The Bank of Nova Scotia has issued $33.659 million in Contingent Income Auto-Callable Securities maturing in July 2028, offering investors the opportunity to earn quarterly coupons based on the performance of the Nasdaq-100, Russell 2000, and S&P 500 indices. The structured notes, priced on July 17, 2026, feature a contingent quarterly coupon of $26.15 per security (equivalent to 10.46% annually) if all three underlying indices remain above 70% of their initial values on determination dates. However, the securities expose investors to principal risk, with payments based on the worst-performing index, and investors could lose their entire investment if any index declines significantly.

Key Points

  • NYSE: BNS
  • Bank of Nova Scotia issued $33.659 million in auto-callable structured notes with a maturity date of July 20, 2028
  • Pricing date: July 17, 2026; original issue date: July 22, 2026; stated principal amount: $1,000 per security
  • Contingent quarterly coupon of $26.15 per security (10.46% annually) payable if all underlying indices remain at or above 70% of their initial values on determination dates
  • Securities automatically redeem early if all three indices close at or above 100% of initial values on any determination date prior to maturity
  • Payment at maturity depends on worst-performing index; investors exposed to full downside decline if any index falls below 70% of its initial value

Structure and Coupon Mechanics of the Auto-Callable Securities

The Bank of Nova Scotia's structured notes are designed as contingent income securities that provide investors with the potential to receive quarterly coupon payments contingent on the performance of three underlying equity indices. The securities offer a quarterly coupon payment of $26.15 per security, which equates to 10.46% per annum of the $1,000 stated principal amount. For investors to receive the contingent coupon on any determination date, the index closing values of all three underlying indices must be greater than or equal to their respective coupon threshold levels, which are set at 70% of their initial values as measured on the pricing date.

The determination dates for coupon assessment are scheduled for eight dates throughout the two-year period: October 19, 2026, January 19, 2027, April 19, 2027, July 19, 2027, October 18, 2027, January 18, 2028, April 17, 2028, and July 17, 2028, with corresponding coupon payment dates occurring approximately three business days after each determination date. The contingent nature of these payments means that if any single underlying index falls below its coupon threshold level on a determination date, no coupon will be paid for that period, creating a scenario where investors may receive no interest income over the entire two-year term if market conditions are unfavorable.

Auto-Call Feature and Early Redemption Provisions

A distinctive feature of these structured notes is the auto-callable provision, which provides for automatic early redemption if market conditions satisfy specified criteria. If on any determination date prior to the final determination date, all three underlying indices close at or above their respective call threshold levels—each set at 100% of the initial index value—the securities will be automatically redeemed early. Upon early redemption, each security holder receives a payment equal to the stated principal amount of $1,000 plus the contingent quarterly coupon otherwise payable for that determination date.

The auto-call mechanism effectively caps the potential return for investors, as the securities will not participate in any gains beyond the contingent coupons received prior to redemption. This structure benefits issuers in rising or stable market environments by allowing them to retire the securities early while limiting upside exposure for investors. However, if the index closing value of any underlying index falls below its respective call threshold level on a determination date, the auto-call provision does not trigger, and the securities continue through their remaining term or until the next potential auto-call date.

Principal Risk and Downside Exposure Structure

The Bank of Nova Scotia's disclosure emphasizes that these are principal-at-risk securities with no guaranteed return of the initial investment. The payment structure at maturity depends critically on whether any of the three underlying indices has declined below the downside threshold level of 70% of its initial index value. If all three indices remain at or above their downside thresholds at maturity, investors receive their full stated principal amount of $1,000 plus any final contingent coupon payment. However, if any single underlying index falls below 70% of its initial value, the maturity payment is significantly reduced.

In scenarios where any underlying index declines below the 70% downside threshold, the payment at maturity consists of the stated principal amount plus the stated principal amount multiplied by the underlying return of the worst-performing index. This structure creates a one-to-one decline exposure to the weakest-performing index, meaning investors bear the full downside of whichever of the three indices experiences the steepest decline. The calculation methodology ensures that if the worst-performing index has fallen 40% from its initial level, investors would receive only 60% of their original principal investment, representing a substantial loss.

Underlying Indices and Initial Reference Values

The securities track three major U.S. equity market indices, each with initial values established on the pricing date of July 17, 2026. The Nasdaq-100 Index, tracked under Bloomberg ticker NDX, had an initial index value of 28,592.66; the Russell 2000 Index, tracked under Bloomberg ticker RTY, had an initial value of 2,962.217; and the S&P 500 Index, tracked under Bloomberg ticker SPX, had an initial value of 7,457.69. These indices represent different segments of the U.S. equity market, with the Nasdaq-100 reflecting large-cap technology and growth stocks, the Russell 2000 representing small-cap stocks, and the S&P 500 covering large-cap stocks broadly across sectors.

The worst-performing index methodology means that the securities' value is determined by the index with the lowest underlying return, calculated as (final index value minus initial index value) divided by initial index value. This structure creates asymmetric risk, as a significant decline in any single index directly impacts all security holders, even if the other two indices remain stable or appreciate. The choice of three indices with different market capitalizations and composition introduces diversified exposure but also concentrates risk on the single weakest performer.

Issue Terms and Settlement Procedures

The Bank of Nova Scotia issued these structured notes as part of its Senior Note Program, Series A, with an aggregate principal amount of $33.659 million. The issue price was set at $1,000 per security on the pricing date of July 17, 2026, with an original issue date of July 22, 2026—three business days after pricing. This three-business-day settlement period creates implications for secondary market trading, as trades in the secondary market generally settle in one business day under Securities Exchange Act Rule 15c6-1.

Investors seeking to trade the securities in the secondary market before one business day prior to delivery must specify alternative settlement arrangements to prevent settlement failures. The minimum investment required is $1,000, equivalent to one security. The maturity date is scheduled for July 20, 2028, subject to postponement for certain market disruption events as outlined in the accompanying product supplement documentation.

Threshold Levels and Valuation Framework

The securities employ multiple threshold levels that determine coupon payments, early redemption, and final maturity payments. For each underlying index, the coupon threshold level is set at 70% of the initial index value: 20,014.862 for the Nasdaq-100, 2,073.5519 for the Russell 2000, and 5,220.383 for the S&P 500. These coupon threshold levels represent the barrier below which contingent coupon payments are forfeited. The call threshold levels are set at 100% of each index's initial value, requiring all indices to remain above these levels to trigger the auto-call feature.

The downside threshold levels are identical to the coupon threshold levels at 70% of initial values for each index. The framework means that if an index declines from 100% to between 70% and 100% of its initial value, investors forfeit coupon payments but retain principal protection. However, declines below 70% result in both forfeited coupons and principal erosion. This tiered structure creates distinct investor outcomes depending on the magnitude and breadth of market declines across the three tracked indices.

Credit Risk and Issuer Obligations

All payments on these structured securities are subject to the credit risk of The Bank of Nova Scotia, a major Canadian financial institution. The securities are senior unsecured debt obligations, meaning they are not backed by collateral and do not grant investors any security interest in underlying assets. In the event BNS defaults on its payment obligations, investors may not receive any amounts owed and could lose their entire investment, regardless of the performance of the underlying indices.

The disclosure specifies that these securities represent direct obligations of BNS and are not linked to any underlying reference asset beyond the index performance metrics used for coupon and payment calculations. This structure means investors assume both market risk through the underlying indices and credit risk associated with BNS's ability to meet its payment obligations. The unsecured nature distinguishes these securities from collateralized investment products and elevates the importance of monitoring BNS's financial health and credit ratings throughout the two-year term.

Investor Considerations and Return Limitations

The Bank of Nova Scotia emphasizes in its disclosure that these securities are designed for investors willing to accept the risk of receiving no contingent income over the entire two-year term. The contingent coupon mechanism creates a scenario where quarterly coupon payments are entirely discretionary based on index performance, and investors must be comfortable with the possibility of earning zero interest income if any underlying index declines below the coupon threshold level on any determination date. Additionally, investors will not participate in any gains of the underlying indices, as the securities do not provide for upside participation beyond the contingent coupons.

The return profile is capped at the level of contingent quarterly coupons received, with early redemption occurring at principal plus final coupon if the auto-call feature is triggered. However, if the worst-performing index declines significantly, the maturity payment could be substantially below the original principal investment. The disclosure notes that investors could lose a significant portion or potentially their entire investment if the worst-performing index declines more than 30% from its initial level, as this would push the index below the 70% downside threshold.

Market Disruption and Determination Date Adjustments

The Bank of Nova Scotia's product supplement documentation, incorporated by reference in the pricing update, includes provisions for postponement of determination dates and valuation dates in certain market disruption events. The disclosure indicates that determination dates may be postponed for non-trading days, ensuring valuations occur only when markets are functioning normally. These provisions protect both investors and the issuer from situations where index values cannot be reliably determined due to market closures or significant disruptions.

Similarly, contingent coupon payment dates may be postponed for non-business days, ensuring payments are made on actual business days when settlement infrastructure is operational. The maturity date is also subject to potential postponement for market disruption events, though the filing does not specify the precise definitions of market disruption qualifying for postponement. Investors relying on specific payment dates should review the complete product supplement documentation for detailed provisions regarding postponement scenarios and their implications for the overall return profile.

Prior Registration and Legal Framework

The securities are offered pursuant to a registration statement (Registration Statement No. 333-282565) with the Securities and Exchange Commission, filed under the prospectus dated November 8, 2024, prospectus supplement dated November 8, 2024, underlier supplement dated November 8, 2024, and product supplement dated November 8, 2024. The July 2026 pricing update represents a Form 424B2 filing, which incorporates by reference all prior prospectus materials and supplements. This regulatory structure allows BNS to issue multiple securities under the same registration statement with pricing supplements specifying the terms for each distinct security offering.

The filing indicates that these particular securities are offered as part of BNS's continuing program for structured investments providing opportunities in U.S. and international equities. The comprehensive documentation framework ensures that all material terms, risks, and conditions are disclosed to investors before purchase, with the pricing supplement serving as the specific offering document for this $33.659 million issuance.