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The Bank of Nova Scotia (NYSE:BNS) has priced $11.478 million in Auto-Callable Trigger PLUS structured notes tied to the S&P 500 Index, set to mature on August 3, 2028. These notes offer potential early redemption if the index closes at or above its initial level on specified determination dates, or a leveraged upside of 125% if held to maturity with index gains. However, investors risk full principal loss if the index falls more than 20% from its initial level. This issuance continues BNS's expansion of structured product offerings under its Senior Note Program, Series A.
Key Highlights
- Issuer: Bank of Nova Scotia (NYSE:BNS)
- Auto-Callable Trigger PLUS structured notes priced at $11.478 million on July 17, 2026; issued July 22, 2026
- Initial S&P 500 index value: 7,457.69; trigger level: 5,966.152 (80% of initial value); final determination date: July 31, 2028
- Early redemption at $1,095.30 per security if S&P 500 closes at or above initial level on determination dates; investors should monitor index relative to trigger levels through maturity
Structured Note Features and Redemption Terms
The Auto-Callable Trigger PLUS notes are complex derivatives combining equity upside participation with embedded downside risk. They include an automatic early redemption feature activating if the S&P 500 closes at or above 7,457.69 on any determination date before maturity. Upon activation, holders receive $1,095.30 per security in cash, terminating the investment with no further payments. Multiple determination dates during the two-year term offer periodic early redemption opportunities.
If the notes remain outstanding until maturity on August 3, 2028, the payoff depends on the final index closing value relative to the initial value, the leverage threshold, and the 5,966.152 trigger level. Investors earn 125% of any positive index gains above the initial value, while losses below 80% of the initial index value result in dollar-for-dollar principal losses. Severe index declines can lead to complete loss of principal.
Principal Risk and Loss Scenarios
The notes carry principal-at-risk characteristics, differing from traditional debt. Investors risk losing their entire $1,000 principal per security if the S&P 500 declines more than 20% from the July 17, 2026 pricing level. Losses are proportional: for each 1% drop below the trigger level, investors lose 1% of their investment. The filing notes that maturity payments could be significantly less than principal, potentially zero.
Protection is limited to a narrow band: if the final index value falls between the initial value and trigger level, investors receive full principal back at maturity despite interim declines. This 20% performance window offers limited downside protection only at maturity, with no interim safeguards. The estimated value per security at pricing was $968.94, a $31.06 discount to the $1,000 issue price, indicating embedded risk premiums.
Index Performance and Leverage Details
The notes reference the S&P 500 Index (Bloomberg ticker "SPX"), with an initial value of 7,457.69 as of July 17, 2026. The 125% leverage applies solely to positive returns above the initial index value at maturity. Returns are calculated as the percentage change from initial to final index value, determining both leveraged gains and losses below the trigger level.
Scotia Capital Inc. acts as calculation agent, responsible for index value determinations and adjustments if index data becomes unavailable. The product supplement details procedures for such adjustments, though specifics are not included in this pricing document. The leverage creates asymmetric payoffs: investors gain 125% of index increases but face full principal loss if the index drops beyond 20%, exposing them to negative convexity amid volatility.
Issuer Credit Risk and Security Status
Payments depend entirely on the creditworthiness of The Bank of Nova Scotia, a Canadian bank. These notes are senior unsecured obligations under BNS's Senior Note Program, Series A, with no collateral backing. The filing warns that if BNS defaults, investors may lose their entire investment. This credit risk compounds structural risks from the index-linked payoff.
The notes are not insured by the Canada Deposit Insurance Corporation, the U.S. Federal Deposit Insurance Corporation, or any government guarantee program. Sold through Morgan Stanley Wealth Management, investors bear counterparty risk identical to holding unsecured senior notes of BNS, requiring confidence in the bank's financial stability.
Distribution and Commission Structure
Scotia Capital (USA) Inc., a BNS affiliate, serves as agent for the offering, with Scotia Capital Inc. as calculation agent. Morgan Stanley Wealth Management purchases the notes at par from SCUSA and resells to clients with embedded commissions. Total commissions include a $20 sales commission and a $5 structuring fee per $1,000 principal, totaling $25 per security or $286,950 on the $11.478 million issuance. These fees reduce net proceeds to BNS to $11.191 million, while investors pay $1,000 per unit.
The filing discloses potential conflicts of interest: both calculation and distribution agents are BNS affiliates, and Morgan Stanley Wealth Management earns fixed fees regardless of performance. This may incentivize emphasizing attractive features like early redemption and leverage while downplaying risks. Governance and independence procedures for the calculation agent are not detailed.
Settlement, Trading, and Liquidity Considerations
The notes settled on July 22, 2026, three business days after pricing (T+3). This settlement creates constraints for secondary market trading, as trades before one business day prior to delivery require alternative settlement arrangements to avoid failed trades under standard T+1 conventions. The disclosure warns purchasers accordingly.
The notes will not be listed on any exchange or electronic network; secondary trading, if any, will be over-the-counter. BNS and Morgan Stanley do not commit to providing liquidity or continuous secondary markets. Investors should view these as buy-and-hold instruments until maturity or early redemption. The $968.94 estimated value at pricing reflects illiquidity premiums embedded in the spread versus issue price.
Estimated Value and Pricing Insights
The estimated value at pricing was $968.94 per $1,000 principal, a 3.1% discount reflecting costs of leverage, early redemption, and downside protection features. The filing cautions that actual values fluctuate and cannot be precisely predicted, noting valuation uncertainties inherent in structured products. Investors are advised to consult the "Risk Factors — Risks Relating to Estimated Value and Liquidity" section for further details.
The significant gap between estimated value and issue price suggests embedded structuring costs exceed the $25 per security commission. No regulatory body has approved the valuation methodology or estimated value figure, underscoring the need for independent valuation before investing.
Product Supplement and Determination Dates
This pricing supplement incorporates by reference prior documents dated November 8, 2024, including prospectus, prospectus supplement, underlier supplement, and product supplement. The product supplement details market disruption procedures, valuation dates, and adjustments to reference asset values.
Multiple determination dates before the final date of July 31, 2028, are listed, subject to postponement for non-trading days or market disruptions. Early redemption payments of $1,095.30 per security occur if the S&P 500 closes at or above 7,457.69 on these dates. Investors should consult the product supplement for the full schedule. Market disruption provisions may extend the effective maturity beyond August 3, 2028.
Regulatory Status and Investor Protections
The disclosure states that neither the Securities and Exchange Commission nor any other regulator has approved or disapproved these securities or their offering documents. The notes are offered under Rule 424(b)(2) of the Securities Act of 1933, registered under an effective registration statement but not subject to pre-approval of terms.
No secondary market making commitments, investor insurance, or regulatory oversight of trading practices are provided. Investors should perform independent due diligence on BNS’s creditworthiness and suitability of these structured products, as no regulatory body has endorsed or assessed the offering.
Registration and Legal Framework
The notes are issued under BNS's Senior Note Program, Series A, registered with the SEC under Registration Statement No. 333-282565. The $11.478 million tranche is identified by CUSIP 06419TJD1 and ISIN US06419TJD19. Minimum investment is $1,000 per security, totaling 11,478 units issued.
Maturity is August 3, 2028, subject to postponement due to market disruptions. The two-year measurement period commenced on the July 22, 2026 issue date, with index values determined from the July 17, 2026 pricing close of 7,457.69. The legal framework complies with federal securities laws, Bank Secrecy Act, and applicable state blue sky laws, targeting sophisticated investors through Morgan Stanley Wealth Management.
