Bank of Nova Scotia Issues $7.07 Million Auto-Callable Securities Tied to South Korea ETF

Structured Security Offering Targets Experienced Investors

The Bank of Nova Scotia disclosed a pricing supplement for $7.07 million in contingent income auto-callable securities issued under its Senior Note Program, Series A. The announcement, dated July 20, 2026, represents a structured investment product designed for investors with sophisticated understanding of equity-linked instruments and willingness to accept substantial capital risk. Each security carries a stated principal amount of $1,000 and was offered at par, with a minimum investment requirement of $1,000 per investor. The original issue date occurred on July 23, 2026, representing a three-business-day settlement period from the pricing date.

This offering underscores the continued demand among institutional and high-net-worth investors for non-traditional fixed income products that provide above-market coupon opportunities in exchange for principal exposure and equity performance linkage. The Bank of Nova Scotia structured these securities as senior unsecured debt obligations, meaning investors bear full credit risk of the issuer alongside the performance risk of the underlying reference asset.

Performance-Contingent Coupon Mechanism and Payment Structure

The securities feature a contingent semi-annual coupon of $116.75 per security, equivalent to 23.35% per annum on the stated principal amount, payable only if specific performance thresholds are met. The coupon threshold price is established at 60% of the initial share price of the iShares MSCI South Korea ETF (Bloomberg Ticker: EWY UP). On each of six scheduled determination dates—January 20, 2027, July 20, 2027, January 20, 2028, July 20, 2028, January 22, 2029, and July 20, 2029—BNS will assess whether the closing price of the underlying shares meets or exceeds this 60% threshold. If the condition is satisfied, a contingent coupon payment is due on the corresponding contingent coupon payment date.

The disclosure indicates a memory coupon feature that allows unpaid coupons to accumulate and be redeemed on subsequent payment dates if performance conditions are eventually satisfied. Specifically, if the coupon threshold is not met on a determination date, that missed coupon does not expire but rather becomes eligible for payment on any future contingent coupon payment date on which the underlying price meets the threshold. However, the filing emphasizes that if the underlying share price remains below the coupon threshold price on all six determination dates throughout the security's term, investors will receive no contingent coupons and no positive return on their investment, representing a complete loss of income despite retaining nominal principal if the final price remains above the downside threshold.

Automatic Early Redemption Triggered by Price Performance

The securities incorporate an automatic early redemption feature that activates if the closing price of the underlying shares reaches or exceeds the call threshold price on any determination date other than the final determination date. The announcement does not explicitly state the numerical call threshold price value in the excerpted disclosure, but indicates that when this condition is met, the securities will be automatically redeemed on the first contingent coupon payment date following the relevant determination date. Upon early redemption, investors receive the stated principal amount plus the contingent semi-annual coupon otherwise payable on that date, along with any previously unpaid contingent coupons accrued under the memory coupon feature.

This early redemption mechanism effectively caps upside participation for investors. The disclosure states explicitly that "investors will not participate in any appreciation of the underlying shares and will not realize a return beyond the returns represented by the contingent semi-annual coupons received, if any, during the term of the securities." Once early redemption occurs, no further payments are made on the securities, regardless of subsequent performance of the underlying ETF.

Downside Risk and Principal Repayment at Maturity

The filing establishes a downside threshold price at 50% of the initial share price. At maturity on July 25, 2029, if the final closing price of the iShares MSCI South Korea ETF remains at or above this 50% downside threshold, investors receive the stated principal amount of $1,000 plus any contingent semi-annual coupons earned and unpaid. However, if the final share price declines below 50% of the initial price, the maturity payment is reduced by the share performance factor, calculated as the final share price divided by the initial share price. The disclosure explicitly states that in this adverse scenario, "the payment at maturity will be less than 50.00% of the stated principal amount and could be as low as zero," meaning investors face potential total loss of principal.

The announcement emphasizes this capital-at-risk nature throughout, warning that "the securities do not guarantee any return of principal at maturity" and that investors "must be willing to accept the risk of not receiving any contingent semi-annual coupons during the term of the securities." This represents a fundamental structural characteristic distinguishing these instruments from traditional bonds or notes, where principal repayment is typically guaranteed by the issuer. Here, principal repayment depends directly on the performance of an international equity fund tracking South Korean equities, introducing currency, equity market, country-specific, and issuer credit risks simultaneously.

Underlying Reference Asset and Term Structure

The securities are linked to the iShares MSCI South Korea ETF, a fund that provides exposure to South Korean equity markets. By tying the instrument's financial terms to this specific fund, BNS has created structured products offering synthetic exposure to South Korean equities without direct ownership. The three-year term, running from July 23, 2026, through July 25, 2029, provides six semi-annual determination and coupon payment dates, allowing multiple opportunities for coupon accrual or early redemption. The determination dates are subject to postponement for non-trading days and certain market disruption events, as referenced in the accompanying product supplement and general terms documentation.

Investors considering these securities should evaluate the specific drivers of South Korean equity performance, currency exchange rate fluctuations between the U.S. dollar and South Korean won, and the ongoing macroeconomic conditions in South Korea, as these factors directly influence whether determination dates will trigger coupon payments, early redemption, or result in reduced principal repayment. The disclosure suggests that investors must independently assess the likelihood that the underlying ETF will remain above the 60% coupon threshold on sufficient determination dates to generate meaningful income returns.

Issuer Credit Risk and Senior Unsecured Status

The securities are issued by The Bank of Nova Scotia as senior unsecured debt obligations under its Senior Note Program, Series A. The announcement clearly states that "all payments on the securities are subject to the credit risk of BNS" and warns that "if BNS were to default on its payment obligations, you may not receive any amounts owed to you under the securities and you could lose your entire investment in the securities." This credit risk operates independently and cumulatively with the performance risk of the underlying South Korean ETF. Even if the ETF performs favorably and performance conditions are met, investors remain exposed to counterparty risk from the Bank of Nova Scotia.

The securities do not carry collateral backing or security interest in any asset, making them structurally subordinate to secured obligations. Investors relying on coupon income or principal repayment depend entirely on BNS's ongoing financial stability and willingness to meet its obligations. This dual-risk structure—combining issuer credit risk with equity performance risk—creates a complex risk profile that may not be suitable for all investors, particularly those with limited risk tolerance or those seeking investments with full principal guarantee.

Settlement Mechanics and Secondary Market Trading

The announcement discloses that the original issue date was July 23, 2026, which represents a T+3 (three business day) settlement period following the July 20, 2026, pricing date. The filing notes that under Rule 15c6-1 of the Securities Exchange Act of 1934, secondary market trades typically settle in T+1 (one business day), unless parties agree otherwise. Consequently, purchasers intending to trade these securities in the secondary market before one business day prior to final delivery will need to arrange alternative settlement instructions to prevent failed trades due to the initial three-day settlement timing mismatch.

This settlement structure may create liquidity management challenges for investors who require rapid access to their capital or who wish to execute secondary market trades shortly after purchase. The filing does not disclose the existence or terms of any secondary market, liquidity provider commitments, or bid-ask spreads, meaning investors should not assume efficient secondary trading is available for these securities if they need to exit their positions prior to maturity or early redemption.

Commissions and Pricing Information

The disclosure states that the issue price was $1,000 per security, matching the stated principal amount. While the announcement references "Commissions and issue price" in a section header, the specific commission amount and breakdown between commissions and net proceeds to BNS are not provided in the excerpted pricing supplement content. Investors should review the complete prospectus and pricing supplement for detailed compensation information regarding any underwriting commissions, selling concessions, or other costs embedded in the pricing.

The aggregate principal amount issued totals $7.07 million, with a minimum investment of $1,000 per investor (one security). The filing does not disclose the number of individual investors who purchased these securities, the distribution channel used, or institutional allocations if applicable.

Memory Coupon Feature and Deferred Payment Mechanics

The memory coupon feature represents a key structural element designed to provide investors with income opportunities even if initial determination dates result in missed coupon payments. Under this mechanism, if the underlying share price falls below the 60% coupon threshold on any determination date other than maturity, the associated $116.75 coupon does not expire but remains payable on the next determination date on which the threshold is satisfied. This creates the potential for coupon payment clustering if performance improves after initial periods of underperformance.

However, the memory coupon feature does not alter the fundamental binary nature of coupon determination—either the price reaches the threshold or it does not on each date. The feature simply defers payment rather than eliminating it. The announcement cautions that "if the closing price of the underlying shares on each of the determination dates is less than the coupon threshold price, you will receive no contingent semi-annual coupons during the term of, and will not receive a positive return on, the securities." This scenario, while potentially unlikely given a 60% threshold across a three-year period, illustrates the maximum adverse outcome in which investors receive neither coupon income nor appreciation upside.

Regulatory Framework and Product Documentation References

The pricing supplement was filed pursuant to Rule 424(b)(2) under the Securities Act of 1933, dated July 20, 2026, and relates to Registration Statement No. 333-282565. The announcement references accompanying documentation including a prospectus dated November 8, 2024, a prospectus supplement dated November 8, 2024, and a product supplement dated November 8, 2024. These materials provide comprehensive definitions and terms governing valuation dates, market disruption events, maturity date adjustments, and coupon payment mechanics not fully detailed in the pricing supplement excerpt.

Investors should review all referenced prospectus materials, including general terms of the notes and product-specific supplement materials, to fully understand contingencies such as market disruption event postponement provisions and any adjustments to determination or payment dates. The Bank of Nova Scotia's complete disclosure package provides the authoritative source for all material terms, conditions, and risk factors associated with these securities.