In a move that could benefit many junior issuers on the TSX
Venture Exchange (TSX-V), Canadian securities regulators in all
jurisdictions except Ontario and Newfoundland and Labrador
published for comment a draft prospectus exemption for existing
security holders (Multilateral CSA Notice 45-312). The proposed
prospectus exemption would provide TSX-V issuers a more efficient
avenue to offer securities to existing security holders.
Currently, issuers offering securities to retail investors
(those not considered "accredited investors") are limited
to using a prospectus or an exemption requiring a disclosure
document. As TSX-V issuers are also held to continuous disclosure
obligations, regulators recognize that duplicative disclosure under
current exemptions may cause issuers to incur unnecessary and
prohibitive costs. Retail investors are in turn limited to
purchasing additional securities on the secondary market, where
market prices and brokerage fees may reduce their incentive to
In the interest of market growth, the proposed exemption will
allow TSX-V issuers to raise capital through direct issues to
existing security holders, subject to the following conditions:
i. the issuer has a class of securities listed on
ii. the issuer has filed all required timely and
periodic disclosure documents;
iii. the offering consists only of the class of securities
listed on the TSX-V or units consisting of the listed security and
a warrant to acquire the listed security;
iv. the issuer issues a news release disclosing the
proposed offering, including details of the use of the proceeds;
v. each investor confirms in writing to the issuer that,
as at the record date, the investor held the type of listed
security that the investor is acquiring under the exemption.
Each investor would be limited to investing a maximum of $15,000
in a 12 month period under the exemption, unless the investor
obtains suitability advice from a registered investment dealer.
Additionally, issuers must provide investors with rights of action
in the event the issuer makes a misrepresentation in its continuous
disclosure, or in an offering document it may voluntarily provide.
Further, securities issued under the proposed exemption will be
subject to a four month resale restriction and issuers will be
required to file a report of exempt distribution within ten days
after each distribution under the exemption. Finally, issuers must
represent to prospective purchasers in a subscription agreement
that there are no material facts or material changes that have not
This proposed exemption has the potential to assist many junior
venture issuers to raise additional capital more efficiently with
lower upfront costs. Additionally, it provides active investors an
attractive avenue to acquire further securities. The regulators
invite and encourage written comments on the proposal until January
20, 2014. For more information, please see the Multilateral CSA Proposed Prospectus Exemption
45-312, the parallel BCI Proposed Exemption 45-5XX.
The foregoing provides only an overview. Readers are
cautioned against making any decisions based on this material
alone. Rather, a qualified lawyer should be consulted.
The Canadian Office of the Superintendent of Financial Institutions ("OSFI") recently ruled that a bank cannot promote comprehensive credit insurance ("CCI") within its Canadian branches under the Insurance Business (Banks and Bank Holdings Companies) Regulations (the "Regulations").
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