Many TSX Venture Exchange listed issuers and numerous private companies looking to go public have used “finders” to help them raise capital. These finders are most often not registered brokers or exempt market dealers, and are paid a finder’s fee for locating and introducing participants in private placements conducted by the issuer.
For the past three years, since the advent of Canadian Securities Administrators’ National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations (“NI 31-103″), which governs anyone who trades or advises in securities in Canada, unregistered finders were still able to be paid a finder’s fee through an exemption from registration requirements in NI 31-103 called the “Northwest Exemption”, adopted by the western provinces and the northern territories. If certain conditions were met, an unregistered person could be paid a fee for assisting in the raising of capital.
On January 3, 2013, the BCSC proposed that the Northwest Exemption be eliminated and provided for a comment period of 30 days. The BCSC states that the effect on capital raising will be negligible and that most unregistered persons did not comply with the conditions of the Northwest Exemption. See the BCSC proposal at: http://www.bcsc.bc.ca/policy.aspx?id=16292&cat=BC%20Notices.
If implemented, this will end the ability of an issuer in British Columbia to pay any person a finder’s fee for assisting in capital raising unless that person is registered under NI 31-103 as a broker or an exempt market dealer. Issuers will only be able to raise funds directly, without a finder, or by using a registered broker or exempt market dealer.
Comments on how this change may affect your business should be addressed to:
Manager, Legal Services
Capital Markets Regulation
British Columbia Securities Commission
P.O. Box 10142, Pacific Centre
701 West Georgia Street
Vancouver, British Columbia V7Y 1L2
If you have questions about the Northwest Exemption or NI 31-103, contact any member of Clark Wilson LLP’s Corporate Finance & Securities Law Group.