COMPANION POLICY 45-501CP (BC)
MORTGAGES
PART 1 BACKGROUND
1.1 Background
A mortgage is a security. Section 8.12 of National Instrument 31-103 Registration
Requirements, Exemptions and Ongoing Registrant Obligations (NI 31-103) exempts
from the registration requirements of the Securities Act trades in mortgages on real
property by a person registered or exempt from registration under mortgage brokers
legislation if the real property is located in the jurisdiction where the person is registered
or exempt from registration as a mortgage broker.
Section 2.36 of National Instrument 45-106 Prospectus Exemptions (NI 45-106) exempts
from the prospectus requirements of the Act distributions of mortgages on real property
by a person registered or exempt from registration under mortgage brokers legislation if
the real property is located in the jurisdiction where the person is registered or exempt
from registration as a mortgage broker.
In British Columbia, neither of these exemptions covers mortgage syndications, where a
single mortgage is sold to a number of investors. Syndicated mortgages, particularly on
commercial property and development property, are complex and risky securities similar
to other real estate based securities that are subject to the registration and prospectus
requirements of the Act.
1.2 Purpose
The purpose of BC Instrument 45-501 is to
(1) allow trades in, and distributions of, syndicated mortgages on real property by
persons registered or exempt from registration under the Mortgage Brokers Act to
institutional investors, and
(2) provide an exemption from the registration and prospectus requirements of the Act for
relatively simple syndicated mortgages, called “qualified syndicated mortgages”.
A qualified syndicated mortgage is defined as a syndicated mortgage on property that is
used solely for residential purposes, that contains no more than four residential dwelling
units, that is not under construction and that meets other conditions set out in the
instrument. The Mortgage Brokers Act continues to govern qualified syndicated
mortgages.
The Commission has adopted related BC Instrument 33-517 Registration and Prospectus
Exemptions for Persons Registered under the Mortgage Brokers Act, which provides a
blanket exemption for trades in, or distributions of, mortgages on real property located
outside of British Columbia by persons registered under the Mortgage Brokers Act. That
exemption similarly does not apply to trades in syndicated mortgages.
PART 2 STATUTORY EXEMPTIONS
2.1 General – The Commission does not intend BC Instrument 45-501 to restrict the use of
other available exemptions. NI 31-103, NI 45-106 and BC Instrument 35-516
Registration Exemption for Trades in connection with certain Prospectus-exempt
Distributions describe these exemptions. Where an offering memorandum is required for
the use of an exemption, the required form for mortgages is BC Form 45-901F.
[Amended May 5, 2015]