Subject to Completion
Issuer Free Writing Prospectus
Dated June 29, 2022
(To Prospectus dated December 29,
2021
and Prospectus Supplement dated
December 29, 2021)
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Filed Pursuant to
Rule 433
Registration No.
333-261476
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$__________________
Callable Fixed
Rate Notes, due July [13], 2026 (Bail-inable notes)
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The notes are unsecured
unsubordinated debt securities issued by The Bank of Nova Scotia
(“BNS”). All payments and the return of the principal amount on the
notes are subject to our credit risk.
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The notes are expected to
price on July [11], 2022. The notes will mature on July
[13], 2026. At maturity, if the
notes have not been previously redeemed, you will receive a cash
payment equal to 100% of the principal amount of the notes, plus
any accrued and unpaid interest.
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Interest will be paid
on January [13], April
[13], July [13] and October [13] of each year, commencing on October
[13], 2022, with the final interest payment date
occurring on the maturity date.
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The notes will accrue interest at
the rate of 4.50% per annum, calculated using the day count
fraction specified under “Summary Terms” herein.
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We have the right to redeem the
notes, in whole but not in part, on October [13], 2022 and on each
subsequent interest payment date (other than the maturity date).
The redemption price will be 100% of the principal amount of the
notes, plus any accrued and unpaid interest.
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The notes are issued in minimum
denominations of $1,000 and whole multiples of $1,000 in excess
thereof.
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The notes will not be listed on
any securities exchange.
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The CUSIP number for the notes is
06416DBK1.
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The notes:
Are Not FDIC
Insured
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Are Not Bank
Guaranteed
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May Lose
Value
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Per Note
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Total
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Public Offering Price(1)
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100.00%
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$
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Underwriting Discount(1)(2)
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[1.50]%
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$
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Proceeds (before expenses) to
BNS
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[98.50]%
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$
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(1) |
Certain dealers who purchase the notes for sale to certain
fee-based advisory accounts and/or eligible institutional investors
may forgo some or all of their selling concessions, fees or
commissions. The price to public for investors purchasing the notes
in these accounts and/or for an eligible institutional investor may
be as low as $[985.00] ([98.50]%) per $1,000 in principal amount of
the notes. See “Supplemental Plan of Distribution—Conflicts of
Interest” herein.
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(2)
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Scotia Capital (USA) Inc. (“SCUSA”), our affiliate, will
purchase the notes at the principal amount and, as part of the
distribution of the notes, will sell the notes to BofA Securities,
Inc. (“BofAS”) at a discount of $[15.00] ([1.50]%) per $1,000
principal amount of the notes. BofAS may pay varying selling
concessions of up to $[15.00] ([1.50]%) in connection with the
distribution of the notes to other registered broker-dealers.
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The notes are unsubordinated and unsecured obligations of BNS and
are subject to investment risks including possible loss of the
principal amount invested due to the credit risk of BNS. Investment
in the notes involves certain risks. You should refer to “Risk
Factors” beginning on page P-5 herein and “Risk Factors” beginning
on page S-2 of the accompanying prospectus supplement.
The
notes are bail-inable debt securities (as defined in the
accompanying prospectus) and subject to conversion in whole or in
part – by means of a transaction or series of transactions and in
one or more steps – into common shares of BNS or any of its
affiliates under subsection 39.2(2.3) of the CDIC Act and to
variation or extinguishment in consequence, and subject to the
application of the laws of the Province of Ontario and the federal
laws of Canada applicable therein in respect of the operation of
the CDIC Act with respect to the notes. See “Description of the
Debt Securities We May Offer ― Special Provisions Related to
Bail-inable Debt Securities” and “Risk Factors — Risks Related to
the Bank’s Debt Securities” in the accompanying prospectus.
Neither the United States Securities and Exchange Commission (the
“SEC”) nor any state securities commission has approved or
disapproved of the notes or passed upon the accuracy or the
adequacy of this document, the prospectus supplement or the
accompanying prospectus. Any representation to the contrary is a
criminal offense.
The notes are not insured by the Canada Deposit Insurance
Corporation (“CDIC”) pursuant to the Canada Deposit Insurance
Corporation Act (Canada) (“CDIC Act”), the United States Federal
Deposit Insurance Corporation (“FDIC”), or any other governmental
agency of Canada, the United States or any other
jurisdiction.
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We will deliver the
notes in book-entry form only through The Depository Trust Company
on the Issue Date against payment in immediately available
funds.
Scotia Capital (USA) Inc.
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BofA Securities
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SUMMARY OF TERMS
This document supplements the terms and conditions in the
prospectus, dated December 29, 2021, as supplemented by the
prospectus supplement, dated December 29, 2021 (together with all
documents incorporated by reference, the “prospectus”), and should
be read with the prospectus.
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Issuer:
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The Bank of Nova Scotia (“BNS”)
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Issue:
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Senior Note Program, Series B
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Title of the
Notes:
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Callable Fixed Rate Notes, due July [13], 2026
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Aggregate
Principal
Amount
Initially Being Issued:
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$________________
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Pricing
Date:
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July [11], 2022
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Issue
Date:
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July [13], 2022 (to be
determined on the pricing date and expected to be the
2nd
business day after the pricing
date)
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Maturity
Date:
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July [13], 2026, if not previously redeemed (to be determined on the pricing
date)
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CUSIP/ISIN:
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06416DBK1 /
US06416DBK19
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Minimum
Denominations:
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$1,000 and multiples of $1,000 in excess thereof
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Principal
Amount:
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Issue
Price:
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$1,000 per note
100%
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Currency:
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U.S. Dollars
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Ranking:
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Unsecured and unsubordinated
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Day Count
Fraction:
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30/360
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Interest
Periods:
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Quarterly. Each interest period (other than the first interest
period, which will begin on the issue date) will begin on, and will
include, an interest payment date, and will extend to, but will
exclude, the next succeeding interest payment date (or the maturity
date, as applicable), in each case, without any adjustment in the
event an interest payment date is postponed.
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Interest Payment
Dates:
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January [13], April [13], July [13]
and October [13] of each year, commencing on October [13], 2022,
with the final interest payment date occurring on the maturity
date.
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Interest
Rate:
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The notes will accrue interest at the rate of 4.50% per annum.
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Optional
Early
Redemption:
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We have the right to redeem the notes, in whole but not in part, on
October [13], 2022, and on each subsequent interest payment date
(other than the maturity date). The redemption price will be 100%
of the principal amount of the notes, plus any accrued and unpaid
interest. In order to call the notes, we will give notice at least
ten calendar days, but not more than 60 calendar days, before the
applicable interest payment date (such date, the specified “early
redemption date”).
In the event that a redemption (for any reason) would lead to a
breach of our total loss absorbing capacity requirements, such
redemption will be subject to the prior approval of the
Superintendent of Financial Institutions (Canada), as described
further under “Description of the Debt Securities We May Offer —
Special Provisions Related to Bail-inable Debt Securities —
Approval of Redemption, Repurchases and Defeasance” and “― Canadian
Bank Resolution Powers — TLAC Guideline” in the accompanying
prospectus.
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Business
Days:
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If any interest payment date, any early redemption date, or the
maturity date occurs on a day that is not a business day in New
York City, then that interest payment will be postponed until the
next day that is a business day in New York City. No additional
interest will accrue on the notes as a result of such postponement,
and no adjustment will be made to the length of the relevant
interest period.
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Repayment at
Option
of Holder:
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None
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Record Dates
for
Interest Payments:
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As set forth in the prospectus supplement, in the section
“Description of the Notes — Interest.”
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Listing:
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The notes will not be listed on any securities exchange.
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Use of
Proceeds:
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We will use the net proceeds we receive from the sale of the notes
for the purposes we describe in the accompanying prospectus
supplement under “Use of Proceeds”. We or our affiliates may
also use those proceeds in transactions intended to hedge our
obligations under the notes.
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Status:
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The notes will constitute direct, unsubordinated and unsecured
obligations of BNS ranking pari
passu with all other direct, unsecured and unsubordinated
indebtedness of BNS from time to time outstanding (except as
otherwise prescribed by law). Holders will not have the
benefit of any insurance under the provisions of the CDIC Act, the U.S. Federal Deposit Insurance Act or under
any other deposit insurance regime of any jurisdiction.
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Calculation
Agent:
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Scotia Capital Inc.
The calculation agent will make all determinations regarding the
amount payable on your notes. All determinations made by the
calculation agent shall be made in its sole discretion and, absent
manifest error, will be final and binding on you and us, without
any liability on the part of the calculation agent. We may change
the calculation agent for your notes at any time without notice and
the calculation agent may resign as calculation agent at any time
upon 60 days’ written notice to BNS.
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Agent(s):
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BofAS and SCUSA or one or more of their respective affiliates will
act as our agent(s) in connection with the offering of the
notes. None of the agent(s) is your fiduciary or advisor
solely as a result of the making of any offering of the notes, and
you should not rely upon this document, the accompanying prospectus
supplement or prospectus as investment advice or a recommendation
to purchase the notes. See “Supplemental Plan of Distribution
(Conflicts of Interest)” herein.
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Canadian
Bail-in
Powers:
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The notes are bail-inable debt securities (as defined in the
accompanying prospectus) and subject to conversion in whole or in
part – by means of a transaction or series of transactions and in
one or more steps – into common shares of BNS or any of its
affiliates under subsection 39.2(2.3) of the CDIC Act and to
variation or extinguishment in consequence, and subject to the
application of the laws of the Province of Ontario and the federal
laws of Canada applicable therein in respect of the operation of
the CDIC Act with respect to the notes. See “Description of the
Debt Securities We May Offer ― Special Provisions Related to
Bail-inable Debt Securities” and “Risk Factors — Risks Related to
the Bank’s Debt Securities” in the accompanying prospectus.
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Agreement
with
Respect to the
Exercise of Canadian
Bail-in Powers:
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By its acquisition of an interest in any note, each holder or
beneficial owner of that note is deemed to (i) agree to be bound,
in respect of the notes, by the CDIC Act, including the conversion
of the notes, in whole or in part – by means of a transaction or
series of transactions and in one or more steps – into common
shares of BNS or any of its affiliates under subsection 39.2(2.3)
of the CDIC Act and the variation or extinguishment of the notes in
consequence, and by the application of the laws of the Province of
Ontario and the federal laws of Canada applicable therein in
respect of the operation of the CDIC Act with respect to the notes;
(ii) attorn and submit to the jurisdiction of the courts in the
Province of Ontario with respect to the CDIC Act and those laws;
and (iii) acknowledge and agree that the terms referred to in
paragraphs (i) and (ii), above, are binding on that holder or
beneficial owner despite any provisions in the indenture or the
notes, any other law that governs the notes and any other
agreement, arrangement or understanding between that holder or
beneficial owner and BNS with respect to the notes.
Holders and beneficial owners of notes will have no further rights
in respect of their bail-inable debt securities to the extent those
bail-inable debt securities are converted in a bail-in conversion,
other than those provided under the bail-in regime, and by its
acquisition of an interest in any note, each holder or beneficial
owner of that note is deemed to irrevocably consent to the
converted portion of the principal amount of that note and any
accrued and unpaid interest thereon being deemed paid in full by
BNS by the issuance of common shares of BNS (or, if applicable, any
of its affiliates) upon the occurrence of a bail-in conversion,
which bail-in conversion will occur without any further action on
the part of that holder or beneficial owner or the trustee;
provided that, for the avoidance of doubt, this consent will not
limit or otherwise affect any rights that holders or beneficial
owners may have under the bail-in regime.
See “Description of the Debt Securities We May Offer ― Special
Provisions Related to Bail-inable Debt Securities” and “Risk
Factors — Risks Related to the Bank’s Debt Securities” in the
accompanying prospectus for a description of provisions and risks
applicable to the notes as a result of Canadian bail-in
powers.
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Certain
capitalized terms used and not defined in this document have the
meanings ascribed to them in the prospectus. Unless otherwise
indicated or unless the context requires otherwise, all references
herein to “we,” “us,” “our,” or similar references are to The Bank
of Nova Scotia.
We have filed a registration statement (including a prospectus
supplement and a prospectus) with the SEC for the offering to which
this document relates. You should read the prospectus,
including this document, and the other documents that we have filed
with the SEC, for more complete information about us and this
offering. You may get these documents without cost by
visiting EDGAR on the SEC website at www.sec.gov.
Alternatively, we, any agent, or any dealer participating in this
offering will arrange to send you these documents if you so request
by calling BofAS toll-free at 1-800-294-1322.
RISK FACTORS
Your investment in the notes entails significant risks, many of
which differ from those of a conventional fixed-rate debt
security. Your decision to purchase the notes should be made
only after carefully considering the risks of an investment in the
notes, including those discussed below and under “Risk Factors”
beginning on S-2 of the accompanying prospectus supplement, with
your advisors in light of your particular circumstances. The
notes are not an appropriate investment for you if you are not
knowledgeable about significant elements of the notes or financial
matters in general.
Structure- and Credit-Related Risks
The notes are subject to our early
redemption. We may redeem the notes, in whole but not in
part, on any interest payment date on or after October [13], 2022
(other than the maturity date). If you intend to purchase the
notes, you must be willing to have your notes redeemed as early as
that date. We are generally more likely to elect to redeem the
notes during periods when the interest accruing on the notes is
greater than that which we would pay on our other interest bearing
debt securities having a maturity comparable to the remaining term
of the notes. No further payments will be made on the notes after
they have been redeemed.
If we
redeem the notes prior to the maturity date, you may not be able to
reinvest your proceeds from the redemption in an investment with a
return that is as high as the return on the notes would have been
if they had not been redeemed, or that has a similar level of
risk.
The notes are subject to interest
rate risk and may be more risky than an investment in notes with a
shorter term. The notes have a term of 4 years,
subject to our right to redeem the notes as set forth herein.
By purchasing notes with a relatively longer term, you are more
exposed to fluctuations in interest rates than if you purchased a
note with a shorter term. In particular, you may be
negatively affected if interest rates begin to rise, because the
likelihood that we will redeem your notes will decrease and the
interest rate on the notes may be less than the amount of interest
you could earn on other investments with a similar level of risk
available at that time. In addition, if you tried to sell
your notes at such time, their value in any secondary market
transaction would also be adversely affected.
The notes are subject to the risk
of conversion in whole or in part — by means of a transaction or
series of transactions and in one or more steps — into common
shares of BNS or any of its affiliates, under Canadian bank
resolution powers. Under Canadian bank resolution powers, if
the CDIC were to take action under the Canadian bank resolution
powers with respect to BNS, this could result in holders or
beneficial owners of bail-inable notes such as the notes being
exposed to losses and conversion of the notes in whole or in part —
by means of a transaction or series of transactions and in one or
more steps — into common shares of BNS or any of its affiliates,
and, in such an event, you will be obligated to accept those common
shares. As a result, you should consider the risk that you may lose
all or part of your investment, including the principal amount plus
any accrued but unpaid interest, if the CDIC were to take action
under the Canadian bank resolution powers, including the bail-in
regime, and that any remaining outstanding notes, or common shares
of BNS or any of its affiliates into which bail-inable notes are
converted, may be of little value at the time of a bail-in
conversion and thereafter. You are urged to also read the
discussion in the accompanying prospectus under “Risk Factors —
Risks Related to the Bank’s Debt Securities” and “Description of
the Debt Securities We May Offer ― Canadian Bank Resolution Powers”
for additional information.
Payments on the notes are subject
to our credit risk, and actual or perceived changes in our
creditworthiness are expected to affect the value of the
notes. The notes are our unsecured unsubordinated debt
obligations and are not, either directly or indirectly, an
obligation of any third party. As further described in the
accompanying prospectus and prospectus supplement, the notes will
rank on par with all of our other unsecured and unsubordinated debt
obligations, except such obligations as may be preferred by
operation of law. All payments on the notes depend on our
ability to satisfy our obligations as they come due. As a
result, our actual and perceived creditworthiness of BNS may affect
the market value of the notes and, in the event we were to default
on our obligations, you may not receive the amounts owed to you
under the terms of the notes.
In
addition, our credit ratings are an assessment by ratings agencies
of our ability to pay our obligations. Consequently, our perceived
creditworthiness and actual or anticipated decreases in our credit
ratings or increases in the spread between the yield on our
securities and the yield on U.S. Treasury securities (the “credit
spread”) prior to the maturity date may adversely affect the market
value of the notes. However, because your return on the notes
depends upon factors in addition to our ability to pay our
obligations, such as market interest rates, an improvement in our
credit ratings will not reduce the other investment risks related
to the notes.
The COVID-19 Virus may Have an
Adverse Impact on BNS. On March 11, 2020, the World Health
Organization declared the outbreak of a strain of novel coronavirus
disease, COVID-19, a global pandemic. Governments in affected areas
have imposed a number of measures designed to contain the outbreak,
including business closures, travel restrictions, quarantines and
cancellations of gatherings and events. The spread of COVID-19 has
had disruptive effects in countries in which BNS operates and the
global economy more widely, as well as causing increased volatility
and declines in financial markets. COVID-19 has materially impacted
and continues to materially impact the markets in which BNS
operates. If the pandemic is prolonged, or further diseases emerge
that give rise to similar effects, the adverse impact on the global
economy could deepen and result in further declines in financial
markets. A substantial amount of BNS’ business involves making
loans or otherwise committing resources to specific companies,
industries or countries. The COVID-19 pandemic’s impact on such
borrowers, industries and countries could have a material adverse
effect on BNS’ financial results, businesses, financial condition
or liquidity. The COVID-19 pandemic may also result in disruption
to BNS’ key suppliers of goods and services and result in increased
unavailability of staff adversely impacting the quality and
continuity of service to customers and the reputation of BNS. As a
result, the business, results of operations, corporate reputation
and financial condition of BNS could be adversely impacted for a
substantial period of time.
Valuation- and Market-Related Risks
We have included in the terms of
the notes the costs of developing, hedging, and distributing them,
and the price, if any, at which you may sell the notes in any
secondary market transactions will likely be lower than the public
offering price due to, among other things, the inclusion of these
costs. In determining the economic terms of the notes, and
consequently the potential return on the notes to you, a number of
factors are taken into account. Among these factors are certain
costs associated with developing, hedging, and offering the
notes.
Assuming
there is no change in market conditions or any other relevant
factors, the price, if any, at which the agent(s) or another
purchaser might be willing to purchase the notes in a secondary
market transaction is expected to be lower than the price that you
paid for them. This is due to, among other things, the inclusion of
these costs, and the costs of unwinding any related hedging.
The quoted price of any of our affiliates for the notes could be
higher or lower than the price that you paid for them.
We cannot assure you that a
trading market for the notes will ever develop or be
maintained. We will not list the notes on any securities
exchange. We cannot predict how the notes will trade in any
secondary market, or whether that market will be liquid or
illiquid.
The development of a trading market for the notes will depend on
our financial performance and other factors. The number of
potential buyers of the notes in any secondary market may be
limited. We anticipate that one or more of BofAS or its affiliates
will act as a market-maker for the notes, but none of BofAS nor any
of its affiliates is required to do so. BofAS and its affiliates
may discontinue their market-making activities as to the notes at
any time. To the extent that BofAS or any of its affiliates engages
in any market-making activities, it may bid for or offer the notes.
Any price at which BofAS or any of its affiliates may bid for,
offer, purchase, or sell any notes may differ from the values
determined by pricing models that each may use, whether as a result
of dealer discounts, mark-ups, or other transaction costs. These
bids, offers, or completed transactions may affect the prices, if
any, at which the notes might otherwise trade in the market.
In addition, if at any time any entity were to cease acting as a
market-maker for the notes, it is likely that there would be
significantly less liquidity in the secondary market and there may
be no secondary market at all for the notes. In such a case, the
price at which the notes could be sold likely would be lower than
if an active market existed, and you should be prepared to hold the
notes until maturity.
Many economic and other factors
will impact the market value of the notes. The market
for, and the market value of, the notes may be affected by a number
of factors that may either offset or magnify each other,
including:
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the time remaining to maturity of the
notes;
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the aggregate amount outstanding of
the notes;
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our right to redeem the notes on the
dates set forth above;
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the level, direction, and volatility
of market interest rates generally (in particular, increases in
U.S. interest rates, which may cause the market value of the notes
to decrease);
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general economic conditions of the
capital markets in the United States;
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geopolitical conditions and other
financial, political, regulatory, and judicial events that affect
the capital markets generally;
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our financial condition and
creditworthiness; and
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any market-making activities with
respect to the notes.
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Conflict-Related Risks
Trading, hedging and business
activities by us, the agents and our other or their respective
affiliates may create conflicts of interest with you. We,
the agents or our or their respective affiliates may engage in
trading activities related to the notes that are not for your
account or on your behalf. We expect to enter into arrangements to
hedge the market risks associated with our obligation to pay the
amounts due under the notes. We may seek competitive terms in
entering into the hedging arrangements for the notes, but are not
required to do so, and we may enter into such hedging arrangements
with BofAS or its affiliates. This hedging activity is expected to
result in a profit to those engaging in the hedging activity, which
could be more or less than initially expected, but which could also
result in a loss for the hedging counterparty.
In addition, in the ordinary course of their business activities,
the agents and our other or their respective affiliates may hold
and trade our or our affiliates’ debt and equity securities (or
related derivative securities) and financial instruments (including
bank loans) for their own account and for the accounts of their
customers. The agents and our other or their respective affiliates
may also have lending or other capital markets relationships with
us. In order to hedge such exposure, they may enter into
transactions such as the purchase of credit default swaps or the
creation of short positions in our or our affiliates’ securities.
With respect to
BofAS or
its affiliates, such securities may include the notes offered
hereby, and any such short positions could adversely affect future
trading prices of the notes.
We, the agents or one or more of our other or their respective
affiliates may also, at present or in the future, publish research
reports with respect to movements in interest rates generally. This
research is modified from time to time without notice and may
express opinions or provide recommendations that are inconsistent
with purchasing or holding the notes. Any of these activities may
affect the market value of the notes.
These trading, hedging and business activities may present a
conflict of interest between your interest in the notes and the
interests we, the agents and our other or their respective
affiliates may have in our or their proprietary accounts, in
facilitating transactions for our or their other customers, and in
accounts under our or their management.
There are potential conflicts of
interest between you and the calculation agent. We have the right
to appoint and remove the calculation agent. The calculation
agent will, among other things, determine the amount of your
payment for any interest payment date on the notes. Our affiliate,
Scotia Capital Inc., will serve as the calculation agent. We may
change the calculation agent after the issue date without notice to
you. For additional information as to the calculation agent’s role,
see “Summary of Terms—Calculation Agent” herein. The calculation
agent will exercise its judgment when performing its functions and
may take into consideration BNS’ ability to unwind any related
hedges. Since this discretion by the calculation agent may affect
payments on the notes, the calculation agent may have a conflict of
interest if it needs to make any such decision.
SUPPLEMENTAL DISCUSSION OF CANADIAN FEDERAL INCOME TAX
CONSEQUENCES
The following is a summary of the
principal Canadian federal income tax considerations generally
applicable to a purchaser who acquires, as beneficial owner, notes,
including entitlements to all payments thereunder, pursuant to this
document, or shares of BNS or an affiliate of BNS on any notes
subject to a bail-in conversion (“Common Shares”), and who, at all
relevant times, for purposes of the application of the Income Tax
Act (Canada) and the Income Tax Regulations (collectively, the
“Act”) is not, and is not deemed to be, resident in Canada; deals
at arm’s length with BNS, any issuer of Common Shares, and with any
transferee resident (or deemed to be resident) in Canada to whom
the purchaser disposes of the notes; does not use or hold the notes
in a business carried on in Canada; is not a “specified
shareholder” and is not a person who does not deal at arm’s length
with a “specified shareholder” (as defined for purposes of
subsection 18(5) of the Act) of BNS; is not a “specified entity” as
defined in proposals to amend the Canadian Tax Act on April 29,
2022 with respect to “hybrid mismatch arrangements”; and does not
receive any payment of interest on the notes in respect of a debt
or other obligation to pay an amount to a person with whom BNS does
not deal at arm’s length (a “Non-Resident Holder”). Special rules,
which are not discussed in this summary, may apply to a
Non-Resident Holder that is an insurer that carries on an insurance
business in Canada and elsewhere.
This
summary is based upon the current provisions of the Act and an
understanding of the current administrative practices and assessing
policies of the Canada Revenue Agency published in writing prior to
the date hereof. This summary takes into account all specific
proposals to amend the Act publicly announced by or on behalf of
the Minister of Finance prior to the date hereof (the “Proposals”)
and assumes that all Proposals will be enacted in the form
proposed. However, no assurance can be given that the Proposals
will be enacted as proposed or at all. This summary does not
otherwise take into account any changes in law or in administrative
practices or assessing policies, whether by legislative,
administrative or judicial action, nor does it take into account
any provincial, territorial or foreign income tax considerations,
which may differ from those discussed herein.
This summary is of a general nature only and is not intended to be
legal or tax advice to any particular purchaser. This summary
is not exhaustive of all Canadian federal income tax
considerations. Accordingly, prospective purchasers of the notes
should consult their tax advisors with respect to their particular
circumstances.
Currency
Conversion
Generally, for purposes of the Act, all amounts relating to the
acquisition, holding or disposition of the notes or Common Shares
not denominated in Canadian dollars must be converted into Canadian
dollars based on the exchange rates as determined in accordance
with the Act. The amounts subject to withholding tax and any
capital gains or capital losses realized by a Non-Resident Holder
may be affected by fluctuations in the relevant exchange
rate.
Notes
No Canadian withholding tax will apply to interest or principal
paid or credited to a Non-Resident Holder by BNS or to proceeds
received by a Non-Resident Holder on the disposition of a note,
including on a redemption, payment on maturity, bail-in conversion,
repurchase or purchase for cancellation.
No other tax on income or gains will be payable by a Non-Resident
Holder on interest or principal, or on proceeds received by a
Non-Resident Holder on the disposition of a note, including on a
redemption, payment on maturity, repurchase or purchase for
cancellation.
Common Shares
Dividends paid or credited, or deemed under the Act to be paid or
credited, on Common Shares of BNS or of any affiliate of BNS that
is a Canadian resident corporation to a Non-Resident Holder will
generally be subject to Canadian non-resident withholding tax at
the rate of 25% on the gross amount of such dividends unless the
rate is reduced under the provisions of an applicable income tax
treaty or convention between Canada and the country of residence of
the Non-Resident Holder.
A
Non-Resident Holder will not be subject to tax under the Act in
respect of any capital gain realized on a disposition or deemed
disposition of a Common Share unless the Common Share is or is
deemed to be “taxable Canadian property” of the Non-Resident Holder
for the purposes of the Act and the Non-Resident Holder is not
entitled to an exemption under an applicable income tax convention
between Canada and the country in which the Non-Resident Holder is
resident.
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES
General
The
following discussion summarizes the material U.S. federal income
tax consequences to U.S. Holders of the purchase, beneficial
ownership and disposition of the notes.
For
purposes of this summary, a “U.S. Holder” is a beneficial owner of
a note that is:
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an individual who is a citizen or a
resident of the United States, for U.S. federal income tax
purposes;
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a corporation (or other entity that
is treated as a corporation for U.S. federal income tax purposes)
that is created or organized in or under the laws of the United
States or any State thereof (including the District of
Columbia);
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an estate whose income is subject to
U.S. federal income taxation regardless of its source; or
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a trust if a court within the United
States is able to exercise primary supervision over its
administration, and one or more United States persons, for U.S.
federal income tax purposes, have the authority to control all of
its substantial decisions.
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An
individual may, subject to certain exceptions, be deemed to be a
resident of the United States for U.S. federal income tax purposes
by reason of being present in the United States for at least 31
days in the calendar year and for an aggregate of at least 183 days
during a three year period ending in the current calendar year
(counting for such purposes all of the days present in the current
year, one third of the days present in the immediately preceding
year, and one sixth of the days present in the second preceding
year).
This
summary is based on interpretations of the U.S. Internal Revenue
Code of 1986, as amended (the “Code”), regulations issued
thereunder, and rulings and decisions currently in effect (or in
some cases proposed), all of which are subject to change. Any such
change may be applied retroactively and may materially and
adversely affect the U.S. federal income tax consequences described
herein. In addition, this summary addresses only U.S. Holders that
purchase notes at initial issuance, and own notes as capital assets
and not as part of a “straddle,” “hedge,” “synthetic security,” or
a “conversion transaction” for U.S. federal income tax purposes or
as part of some other integrated investment. This summary does not
discuss all of the tax consequences (such as any alternative
minimum tax consequences) that may be relevant to particular
investors or to investors subject to special treatment under the
U.S. federal income tax laws (such as banks, thrifts or other
financial institutions; insurance companies; securities dealers or
brokers, or traders in securities electing mark-to-market
treatment; regulated investment companies or real estate investment
trusts; small business investment companies; S corporations;
partnerships; or investors that hold their notes through a
partnership or other entity treated as a partnership for U.S.
federal income tax purposes; U.S. Holders whose functional currency
is not the U.S. dollar; certain former citizens or residents of the
United States; retirement plans or other tax-exempt entities, or
persons holding the notes in tax-deferred or tax-advantaged
accounts; persons that purchase or sell the notes as part of a wash
sale for tax purposes; or “controlled foreign corporations” or
“passive foreign investment companies” for U.S. federal income tax
purposes). This summary also does not address the tax consequences
to any holder that is not a U.S. Holder or to shareholders, or
other equity holders in, or beneficiaries of, a holder, or any
state, local or (except as discussed above under “Supplemental
Discussion of Canadian Federal Income Tax Consequences”) non-U.S.
tax consequences of the purchase, ownership or disposition of the
notes. Investors should consult their tax advisors concerning the
application of U.S. federal income tax laws to their particular
situations as well as any consequences of the purchase, beneficial
ownership and disposition of notes arising under the laws of any
other taxing jurisdiction.
U.S. Federal Income Tax Treatment of the Notes as Indebtedness for
U.S. Federal Income Tax Purposes and Payments of Interest
While there is no authority that specifically addresses the U.S.
federal income tax treatment of an instrument like the bail-inable
notes, such notes should be treated as indebtedness for U.S.
federal income tax purposes, and the balance of this summary
assumes that such notes are treated as indebtedness for U.S.
federal income tax purposes. However, the U.S. Internal Revenue
Service (the “IRS”) could assert that the notes should be treated
as equity for U.S. federal income tax purposes. Nevertheless,
treatment of the notes as equity for U.S. federal income tax
purposes should not result in inclusions of income with respect to
the notes that are materially different from those if the notes are
treated as indebtedness. If the notes were treated as equity, it is
unlikely that interest payments on the notes that are treated as
dividends for U.S. federal income tax purposes would be treated as
“qualified dividend income” for U.S. federal income tax purposes
and, if such dividends were not treated as qualified dividend
income, amounts treated as dividends would be taxed at ordinary
income tax rates. You should consult with your tax advisor
regarding the appropriate characterization of bail-inable notes for
U.S. federal income tax purposes, and the U.S. federal income and
other tax consequences of any bail-in conversion.
Under the above treatment, interest payments on the notes will be
taxable to a U.S. Holder as ordinary interest income at the time it
accrues or is received in accordance with the U.S. Holder’s normal
method of accounting for tax purposes. Pursuant to the terms of the
notes, you agree to treat the notes consistent with our treatment
for all U.S. federal income tax purposes.
Based on certain factual representations received from us, our
special U.S. tax counsel, Fried, Frank, Harris, Shriver &
Jacobson LLP, is of the opinion that your notes should be treated
in the manner described above. However, the U.S. federal income tax
treatment of the notes is uncertain. We do not plan to request a
ruling from the IRS regarding the tax treatment of the notes, and
the IRS or a court may not agree with the tax treatment described
above. We urge you to consult your tax advisor as to the tax
consequences of your investment in the notes.
Sale, Exchange,
Early Redemption or Maturity of the Notes
On a
taxable disposition of a note, you should generally recognize
taxable gain or loss equal to the difference between (1) the amount
realized on such taxable disposition (other than amounts
attributable to accrued but untaxed interest) and (2) your adjusted
tax basis in the note. Your adjusted tax basis in a note generally
will equal your cost of the note. Because the note is held as a
capital asset, as defined in Section 1221 of the Code, such gain or
loss will generally constitute capital gain or loss. Capital gain
of a noncorporate U.S. Holder is generally taxed at preferential
rates where such holder has a holding period of greater than one
year. The deductibility of a capital loss realized on the taxable
disposition of a note is subject to limitations.
FATCA
The
Foreign Account Tax Compliance Act (“FATCA”) was enacted on March
18, 2010, and imposes a 30% U.S. withholding tax on “withholdable
payments” (i.e., certain U.S.-source payments, including interest
(and original issue discount), dividends, other fixed or
determinable annual or periodical gain, profits, and income, and on
the gross proceeds from a disposition of property of a type which
can produce U.S.-source interest or dividends) and “passthru
payments” (i.e., certain payments attributable to withholdable
payments) made to certain foreign financial institutions (and
certain of their affiliates) unless the payee foreign financial
institution agrees (or is required), among other things, to
disclose the identity of any U.S. individual with an account at the
institution (or the relevant affiliate) and to annually report
certain information about such account. FATCA also requires
withholding agents making withholdable payments to certain foreign
entities that do not disclose the name, address, and taxpayer
identification number of any substantial U.S. owners (or do not
certify that they do not have any substantial U.S. owners) to
withhold tax at a rate of 30%. Under certain circumstances, a
holder may be eligible for refunds or credits of such taxes.
Pursuant
to final and temporary Treasury regulations and other IRS guidance,
the withholding and reporting requirements under FATCA will
generally apply to certain “withholdable payments”, will not apply
to gross proceeds on a sale or disposition and will apply to
certain foreign passthru payments only to the extent that such
payments are made after the date that is two years after final
regulations defining the term “foreign passthru payment” are
published. If withholding is required, we (or the applicable paying
agent) will not be required to pay additional amounts with respect
to the amounts so withheld. Foreign financial institutions and
non-financial foreign entities located in jurisdictions that have
an intergovernmental agreement with the U.S. governing FATCA may be
subject to different rules.
Investors
should consult their own advisors about the application of FATCA,
in particular if they may be classified as financial institutions
(or if they hold their notes through a foreign entity) under the
FATCA rules.
Medicare Tax on Net Investment Income
U.S.
Holders that are individuals, estates or certain trusts are subject
to an additional 3.8% tax on all or a portion of their “net
investment income,” or “undistributed net investment income” in the
case of an estate or trust, which may include any income or gain
realized with respect to the notes, to the extent of their net
investment income or undistributed net investment income (as the
case may be) that, when added to their other modified adjusted
gross income, exceeds $200,000 for an unmarried individual,
$250,000 for a married taxpayer filing a joint return (or a
surviving spouse), $125,000 for a married individual filing a
separate return or the dollar amount at which the highest tax
bracket begins for an estate or trust. The 3.8% Medicare tax is
determined in a different manner than the regular income tax. You
should consult your tax advisor as to the consequences of the 3.8%
Medicare tax with respect to your investment in the notes.
Specified Foreign Financial Assets
Certain
U.S. Holders that own “specified foreign financial assets” in
excess of an applicable threshold may be subject to reporting
obligations with respect to such assets with their tax returns,
especially if such assets are held outside the custody of a U.S.
financial institution. You are urged to consult your tax advisor as
to the application of this reporting obligation to your ownership
of the notes.
Backup Withholding and Information Reporting
Interest
paid on the notes, and proceeds received from a taxable disposition
of the notes, will be subject to information reporting unless you
are an “exempt recipient” and may also be subject to backup
withholding if you fail to provide certain identifying information
(such as an accurate taxpayer number) or meet certain other
conditions.
Amounts
withheld under the backup withholding rules are not additional
taxes and may be refunded or credited against your U.S. federal
income tax liability, provided the required information is
furnished to the IRS.
You should consult your tax advisor as to the federal, state, local
and other tax consequences of acquiring, holding and disposing of
the notes and receiving payments under the notes, as well as any
tax consequences arising under the laws of any state, local or
non-U.S. taxing jurisdiction (including that of BNS).
SUPPLEMENTAL PLAN OF DISTRIBUTION (CONFLICTS OF INTEREST)
Pursuant to the terms of a distribution agreement, SCUSA, an
affiliate of ours, will purchase the notes from us at the principal
amount and will sell the notes to BofAS at a discount of $[15.00]
([1.50]%) per $1,000 principal amount of the notes. BofAS is a
party to the distribution agreement described in the “Supplemental
Plan of Distribution (Conflicts of Interest)” of the accompanying
prospectus supplement. BofAS may pay varying selling concessions of
up to $[15.00] ([1.50]%) in connection with the distribution of the
notes to other registered broker-dealers. Certain dealers who
purchase the notes for sale to certain fee-based advisory accounts
and/or eligible institutional investors may forgo some or all of
their selling concessions, fees or commissions. The price to public
for investors purchasing the notes in these accounts and/or for an
eligible institutional investor may be as low as $[985.00]
([98.50]%) per $1,000 in principal amount of the notes.
Because SCUSA is an affiliate of BNS, SCUSA has a “conflict of
interest” in this offering within the meaning of FINRA Rule 5121.
In addition, BNS will receive the gross proceeds from the initial
public offering of the notes, thus creating an additional conflict
of interest within the meaning of Rule 5121. Consequently, the
offering is being conducted in compliance with the provisions of
Rule 5121. SCUSA is not permitted to sell the notes in this
offering to an account over which it exercises discretionary
authority without the prior specific written approval of the
account holder.
None of the agents or our other or their respective affiliates are
acting as your fiduciary or advisor solely as a result of the
offering of the notes, and you should not rely upon any
communication from the agent(s) in connection with the notes as
investment advice or a recommendation to purchase the notes. You
should make your own investment decision regarding the notes after
consulting with your legal, tax, and other advisors.
BofAS may sell the notes to other broker-dealers that will
participate in the offering and that are not affiliated with us, at
an agreed discount to the principal amount, subject to the maximum
selling concession specified above. Each of those
broker-dealers may sell the notes to one or more additional
broker-dealers. BofAS has informed us that these discounts
may vary from dealer to dealer and that not all dealers will
purchase or repurchase the notes at the same discount.
BofAS and its affiliates may use this document, and the
accompanying prospectus supplement and prospectus for offers and
sales in secondary market transactions and market-making
transactions in the notes. However, they are not obligated to
engage in such secondary market transactions or market-making
transactions. These broker-dealers may act as principal or agent in
these transactions, and any such sales will be made at prices
related to prevailing market prices at the time of the sale. BofAS’
or its affiliates’ distribution of this document in connection with
these offers or sales will be solely for the purpose of providing
investors with the description of the terms of the notes that was
made available to investors in connection with their initial
offering. Secondary market investors who purchase the notes from
BofAS or its affiliates should not, and will not be authorized to,
rely on this document for information regarding BNS or for any
purpose other than that described in the immediately preceding
sentence.
The agents and their respective affiliates have engaged in, and may
in the future engage in, investment banking and other commercial
dealings in the ordinary course of business with us or our
affiliates. The agents have respectively received, or may in
the future receive, customary fees and commissions for these
transactions. In addition, in the ordinary course of its business
activities, the agents and their respective affiliates may make or
hold a broad array of investments and actively trade debt and
equity securities (or related derivative securities) and financial
instruments (including bank loans) for their own account and for
the accounts of their customers. Such investments and
securities activities may involve securities and/or instruments of
ours or our affiliates. To the extent that the agents or their
respective affiliates have a lending relationship with us, they
would routinely hedge their credit exposure to us consistent with
their customary risk management policies. Typically, the
agents or their respective affiliates would hedge such exposure by
entering into transactions which consist of
either the
purchase of credit default swaps or the creation of short positions
in our securities. With respect to BofAS or its affiliates, such
securities may include the notes offered hereby, and any such short
positions could adversely affect future trading prices of the notes
offered hereby. The agents or their respective affiliates may also
make investment recommendations and/or publish or express
independent research views in respect of such securities or
financial instruments and may hold, or recommend to clients that
they acquire, long and/or short positions in such securities and
instruments.
CERTAIN ERISA CONSIDERATIONS
Each fiduciary of a pension, profit-sharing, or other employee
benefit plan subject to the U.S. Employee Retirement Income
Security Act of 1974, as amended (“ERISA”) (a “Plan”), should
consider the fiduciary standards of ERISA in the context of the
Plan’s particular circumstances before authorizing an investment in
the notes. Accordingly, among other factors, the fiduciary should
consider whether the investment would satisfy the prudence and
diversification requirements of ERISA and would be consistent with
the documents and instruments governing the Plan.
In addition, we, BofAS and certain of our and their respective
subsidiaries and affiliates may be each considered a party in
interest within the meaning of ERISA, or a disqualified person
(within the meaning of Section 4975 of the Code), with respect to
many Plans, as well as many individual retirement accounts and
Keogh plans (also “Plans”). Prohibited transactions within the
meaning of ERISA or the Code would likely arise, for example, if
the notes are acquired by or with the assets of a Plan with respect
to which we or any of our affiliates is a party in interest or a
disqualified person, unless the notes are acquired under an
exemption from the prohibited transaction rules. A violation of
these prohibited transaction rules could result in an excise tax or
other liabilities under ERISA and/or Section 4975 of the Code for
such persons, unless exemptive relief is available under an
applicable statutory or administrative exemption.
Under ERISA and various prohibited transaction class exemptions
(“PTCEs”) issued by the U.S. Department of Labor, exemptive relief
may be available for direct or indirect prohibited transactions
resulting from the purchase, holding, or disposition of the notes.
Those exemptions include PTCE 96-23 (for certain transactions
determined by in-house asset managers), PTCE 95-60 (for certain
transactions involving insurance company general accounts), PTCE
91-38 (for certain transactions involving bank collective
investment funds), PTCE 90-1 (for certain transactions involving
insurance company separate accounts), PTCE 84-14 (for certain
transactions determined by independent qualified asset managers),
and the exemption under Section 408(b)(17) of ERISA and Section
4975(d)(20) of the Code for certain transactions with a person that
is a party in interest or disqualified person solely by reason of
providing services to Plans or being an affiliate of such a service
provider and in connection with which the Plan receives no less,
nor pays no more, than adequate consideration (the “Service
Provider Exemption”).
Because each of BNS and BofAS may be considered a party in interest
or disqualified person with respect to many Plans, the notes may
not be purchased, held, or disposed of by any Plan, any entity
whose underlying assets include plan assets by reason of any Plan’s
investment in the entity (a “Plan Asset Entity”) or any person
investing plan assets of any Plan, unless such purchase, holding,
or disposition is eligible for exemptive relief, including relief
available under PTCE 96-23, 95-60, 91-38, 90-1, or 84-14 or the
Service Provider Exemption, or such purchase, holding, or
disposition is otherwise not prohibited. Any purchaser, including
any fiduciary purchasing on behalf of a Plan, transferee or holder
of the notes will be deemed to have represented, in its corporate
and its fiduciary capacity, by its purchase and holding of the
notes that either (a) it is not and will not be a Plan or a Plan
Asset Entity and is not purchasing such notes on behalf of or with
plan assets of any Plan or any plan subject to similar laws or (b)
its purchase, holding, and disposition will not constitute or
result in a non-exempt prohibited transaction due to the
application of a statutory or administrative exemption or such
purchase, holding, and disposition will not otherwise be prohibited
under ERISA or Section 4975 of the Code or a violation of any
similar laws.
Further,
any person acquiring or holding the notes on behalf of any plan or
with any plan assets shall be deemed to represent on behalf of
itself and such plan that (x) the plan is paying no more than, and
is receiving no less than, adequate consideration within the
meaning of Section 408(b)(17) of ERISA and/or Section 4975(f)(10)
of the Code in connection with the transaction or any redemption of
the notes, (y) neither us nor BofAS directly or indirectly
exercises any discretionary authority or control or renders
investment advice or otherwise acts in a fiduciary capacity with
respect to the assets of the plan within the meaning of ERISA
and/or Section 4975 of the Code and (z) in making the foregoing
representations and warranties, such person has applied sound
business principles in determining whether fair market value will
be paid, and has made such determination acting in good
faith.
The fiduciary investment considerations summarized above generally
apply to employee benefit plans maintained by private-sector
employers and to individual retirement accounts and other
arrangements subject to Section 4975 of the Code, but generally do
not apply to governmental plans (as defined in Section 3(32) of
ERISA), certain church plans (as defined in Section 3(33) of
ERISA), and foreign plans (as described in Section 4(b)(4) of
ERISA). However, these other plans may be subject to similar
provisions under applicable federal, state, local, foreign, or
other regulations, rules, or laws (“similar laws”). The fiduciaries
of plans subject to similar laws should also consider the foregoing
issues in general terms as well as any further issues arising under
the applicable similar laws.
In addition, any purchaser that is a Plan or a Plan Asset Entity or
that is acquiring the notes on behalf of a Plan or a Plan Asset
Entity, including any fiduciary purchasing on behalf of a Plan or
Plan Asset entity, will be deemed to have represented, in its
corporate and its fiduciary capacity, by its purchase and holding
of the notes that (a) none of us, BofAS or any of our or their
respective affiliates is a “fiduciary” (under Section 3(21) of
ERISA, or under any final or proposed regulations thereunder, or
with respect to a governmental, church, or foreign plan under any
similar laws) with respect to the acquisition, holding or
disposition of the notes, or as a result of any exercise by us or
our affiliates of any rights in connection with the notes, (b) no
advice provided by us, BofAS or any of our or their respective
affiliates has formed a primary basis for any investment decision
by or on behalf of such purchaser in connection with the notes and
the transactions contemplated with respect to the notes, and (c)
such purchaser recognizes and agrees that any communication from
us, BofAS or any of our or their respective affiliates to the
purchaser with respect to the notes is not intended by us or any of
our affiliates to be impartial investment advice and is rendered in
its capacity as a seller of such notes and not a fiduciary to such
purchaser. Purchasers of the notes have exclusive responsibility
for ensuring that their purchase, holding, and disposition of the
notes do not violate the prohibited transaction rules of ERISA or
the Code or any similar regulations applicable to governmental or
church plans, as described above.
This
discussion is a general summary of some of the rules which apply to
benefit plans and their related investment vehicles. This summary
does not include all of the investment considerations relevant to
Plans and other benefit plan investors such as governmental,
church, and foreign plans and should not be construed as legal
advice or a legal opinion. Due to the complexity of these rules and
the penalties that may be imposed upon persons involved in non-
exempt prohibited transactions, it is particularly important that
fiduciaries or other persons considering purchasing the notes on
behalf of or with “plan assets” of any Plan or other benefit plan
investor consult with their legal counsel prior to directing any
such purchase.