On November 21, 2013, Canadian securities regulators in all
jurisdictions but Ontario and Newfoundland and Labrador published
for comment a proposed prospectus exemption for issuers listed on
the TSX Venture Exchange (TSXV issuers) that would, subject to
certain conditions, allow them to obtain additional financing by
distributing securities to their existing security holders.
TSXV issuers generally do not use prospectus offerings or
prospectus exemptions to sell to retail investors due to the costs
involved in preparing the required offering document and instead
typically raise funds through offerings to "accredited
investors". As a result, when acquiring securities of TSXV
issuers, retail investors are often required to purchase the shares
on the TSXV and pay associated brokerage fees, without receiving
any "sweetener" such as warrants or a discount to the
market price typically available in private placements to
"accredited investors". The proposed exemptions would
increase the opportunity for retail investors to participate in
offerings by TSXV issuers and lower the cost of such offerings.
The proposed exemption will not require a TSXV issuer to provide
additional continuous disclosure, such as an annual information
form, to take advantage of the proposed exemption.
Securities distributed under the proposed exemption would have
to meet certain conditions, including:
the issuer must have filed all continuous disclosure documents
the offering can consist only of the class of equity securities
listed on the TSXV or units consisting of the listed security and a
warrant to acquire the listed security;
the issuer must issue a news release disclosing the proposed
offering, including details of the use of proceeds;
each investor must confirm in writing to the issuer that as at
the "record date" (which will be a date prior to the date
of the announcement of the offering) the investor held the type of
listed security that the investor is acquiring under the proposed
unless the investor has obtained advice regarding the
suitability of the investment from a registered investment dealer,
the aggregate amount invested by the investor in the last 12 months
under the proposed exemption is not more than $15,000; and
an investor must be provided with certain rights of action in
the event of a misrepresentation in the issuer's continuous
The first trade of a security acquired under the proposed
exemption will be subject to a four-month restricted period.
The comment period for the proposed exemption closes on January
20, 2014. Bennett Jones is able to assist clients in submitting
their comments on the proposed exemption. Please contact us if you
would like further information or if you would like us to submit a
comment on your behalf.
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.
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