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The Bank of Nova Scotia has priced $18,914,000 in contingent income auto-callable securities maturing on July 20, 2029, linked to the performance of American depositary receipts (ADRs) of Arm Holdings plc. Priced on July 17, 2026, this structured investment product offers investors the potential for above-market quarterly coupons but involves significant principal risk and does not guarantee capital return. Investors face considerable downside exposure if the underlying Arm Holdings stock underperforms.
Key Points
- NYSE ticker: BNS
- Bank of Nova Scotia priced $18,914,000 aggregate principal amount of contingent income auto-callable securities on July 17, 2026
- Securities mature on July 20, 2029, with $1,000 stated principal per security and a minimum investment of $1,000
- Principal-at-risk structure with a memory coupon feature allowing accumulation of unpaid coupons
Structure and Underlying Asset Details
These contingent income auto-callable securities are senior unsecured debt obligations issued under The Bank of Nova Scotia’s Senior Note Program, Series A. Their performance is linked to Arm Holdings plc ADRs, traded under Bloomberg ticker "ARM UW." Each security has a stated principal amount of $1,000 and was issued at par. The original issue date is July 22, 2026, three business days after pricing, following a T+3 settlement timeline that may require special arrangements for secondary market trading before delivery.
The minimum investment is one security unit ($1,000), and the total offering size is $18,914,000, representing a mid-sized structured product issuance for BNS. Investors assume both the credit risk of The Bank of Nova Scotia and the market risk tied to Arm Holdings ADRs.
Contingent Quarterly Coupons and Memory Feature
Coupons are paid quarterly contingent on the underlying stock’s closing price meeting or exceeding a downside threshold on determination dates. If the closing price is at or above this threshold, investors receive a quarterly coupon of $68.75 per security, equivalent to a 27.50% annualized rate on the stated principal. This elevated coupon rate incentivizes investment despite principal risk.
The securities include a memory coupon mechanism, whereby unpaid coupons due to the stock price falling below the threshold accumulate and may be paid later if the price recovers above the threshold. However, if the underlying stock remains below the downside threshold on all determination dates, no coupons will be paid, resulting in no positive return.
Determination Dates and Coupon Payment Schedule
Determination dates occur quarterly from October 19, 2026, through July 17, 2029, with final determination on July 17, 2029. These dates may be postponed for non-trading days or market disruptions as outlined in the product supplement.
Corresponding coupon payment dates follow shortly after each determination date, concluding with the maturity date on July 20, 2029. Payment dates are subject to postponement for non-business days or corporate calendar adjustments.
Early Redemption and Call Threshold
An automatic early redemption feature triggers if the underlying stock’s closing price meets or exceeds the call threshold on any determination date before maturity. Upon triggering, securities are redeemed on the next coupon payment date, paying principal plus the applicable coupon and any accumulated unpaid coupons. Investors cannot opt to extend beyond early redemption.
This early call caps upside potential, preventing participation in further stock appreciation beyond the structured coupon and redemption amount. This feature is typical for auto-callable products, balancing higher coupon rates against limited upside.
Principal-at-Risk Maturity Terms
At maturity, if the final Arm Holdings ADR price is at or above the downside threshold, investors receive full principal ($1,000) plus the final and any accumulated coupons. Conversely, if the final price is below the threshold, principal repayment is reduced proportionally to the stock’s performance, potentially dropping below 40% of principal or even to zero, resulting in significant capital loss.
Downside Threshold and Capital Loss Risk
The downside threshold is set at 40% of the initial share price, determining coupon eligibility and maturity payments. A decline below this threshold means loss of coupon payments for that period unless the price recovers. Investors risk losing up to 60% or more of their principal if the stock price remains below the threshold through maturity.
These securities are explicitly principal-at-risk, with no guarantee of principal repayment. Investors must be prepared to absorb total loss if Arm Holdings ADRs decline sharply.
Credit Risk and Unsecured Debt Status
Issued as senior unsecured debt of The Bank of Nova Scotia, these securities are not collateralized. Investors’ claims depend solely on BNS’s creditworthiness and rank equally with other senior unsecured obligations. Financial distress or default by BNS could result in loss of principal and coupons regardless of underlying stock performance.
Investors hold no ownership or claim on Arm Holdings or its assets; the securities represent contractual payment obligations of BNS contingent on external reference asset performance.
Secondary Market and Settlement Considerations
The securities settle on a T+3 basis post-pricing, differing from the standard T+1 settlement for most securities. Secondary market trades before delivery require alternative settlement agreements to avoid failures under SEC Rule 15c6-1.
Post-delivery, market prices will fluctuate based on Arm Holdings ADR performance, interest rates, and BNS credit spreads. Secondary market liquidity may be limited with wider bid-ask spreads, potentially complicating early exit.
Risk Factors and Investor Suitability
These securities suit investors willing to risk full principal loss and potential absence of coupon payments. The 27.50% annual coupon rate is contingent on stock price performance, with no participation in stock appreciation beyond early redemption thresholds.
The filing stresses suitability for investors prepared to accept the risk of no coupons and significant capital loss in exchange for above-market coupon potential, emphasizing the importance of understanding market, credit, and structural risks.
Registration and Regulatory Framework
The offering is made under BNS’s registration statement No. 333-282565, with this pricing supplement dated July 17, 2026, filed under Rule 424(b)(2). It references a prospectus and product supplement dated November 8, 2024. Investors should consult these documents for full details on payment mechanics, market disruption provisions, and operational terms.
Market disruption events may delay determination and payment dates, providing issuer flexibility if trading in Arm Holdings ADRs is impaired. Investors should review definitions of such events in the product supplement to understand potential impacts on timing and returns.
