CCA) and regulations, the following tips relate to the process of submitting these documents to FSCO.
1. Remember your audience - Full, True and Plain disclosure to investors is required. What may have previously been considered Full disclosure may no longer be sufficient in today’s marketplace.
- Full - The Offering Statement should be a stand alone document able to answer any questions an investor might reasonably have.
- True - Disclose all pertinent information and the sources thereof.
- Plain - The document must be written so it is clear and easily understood by potential investors.
2. Only submit final copies of all documents - drafts will be returned.
3. Ensure original signatures are on all final documents.
4. Identify and explain any critical dating requirement or timing issue when a document is submitted. FSCO will attempt to accommodate to the extent possible.
5. Submit payment of $50 when documents are sent to FSCO, payable to the Minister of Finance.
6. Provide a cover letter with contact information for the appropriate representative of the co-operative. Include an email address, telephone number and mailing address.
7. Summarize key features of material agreements, relevant to project financing, project details and escrow agreements fundamental to the deal.
8. Submit 2 original copies of the Offering Statement with original signatures, as well as all relevant supporting materials, such as your most recent audited financial statements and applicable consents. When providing interim or audited financial statements, please indicate the accounting standards used in preparing the statements. FSCO keeps one copy and the other is returned to the co-operative with the receipt.
9. Ensure the submission is free of typos, adding errors, omissions and mistakes.
10. Templates provided by the co-operative associations may be used as a guide when preparing your offering statement. The associations are also willing to provide some direction and assistance.
11. Only proceed with your project after the receipt has been issued.
- Moving forward with a project in anticipation of receiving a receipt may represent a contravention of the law as well as expose the co-operative to potential contractual risk relative to premature commitments.
- Co-operatives should allow for and build in sufficient approval time when planning their business activities.
12. Current date all revised submissions to FSCO and respond in a timely manner.
- FSCO’s preliminary review of a submission may result in the co-operative being contacted regarding changes or corrections.
- It is the responsibility of the co-operative, or the co-operative’s legal representative, to respond to such requests for changes or corrections without delay.
- Send an acknowledgement letter when an Offering Statement and all required documentation is received.
- Return "draft documents" promptly.
- Provide the co-operative with a letter listing missing information. Prior to issuing a "formal notice of deficiency letter" under the CCA, FSCO will forward a letter listing missing information anticipating a response within 30 days from the co-operative. If a response is not received by FSCO, FSCO will advise that the file has been closed and no further action will be taken.
- Review the Offering Statement to ensure the standard of Full, True and Plain before issuing a receipt. In complex cases which may represent a greater risk to investors, additional review time will be necessary. Complex submissions (such as brand new start up ventures; submissions looking to raise a significant amount of money; or submissions involving passive rather than active investors) involve greater risk and require more review time and attention
Note: FSCO cannot comment or offer advice in a consultative capacity on any submission as this would create a conflict of interest when FSCO, as the regulator, reviews the submission.