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Underwriter
Practical Law Canada Glossary 4-575-6109 (Approx. 3 pages)
Glossary
Underwriter
Defined in Ontario Securities Act, R.S.O. 1990, c. S.5, section 1(1), as a person or company who, as principal, agrees to purchase securities with a view to distribution or who, as agent, offers for sale or sells securities in connection with a distribution and includes a person or company who has a direct or indirect participation in any such distribution, but does not include:
- A person or company whose interest in the transaction is limited to receiving the usual and customary distributor's or seller's commission payable by an underwriter or issuer.
- A mutual fund that, under the laws of the jurisdiction to which it is subject, accepts its shares or units for surrender and resells them.
- A company that, under the laws of the jurisdiction to which it is subject, purchases its shares and resells them.
- A bank listed in Schedule I, II or III to the Bank Act with respect to securities described in Ontario Securities Act, section 35(1), paragraph 1, or to such banking transactions as are designated by the OSA Regulations.
There are similar definitions under other Applicable Securities Laws in Canada.
Underwriters in Canada are subject to regulatory oversight by the Securities Regulatory Authorities.
A person or company who acts as an underwriter must become registered as a dealer and be authorized under section 7.1(2) of National Instrument 31-103 (on or after January 1, 2011) — Registration Requirements, Exemptions and Ongoing Registrant Obligations and Consequential Amendments to Related Instruments (NI 31-103), or Ontario Securities Act, sections 26 or 27, to act as an underwriter in the circumstances; or be registered as a dealing representative of a registered dealer and be acting on behalf of the registered dealer under Ontario Securities Act, section 25(2). Therefore, the requirements for registration as a dealer apply equally to an underwriter.
A person or company registered as an investment dealer is authorized to act as an underwriter in respect of any distribution of securities unless the OSA Regulations provide otherwise (Ontario Securities Act, section 26(3) and section 7.1(2)(a) of NI 31-103).
An exempt market dealer may act as an underwriter with respect to a distribution of securities made under an exemption from the prospectus requirements under the Ontario Securities Act, the OSA Regulations, or NI 31-103 unless the OSA Regulations provide otherwise (Ontario Securities Act, section 26(4) and section 7.1(2)(d)(iv) of NI 31-103).
A restricted dealer may act as an underwriter if the OSA Regulations allow, and if so, only in accordance with the terms, conditions, restrictions or requirements applied to its registration (Ontario Securities Act, section 26(5) and section 7.1(2)(e) of NI 31-103).
For more information, see Practice Note, Registration Requirements: Overview.