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
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
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
the investor will have rights of action in the event of a
misrepresentation in the issuer's continuous disclosure
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.
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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