Bank of Nova Scotia Launches Trigger Autocallable Securities Linked to Russell 2000 Index

Structure and Automatic Call Mechanism of the New Securities

The Bank of Nova Scotia's Trigger Autocallable GEARS are senior unsecured debt securities designed to provide investors with exposure to the Russell 2000 Index while incorporating an automatic call feature that can terminate the investment early. According to the filing, BNS will automatically call the securities if the closing level of the underlying asset on the observation date equals or exceeds the autocall barrier, which is set at the initial level—the closing level of the Russell 2000 on the trade date. When an automatic call is triggered, investors receive a cash payment per security equal to the principal amount plus a call return based on the 12.00 percent call return rate, with no further payments owed after the call settlement date.

This automatic call feature represents a significant structural element that distinguishes these securities from conventional debt instruments. The filing emphasizes that if the securities are called, investors' exposure to the underlying asset ends immediately, limiting their participation in further gains but also providing a defined exit point. The observation date for the first potential automatic call is August 5, 2027, approximately one year after the expected settlement date. The securities are offered at a minimum investment of $1,000 or 100 securities at $10 per security, with integral multiples of $10 accepted thereafter.

Upside and Downside Payoff Scenarios at Maturity

If the securities are not subject to an automatic call, the amount investors receive at maturity depends on the direction and percentage change in the level of the Russell 2000 Index from the initial level to the final level on July 29, 2031. The filing discloses that if the underlying return is positive, the bank will pay investors a cash payment per security at maturity equal to the principal amount plus a percentage return equal to the underlying return multiplied by the upside gearing. The upside gearing is specified as ranging between 1.35 and 1.60, meaning positive returns are amplified by this multiplier—if the Russell 2000 rises 10 percent and the gearing is 1.50, investors would receive a 15 percent gain on their principal.

The downside protection in these securities operates on a conditional basis. If the underlying return is zero or negative and the final level on July 29, 2031 equals or exceeds the downside threshold of 75.00 percent of the initial level, the bank will pay investors a cash payment per security at maturity equal to the full principal amount. However, if the underlying return is negative and the final level falls below the downside threshold, investors will receive less than the principal amount, with their loss equal to the underlying return percentage. The filing explicitly warns that in extreme situations, investors could lose their entire investment in the securities.

Key Dates, Pricing, and Estimated Value

The preliminary pricing supplement establishes a clear timeline for the securities offering. The trade date is expected to be July 29, 2026, with the settlement date expected July 31, 2026. The filing notes that the bank expects to deliver the securities against payment on or about the second business day following the trade date. The first observation date for potential automatic call eligibility is August 5, 2027, while the final valuation date is July 29, 2031, with the maturity date set for July 31, 2031. These dates establish a total lifespan of approximately five years from settlement to maturity.

Regarding pricing, the filing discloses that the issue price to public is $10.00 per security, with an underwriting discount of $0.25 per security, resulting in proceeds to The Bank of Nova Scotia of $9.75 per security. The filing states that the initial estimated value of the securities at the time the terms are set on the trade date is expected to be between $9.32 and $9.62 per principal amount, which is less than the issue price to public. This distinction between estimated initial value and issue price is significant for investors considering the securities' immediate market positioning. The filing cautions that the actual value of the securities at any time will reflect many factors and cannot be predicted with accuracy.

Significant Risk Warnings and Credit Exposure

The Bank of Nova Scotia's filing contains extensive risk disclosures, prominently noting that the securities are significantly riskier than conventional debt instruments and that investors may lose a significant portion or all of their investment. The securities do not pay interest, meaning investors have no cash flow stream during the holding period unless the securities are called early. Any payment on the securities, including repayment of principal, is subject to the creditworthiness of The Bank of Nova Scotia itself. If the bank were to default on its payment obligations, investors may not receive any amounts owed and could lose their entire investment, creating a dual risk structure combining both market risk from the Russell 2000 Index performance and credit risk from the issuer.

The filing further warns that the contingent repayment of principal applies only if investors hold the securities to maturity, meaning early sale in secondary markets would not guarantee principal recovery. The securities will not be listed or displayed on any securities exchange or electronic communications network, limiting liquidity and exit options. The filing references additional detailed risk factors available in accompanying product supplements and prospectus documents, including sections titled "Key Risks," "Additional Risk Factors Specific to the Notes," and "Risk Factors," indicating that the complete risk profile extends beyond what is summarized in the preliminary pricing supplement itself.

Investment Suitability Guidance and Secondary Market Considerations

The filing emphasizes that investors should not purchase the securities if they do not understand or are not comfortable with the significant risks involved in the investment. The notice to investors specifically states that the securities are not necessarily obligated to be repaid at principal amount at maturity and may have the same downside market risk as the Russell 2000 Index itself. This market risk exists in addition to the credit risk inherent in purchasing a debt obligation of The Bank of Nova Scotia, creating a layered risk structure that distinguishes these instruments from both equity index investments and traditional bonds.

The filing addresses secondary market settlement procedures, noting that under Rule 15c6-1 of the Securities Exchange Act of 1934, trades in the secondary market generally are required to settle in one business day (T+1). However, because each security initially will settle in two business days (T+2), purchasers who wish to trade the securities in the secondary market on any date prior to one business day before delivery of the securities will be required to specify alternative settlement arrangements to prevent failed settlement of secondary market trades. This technical detail suggests the securities may experience liquidity constraints in early trading periods.

Underlying Asset Selection and Parameters

The Bank of Nova Scotia selected the Russell 2000 Index as the underlying asset for these securities, as identified by the Bloomberg ticker RTY. The Russell 2000 is a widely recognized index of small-cap U.S. equities, providing investors with exposure to approximately 2,000 of the smallest publicly traded American companies. The choice of this index as the underlying asset reflects the issuer's determination that this equity market segment offers appropriate characteristics for a structured product offering. The filing identifies the initial level as the closing level of the Russell 2000 on the trade date of July 29, 2026, though the specific numerical value of this level is not provided in the preliminary pricing supplement.

The filing establishes specific parameters governing the securities' behavior relative to the Russell 2000. The autocall barrier is set at 100.00 percent of the initial level, meaning the securities will be automatically called if the index closes at or above its starting level on any observation date. The upside gearing range of 1.35 to 1.60 indicates that the final gearing will be determined on the trade date. The downside threshold of 75.00 percent of the initial level establishes the point below which investors begin experiencing losses that exceed any protective principal repayment.

Registration and Regulatory Framework

The preliminary pricing supplement is filed pursuant to Rule 424(b)(2) and relates to Registration Statement No. 333-282565, establishing this offering within the bank's existing securities registration framework. The filing references accompanying documents including a prospectus dated November 8, 2024, prospectus supplement dated November 8, 2024, underlier supplement dated November 8, 2024, and product supplement dated November 8, 2024. These documents collectively constitute the offering documents, which must be delivered in final form to complete the offering. The preliminary nature of the pricing supplement indicates that final terms remain subject to completion and market conditions.

The filing includes explicit disclaimers regarding regulatory approval, stating that neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon the adequacy or accuracy of the documentation. The filing further clarifies that the securities are not insured by the Canada Deposit Insurance Corporation, the U.S. Federal Deposit Insurance Corporation, or any other government agency in Canada, the U.S., or any other jurisdiction. Additionally, the securities are not bail-inable debt securities under the Canada Deposit Insurance Corporation Act, eliminating any potential government-backed recovery mechanisms for investors.

Issuer Identity and Underwriting Arrangements

The Bank of Nova Scotia, identified as BNS in the filing and referred to as "the issuer," is the entity issuing these senior unsecured debt securities. The filing discloses that Scotia Capital (USA) Inc., identified as an affiliate of The Bank of Nova Scotia, will purchase the securities at an unspecified price. This underwriting arrangement suggests that the securities will be underwritten through the issuer's own subsidiary, creating an integrated sales and distribution structure. The specific underwriting discount of $0.25 per security is disclosed, with the difference between the public issue price of $10.00 per security and the bank's proceeds of $9.75 per security representing compensation for underwriting and distribution services.

The issuer's decision to issue securities linked to the Russell 2000 Index reflects The Bank of Nova Scotia's strategy of offering structured products to investors seeking specific risk-return profiles. These securities allow the bank to issue debt while transferring index performance exposure to investors. The use of an automatic call feature provides the issuer with the ability to terminate its obligations if the underlying index appreciates to its initial level or higher, reducing the issuer's long-term exposure to potentially amplified upside gains through the gearing mechanism.

Estimated Value, Liquidity Concerns, and Secondary Market Trading

The filing states that the initial estimated value of the securities at the time the terms are set on the trade date is expected to be between $9.32 and $9.62 per principal amount, compared to the $10.00 per security issue price to public. This spread of $0.38 to $0.68 per security represents an immediate embedded cost for investors, reflecting the underwriting discount, structuring costs, and the estimated initial market value of the embedded options comprising the securities. The filing notes that this estimated initial value is based on certain assumptions and valuation models, but also cautions that the actual value will reflect many factors and cannot be predicted with accuracy.

The filing emphasizes that the securities will not be listed or displayed on any securities exchange or electronic communications network, creating significant liquidity constraints. Investors seeking to sell the securities prior to maturity would need to arrange transactions in an over-the-counter market with limited pricing transparency and liquidity. The filing further warns under "Key Risks — Risks Relating to Estimated Value and Liquidity" that the estimated initial value does not represent the price at which investors can sell the securities, particularly in early periods after issuance. This illiquidity premium is an important consideration for investors evaluating the true cost of holding these securities.