New Prospectus Exemption for Canadian Listed Issuers

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On March 13, 2014, the securities regulatory authorities in British Columbia, Alberta, Saskatchewan, Manitoba, Québec, New Brunswick, Nova Scotia, Yukon, Northwest Territories, Nunavut and Prince Edward Island adopted a prospectus exemption that will allow issuers listed on the Toronto Stock Exchange (TSX), TSX Venture Exchange (TSX-V) and the Canadian Securities Exchange (CSE) to raise money by distributing securities to their existing security holders.

In order to acquire securities under the new exemption, an existing security holder must confirm in writing that they are a security holder of the issuer. This limits use of the exemption to investors that have already made an investment decision in the issuer. Other key conditions designed for investor protection include:

  • unless an investor has obtained advice regarding the suitability of the investment from a registered investment dealer, the aggregate amount invested by the investor in any one issuer in the last 12 months under the exemption must not be more than $15,000, and
  • the investor will have rights of action in the event of a misrepresentation in the issuer’s continuous disclosure record.

Prior to the adoption of this exemption, retail security holders who wanted to make an additional investment in an issuer they had already invested in usually had to buy the securities on the secondary market at the market price and pay brokerage fees. This meant that issuers did not have access to their existing shareholders as an additional source of capital.

The Ontario Securities Commission announced on December 4, 2013 that it would publish for comment four new capital raising prospectus exemptions in the first quarter of 2014, including a proposed prospectus exemption for distributions to existing security holders. It intends to publish the proposed prospectus exemptions on or around March 20, 2014.

If you have questions about the new prospectus exemption, contact any member of Clark Wilson’s Corporate Finance & Securities Group.