Canada: Toronto Stock Exchange And TSX Venture Exchange Release Consultation Paper On Emerging Market Issuers

Last Updated: February 20 2013
Article by Alexander Lalka

On December 17, 2012, the Toronto Stock Exchange (the "TSX") and the TSX Venture Exchange (the "TSXV" and together with the TSX, the "Exchanges") released a joint consultation paper in connection with the review of the listing requirements applicable to emerging market issuers (the "Consultation Paper"). The Consultation Paper is a response to the Ontario Securities Commission's Emerging Markets Issuer Review (Staff Notice 51-719) which raised concerns with the listing approval process for emerging market issuers.

The Consultation Paper defines emerging market issuers as those with a significant connection to an emerging market jurisdiction, being any jurisdiction outside of Canada, the United States, Western Europe, Australia and New Zealand. The Consultation Paper has a significant impact on the exploration and mining industry given the large and growing number of projects located in emerging markets. The purpose of the Consultation Paper is to (i) identify the risks with emerging market issuers, (ii) present potential new listing requirements for emerging market issuers and (iii) solicit comments from market participants on matters relating to emerging market issuers including the proposed new listing requirements. The Consultation Paper and the trend towards stronger listing requirements for emerging market issuers will lead to better safeguards and greater transparency for investors which should help prevent cases such as Bre-X and Sino-Forest in the future.

Risks Associated with Emerging Market Issuers

Given the recent trend towards globalization and the increased focus on new and emerging markets (especially in China, Africa and South America), the Exchanges have outlined certain risks that may disproportionally affect emerging market issuers. These risks were identified through a review of emerging market issuers which included consultations with market participants such as the Canadian Securities Administrators, the Canadian Public Accounting Board and the Investment Industry Regulatory Organization of Canada. The Consultation Paper provides that emerging market issuers may have members of management with limited knowledge of Canadian securities law requirements and stock exchange policies which may indicate an increased risk of insufficient corporate governance standards and inadequate compliance with continuous and timely disclosure obligations. It also provides that the management, board and committees of emerging market issuers may face difficulties in carrying out their duties in cases where they are not all able to communicate in a common language. Further, the Consultation Paper describes how an emerging market issuer may carry increased risk relating to proper financial reporting and internal controls given differences in business practices and banking systems and considering the possible lack of expertise of its auditors, chief financial officer and audit committee members. Finally, the Consultation Paper notes that emerging market issuers have a higher risk in demonstrating title to its key assets and the ability to validly operate its business due to specific requirements placed on foreign companies operating in emerging markets. Title issues can become even more complicated if a foreign jurisdiction requires the issuer to hold its assets indirectly through a foreign-domiciled entity by way of a contractual arrangement or otherwise. These non-conventional corporate structures can invite risks to ownership of the issuer's assets, depending on the laws and political climate in the particular jurisdiction.

Questions for Public Consultation from the TSX

The TSX plans to use this consultation process in order to determine the necessity to strengthen its listing requirements for emerging market issuers so that the risks relating to these issuers can be mitigated in the future. The Consultation Paper focuses on the following principal areas for public comment and consideration as they relate to an emerging market issuer applying for listing on the TSX:

  • What factors should be used to determine what constitutes an "emerging market issuer"?
  • Should there be a minimum level of knowledge and experience required of management (in particular the chief financial officer), the board and audit committee members with respect to the emerging market jurisdiction?
  • Should there be a minimum level of knowledge and experience required of the auditors with respect to the emerging market jurisdiction?
  • Should the Exchanges require additional comfort from management and/or auditors with respect to the emerging market issuer's internal controls?
  • Should there be an expanded view of "related party transactions"?
  • Should emerging market issuers with non-conventional corporate structures be denied listing or undergo additional scrutiny such as a legal opinion to support the validity of the corporate structure?
  • Should sponsorship be required in all cases, whether or not the emerging market issuer is eligible for an exemption from sponsorship?

Proposed TSXV Appendix 2B – Listing of Emerging Market Issuers

The TSXV has included in the Consultation Paper a draft policy titled Appendix 2B – Listing of Emerging Market Issuers ("Appendix 2B") which outlines new listing requirements for emerging market issuers. It defines an "emerging market issuer" as one with its principal business operations or operating assets located in an emerging market jurisdiction. Certain exemptions from the proposed requirements in Appendix 2B are available for a mining and oil and gas issuer whose majority of senior officers or board members have not been resident in an emerging market jurisdiction for the majority of the past 10 years prior to the listing application. The TSXV has asked for comment from market participants on Appendix 2B and has also posed questions relating to its proposed new listing policy. If implemented, Appendix 2B would impact all new listings on the TSXV, however, the TSXV may (and likely would) also apply these new listing requirements to any transaction that will result in a listed issuer becoming an emerging market issuer, such as in the case of a reverse-takeover or qualifying transaction. Appendix 2B includes the following key new requirements for emerging market issuers applying for listing on the TSXV:

  • The proposed chief executive officer and chief financial officer and collectively, the board, must have Canadian public company knowledge/experience.
  • In the event that some or all of the issuer's senior officers and board members are not fluent in either English or French and the primary language of the relevant emerging market jurisdiction, the issuer must show how the language barrier will be overcome. The TSXV may require that the issuer develop a formal communication plan.
  • The TSXV will require enhanced requirements for the proposed chief financial officer, such as (i) a strong understanding of the business environment in the emerging market jurisdiction and (ii) the ability to design and apply effective internal controls over financial reporting relating to all transactions in the emerging market jurisdiction. Further, the issuer will be required to confirm the frequency with which the proposed chief financial officer will travel to the emerging market jurisdiction to fully discharge his or her duties. These requirements will be enforced at the time of listing and on an on-going basis.
  • Every member of the audit committee must be independent and at least one member must have (i) Canadian financial reporting skills and (ii) experience with audit engagements for public companies. Currently, the TSXV requires that only a majority of audit committee members be independent.
  • The TSXV will require the issuer to adopt a written policy specific to "Related Party Transactions" and transactions with non-arms length parties that addresses independent director approval procedures and compliance with securities law and regulatory requirements.
  • Auditors for the issuer must be pre-cleared by the TSXV and must demonstrate sufficient expertise in the emerging market jurisdiction. This also applies to any change of auditors that may occur post-listing.
  • Auditors are required to perform reviews of the issuer's interim financial statements for each interim period in the two years following listing.
  • The issuer's internal controls must be reviewed and evaluated by its auditors prior to listing and the issuer must confirm in writing that its internal controls are sufficient for its financial reporting. For the first two fiscal years after listing, the issuer will be required to file the full chief executive officer and chief financial officer certifications under National Instrument 52-109 – Certification of Disclosure in Issuer's Annual and Interim Filings which includes disclosure relating to internal controls. Generally, these requirements will not be applicable to emerging market issuers whose business operations are not revenue generating.
  • The issuer will need to justify any non-conventional corporate structure, and the TSXV may require a legal opinion on its validity. The TSXV may deny listing if it considers that the issuer's corporate structure is unnecessary.
  • A legal opinion will generally be required to confirm title of principal assets and properties and that the issuer holds the required permits, licences and other approvals to carry out its operations in the emerging market jurisdiction. A corporate opinion will generally be required to confirm the issuer's ownership of any direct or indirect affiliated entities which own the principal assets and properties.
  • General exemptions from sponsorship will not be available in cases where the issuer is effecting an initial public offering or a brokered financing. The TSXV will require an enhanced sponsor report addressing listing matters specific to emerging market issuers.


The release of the Consultation Paper signals a major shift in listing requirements for emerging market issuers. It is important to note that the TSXV has already begun imposing some of the requirements set out in Appendix 2B and it is a matter of time until the Exchanges formally implement new and more onerous listing requirements for emerging market issuers. It is important for those involved in the potential listing of an emerging market issuer to contact their legal advisors for guidance on the significance and applicability of the proposed listing requirements provided in the Consultation Paper.

A copy of the Consultation Paper containing the full list of questions posed by the Exchanges to market participants including the proposed Appendix 2B can be found on the Exchanges' website. The Exchanges have requested submission of comments from market participants by February 28, 2013.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Events from this Firm
7 Nov 2019, Seminar, Birmingham, UK

Providing content specifically tailored to the needs of GCs and Heads of Legal working in government organisations and their affiliates.

14 Nov 2019, Seminar, London, UK

Providing content specifically tailored to the needs of GCs and Heads of Legal working in government organisations and their affiliates.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions