Canada: 2018 Canadian Capital Markets Report: Looking Back, Looking Ahead

While global markets remained volatile in 2017, Canadian capital markets saw a resurgence of IPOs and the emergence of new industries such as cannabis and blockchain. Canadian regulators also kept busy in 2017 responding to shareholder complaints and investigating ways to reduce the regulatory burden for reporting issuers.

It is in this context that we are pleased to provide you with an overview of the trends and developments in the Canadian capital markets in 2017 and to share with you our views of their potential impact for 2018.

  • The $245-million investment by Constellation Brands, a NYSE-listed producer of beer, wine and spirits, in TSX-listed Canopy Growth in the fall of 2017 sparked interest across North America in the Canadian cannabis industry. Since the Constellation Brands investment, capital markets activity in the cannabis space has soared. In the first quarter of 2018 alone, over $1.4 billion of equity was raised by cannabis companies listed on Canadian stock exchanges. We discuss recent developments in the sector in The Cannabis Frenzy.
  • The year 2017 was one of tremendous growth for blockchain, as the technology underlying bitcoin gained attention from mainstream media outlets, financial institutions, investment funds and securities regulators across the globe. Blockchain's rise to prominence was led by an interest in blockchain-based token sales, commonly referred to as initial coin offerings, which raised almost US$4 billion in 2017. We break down the blocks in Demystifying Crypto in Canada.
  • The volume of initial public offerings in Canada rebounded in 2017. After a dismal 2016, a total of 38 initial public offerings in which Canadian companies (or companies listed on Canadian exchanges) raised an aggregate of $5.1 billion in 2017, compared with eight new issues in 2016, raising an aggregate of only $464 million. A few noteworthy trends are discussed in Initial Public Offerings in Canada: Recent Trends and Developments.
  • In November 2017, the Toronto Stock Exchange published a staff notice providing guidance to TSX-listed issuers on their disclosure obligations when applying to the TSX for approval of a private placement. The staff notice did not alter the substantive requirements of the TSX relating to the approval of private placements. Rather, it was a reaction to an Ontario Securities Commission decision to overturn the listing approval granted by the TSX for a private placement by Eco Oro Minerals Corp. without a full understanding of the facts. We discuss the impact of the Eco Oro decision in TSX Heightens Scrutiny of Private Placements.
  • In March 2018, the Canadian Securities Administrators announced six policy projects aimed at reducing regulatory burdens for non-investment fund reporting issuers. These initiatives were selected following a public consultation to determine which areas were of most concern to market participants and most achievable within the scope of securities regulation. Read more in CSA to Pursue Six Initiatives to Cut "Red Tape" for Reporting Issuers.
  • One of the six policy initiatives announced by the Canadian Securities Administrators in 2018 was the facilitating of at-the-market offerings. ATM offerings allow issuers to sell securities under a prospectus over a determined period of time, through the facilities of a stock exchange and at the prevailing market price at the time of sale. ATM offerings are very common in the United States, but have been much less frequent in Canada due to limitations imposed by Canadian securities laws that necessitate exemptive relief in order for an issuer to effect the offering in an efficient manner. Given the recent CSA announcement, we look forward to A New Framework for At-the-Market Offerings.
  • In 2016, the Ontario Securities Commission took a big first step toward fixing Canada's problematic framework for regulating offshore offerings when it first proposed OSC Rule 72-503, Distributions Outside of Canada. In December 2017, the OSC took a further step when it published a new and improved version of that rule. The final rule is an effective and practical solution for most common offshore offerings by Ontario-based issuers. However, there remains the glaring issue of its scope – it applies only in Ontario and therefore is not a national solution. We think more can be done. See Bordering on Modern: Will Ontario's New Offshore Offering Rules Inspire a National Solution?
  • In May 2017, the Ontario government announced amendments to the Securities Act (Ontario) that would have the effect of requiring some registered dealers to register to be recognized as clearing agencies. This change is an expansion of the scope of the existing rules: registered dealers are not currently subject to the clearing agency regime. After the new rules come into effect, registered dealers will be required either to apply to be recognized as a clearing agency (and comply with the rules applicable to clearing agencies) or to obtain an exemption from doing so if they engage in certain activities. Find out more in Ontario Clearing Agency Regime to Be Extended to Registered Dealers.
  • From a U.S. perspective, 2017 was a fairly quiet rulemaking year. The U.S. Department of the Treasury issued recommendations to promote access to capital through, among other things, reducing regulatory obligations and modernizing the U.S. capital markets regulatory structure and processes. The SEC's proposed and final rules issued in 2017 focused primarily on improving the readability, navigability and accuracy of SEC disclosure documents. While some of these rules are applicable only to U.S. issuers, we discuss how these initiatives impact Canadian issuers that are reporting companies in the United States in SEC Rulemaking Developments in 2017.

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