Securities Regulators in Alberta, British Columbia, Manitoba, New Brunswick and Saskatchewan adopt new investment dealer prospectus exemption

2016/03
January 14, 2016

Vancouver – Securities regulators in Alberta, British Columbia, Manitoba, New Brunswick and Saskatchewan today announced that they are each adopting a prospectus exemption (exemption) that, provided certain conditions are met, will allow issuers listed on a Canadian exchange to more easily raise money by distributing securities without the need for a prescribed offering document.

The exemption is intended to facilitate capital raising for listed issuers and foster participation of retail investors in private placements, while maintaining appropriate investor protection.

Under the exemption, an investor must obtain advice regarding the suitability of the investment from an investment dealer. This is a key condition for investor protection, as the investment dealer must meet its know-your-client and know-your-product obligations when determining the suitability of the investment.

Other key conditions include:

  • the issuer must be a reporting issuer in at least one jurisdiction of Canada and have securities listed on the Toronto Stock Exchange, the TSX Venture Exchange, the Canadian Securities Exchange, or Aequitas Neo Exchange Inc.;
  • the exemption would only be available to reporting issuers whose continuous disclosure is up-to-date and complies with applicable securities legislation;
  • the issuer must issue a news release containing information about the proposed distribution and use of proceeds, and a statement that there is no material fact or material change about the issuer that has not been generally disclosed; and
  • 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. In Alberta, purchasers are afforded a statutory right of action under Part 17.01 of the Securities Act (Alberta).

Previously, if an issuer wanted to raise capital from retail investors that were not existing security holders without a prospectus, the available exemptions required an offering document. CSA data indicates that Canadian issuers rarely use these exemptions because of the time and cost involved in preparing the offering document. This means that retail investors do not have an opportunity to participate in the more favourable terms generally offered through private placements, such as a discount to the current market price allowed under exchange policies. This also means that if retail investors that are not existing security holders want to invest in an issuer, they must generally buy its securities in the secondary market.

The Multilateral CSA Notice describing the exemption is available on participating CSA members’ websites.

The CSA, the council of the securities regulators of Canada’s provinces and territories, co-ordinates and harmonizes regulation for the Canadian capital markets.

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Richard Gilhooley
British Columbia Securities Commission
604-899-6713 

Mark Dickey
Alberta Securities Commission
403-297-4481

Shannon McMillan
Financial and Consumer Affairs
Authority of Saskatchewan
306-798-4160

Ainsley Cunningham
Manitoba Securities Commission
204-945-4733

 

Andrew Nicholson
Financial and Consumer Services Commission,
New Brunswick
506-658-3021

 

 

Don Boyles
Office of the Superintendent of Securities
Newfoundland and Labrador
709-729-4501

 

 

 

 

 

  


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