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Certain securities regulatory authorities are adopting a prospectus exemption that, subject to certain conditions, allows issuers listed on the Toronto Stock Exchange, the TSX Venture Exchange, the Canadian Securities Exchange or Aequitas Neo Exchange Inc. to raise money by distributing listed securities to investors who have obtained advice about the suitability of the investment from an investment dealer.
The securities regulatory authorities in British Columbia, Alberta, Saskatchewan, Manitoba and New Brunswick are each adopting a prospectus exemption (originally proposed in April, 2015) that allows issuers listed on the Toronto Stock Exchange, the TSX Venture Exchange, the Canadian Securities Exchange or Aequitas Neo Exchange Inc. to raise money by distributing listed securities to investors who have obtained advice about the suitability of the investment from an investment dealer, subject to a number of conditions which include:
the issuer must be a reporting issuer in at least one jurisdiction of Canada and have a class of equity securities listed on the Toronto Stock Exchange, the TSX Venture Exchange, the Canadian Securities Exchange or Aequitas Neo Exchange Inc.;
the issuer must have filed all timely and periodic disclosure documents as required under the continuous disclosure requirements in our securities legislation;
the offering can consist only of a listed security, a unit consisting of a listed security and a warrant to acquire another listed security, or another security convertible into a listed security at the security holder’s sole discretion;
the news release announcing the offering must: disclose, in reasonable detail, the distribution, including use of proceeds, and any material fact not yet generally disclosed; and include a statement that there is no material fact or material change about the issuer that has not been generally disclosed;
the investor must obtain advice regarding the suitability of the investment from an investment dealer;
in British Columbia, Saskatchewan, Manitoba and New Brunswick, the investor must be provided with a contractual right of action in the event of a misrepresentation in the issuer’s continuous disclosure record regardless of whether the investor relied on the misrepresentation (in Alberta, purchasers are afforded a statutory right of action under the Securities Act (Alberta)); and
although an offering document is not required, if an issuer voluntarily provides one, an investor will have certain rights of action in the event of a misrepresentation in it.
The first trade of securities issued under the exemption will be subject to resale restrictions under National Instrument 45-102 – Resale of Securities like most other capital raising prospectus exemptions. In addition, issuers will have to file a report of exempt distribution within 10 days after each distribution under the exemption.
Regulators have again emphasized that this is only an exemption from the prospectus requirement. There is no corresponding exemption from the dealer registration requirement. Issuers and their management should review the guidance provided in Companion Policy 31-103 - Registration Requirements, Exemptions and Ongoing Registrant Obligations and seek the advice of qualified legal counsel.
The exemption will be effective in each participating jurisdiction concurrently with, or as soon as possible after, January 14, 2016.
Does not constitute legal or other advice and must not be used as a substitute for legal advice from a qualified legal professional in your jurisdiction who has been fully informed of your specific circumstances. Information may not be up-dated subsequent to its initial publication and may therefore be out of date at the time it is read or viewed. Always consult a qualified legal professional in your jurisdiction.