Bank of Nova Scotia Launches $19.8 Million Amazon-Linked Contingent Income Auto-Callable Securities Featuring Principal-at-Risk and Quarterly Coupons

Structured Note Details and Amazon Reference Asset

The Bank of Nova Scotia structured these securities as senior unsecured debt obligations issued under its Senior Note Program, Series A. The underlying reference asset is Amazon.com Inc. common stock, tracked via Bloomberg ticker AMZN UW. As principal-at-risk investments, these notes do not pay traditional interest but offer contingent quarterly coupons linked to Amazon's stock performance on designated determination dates over the three-year term.

Each security’s initial issue price is $1,000, establishing the baseline for performance calculations. The minimum investment is one security, with a total principal amount of $19.788 million issued. Investors should understand that BNS does not guarantee principal repayment, and these unsecured obligations expose investors to the bank’s credit risk. In the event of a default by BNS, investors could lose their entire investment as there is no collateral backing these securities.

Contingent Coupon Payments and Memory Feature Explained

These securities include a memory coupon feature distinguishing them from standard linked notes. If Amazon’s stock closes at or above 65% of its initial price on any determination date, BNS will pay the quarterly contingent coupon of $27.65 per security on the corresponding payment date. If the stock price falls below this threshold on a determination date, the coupon for that period is deferred and may be paid later if Amazon’s stock recovers above the threshold on a future determination date.

The 11.06% annualized coupon rate offers a potentially attractive return compared to conventional fixed-income products, compensating for the substantial risks involved. However, if Amazon’s stock price remains below the 65% threshold on all determination dates during the three-year term, no coupons will be paid. Investors must be prepared for this possibility, as the issuer does not provide probability estimates for coupon payments.

Automatic Call Feature and Early Redemption Conditions

The securities contain an automatic call provision allowing early redemption if Amazon’s stock price reaches the call threshold on any determination date before maturity. Upon breaching this threshold, BNS will redeem the securities on the next coupon payment date, paying the stated principal plus the applicable quarterly coupon and any accrued unpaid coupons under the memory feature. Early redemption terminates further payments and investor participation.

This call feature limits the issuer’s potential losses if Amazon’s stock appreciates significantly beyond the initial reference price. For investors, early redemption caps returns at the coupons received up to that point, foregoing further gains from Amazon stock appreciation beyond the call trigger. The pricing supplement does not specify the exact call threshold percentage, requiring investors to consult additional documentation.

Principal-at-Risk Payoff Structure at Maturity

At maturity on July 20, 2029, investor payouts depend on Amazon’s final share price relative to the initial reference price. If Amazon’s stock closes at or above 65% of the initial price on July 17, 2029, investors receive the full $1,000 principal plus any contingent and accrued coupons. This scenario represents full principal protection.

If Amazon’s stock closes below the 65% threshold at maturity, investors receive a payment equal to the principal multiplied by the share performance factor, which is not quantified in the supplement but will be less than 65% of principal and could be as low as zero if Amazon’s stock declines near zero. This exposes investors to significant capital loss or total loss of their $1,000 investment per security.

Determination and Coupon Payment Schedule

There are twelve quarterly determination dates: October 19, 2026; January 19, 2027; April 19, 2027; July 19, 2027; October 18, 2027; January 18, 2028; April 17, 2028; July 17, 2028; October 17, 2028; January 17, 2029; April 17, 2029; and July 17, 2029. These dates may be postponed due to non-trading days or market disruption events as outlined in the product supplement. Coupon payments follow roughly three business days after each determination date.

This schedule provides regular opportunities to assess Amazon’s stock price for coupon eligibility or deferral under the memory feature. Investors must monitor each date to determine whether coupons will be paid or deferred.

Settlement Terms and Secondary Market Trading Implications

The original issue date is July 22, 2026, three business days after the pricing date of July 17, 2026. While secondary market trades usually settle in one business day (T+1) under SEC rules, these securities settle in three business days (T+3) initially. Investors wishing to trade before one business day prior to delivery must arrange alternative settlement to avoid failed trades, potentially affecting liquidity and trading flexibility early on.

The pricing supplement does not provide details on secondary market liquidity, bid-ask spreads, or exit strategies. Investors should consult financial advisors regarding potential challenges or costs when selling these securities before maturity.

No Participation in Amazon Stock Appreciation

A key limitation is that investors do not participate in any upside appreciation of Amazon’s stock. Returns are limited to the contingent quarterly coupons during the three-year term. If Amazon’s stock price rises significantly above the initial reference price, investors receive no additional benefit beyond coupons and possible early redemption at principal plus accrued coupons.

This structure caps returns while exposing investors fully to downside risk below the 65% threshold. Investors seeking equity upside should consider direct Amazon stock purchases or equity funds. These securities target investors focused on income generation who accept the risk of no income if Amazon underperforms.

Credit Risk and Unsecured Debt Exposure

The securities’ safety depends on The Bank of Nova Scotia’s creditworthiness. Payments rely on BNS’s ability and willingness to meet obligations. Financial distress, insolvency, or default by BNS could result in total loss regardless of Amazon’s stock performance. The pricing supplement highlights this credit risk explicitly.

As unsecured senior debt obligations, these securities have no collateral backing, ranking alongside other unsecured creditors in bankruptcy scenarios. Investors must independently assess BNS’s credit quality to justify investment, especially given the three-year term and principal-at-risk nature.

Market Disruption Events and Valuation Adjustments

The pricing supplement notes that determination dates and valuations may be postponed due to market disruption events, as detailed in the product supplement. Such events include exchange closures, trading halts, or extraordinary circumstances impacting Amazon’s stock pricing.

Investors should review the full product supplement to understand definitions and procedures for market disruptions. Postponements can affect maturity and coupon payment timing, introducing timing risk important for investors relying on scheduled cash flows.

Investor Suitability and Risk Considerations

The Bank of Nova Scotia states these securities suit investors willing to risk their entire principal for the chance of above-market interest, accepting the possibility of no coupons during the term. They are unsuitable for conservative investors, retirees needing stable income, or those unable to tolerate full principal loss.

Prospective buyers should perform thorough due diligence on both BNS’s credit profile and Amazon’s business outlook and stock performance over three years. Investors make dual credit assessments: BNS’s payment ability and Amazon’s likelihood of trading above 65% on determination dates. Neither issuer nor distributors guarantee Amazon’s future stock price, so investors must rely on their own analysis to ensure alignment with their risk tolerance and investment goals.