The decision by a U.S. adviser to market to Canada-based investors is often driven by the desire to obtain sizeable allocations from large institutional investors, including government pension plans. This choice, however, should not be made in a vacuum, as steps need to be taken by a firm’s legal, compliance and finance professionals to ensure that advisers comply with Canadian laws when marketing funds and selling their interests. In this two-part series, the Hedge Fund Law Report has identified certain pre-sale considerations (e.g.
, registration issues and additional disclosures to be provided to prospective purchasers) and post-sale obligations (e.g.
, regulatory filings and associated fees) for advisers marketing in Canada. This second installment explores when Canadian investment adviser registration requirements are triggered and what they entail; how Canada’s prospectus requirement applies in a private placement; when a U.S. manager must attach a Canadian “wrapper” to its fund’s private placement memorandum; payment of the Ontario capital markets participation fee; and other ongoing reporting requirements. The first article
discussed two registration requirements that all advisers to private funds should consider prior to marketing their funds to Canadian investors. For additional insights on doing business in Canada’s funds market, see “Practitioners Discuss U.S. and Canadian Shareholder Activism and Activist Tools
” (Dec. 4, 2014).