BC investors get more information about private capital-raising
Vancouver – The British Columbia Securities Commission today announced steps it is taking to improve investor protection in the “exempt market”. It will require more disclosure from companies that raise money in BC’s securities markets under prospectus exemptions.
Following a review and consultations with investors and industry participants, the BCSC will require companies that raise money in the exempt market to disclose more about their directors, officers and other insiders, promoters, finders and purchasers. The new requirements will come into effect on October 3, 2011.
“Typically, if someone is buying shares in a private company in the exempt market, there is very little information available to them,” said BCSC Chair Brenda Leong. “The new disclosure requirements are another step in our integrated strategy to protect investors from the risks associated with investing in the exempt market, and to support the integrity of legitimate venture companies raising capital in this market.”
The BCSC plans to replace an existing disclosure form used by other Canadian jurisdictions with a new form that includes the increased disclosure requirements. The new form will require private companies to disclose information about their insiders and promoters, and will require both public and private companies to disclose whether anyone who purchases their securities, or finds investors for them, is an insider or is registered under the Securities Act. All purchaser information will be available to the public, except for contact and financial information.
“The additional disclosure will help current and prospective investors make more informed investment decisions when considering exempt market securities, and support our increased regulatory scrutiny of this higher risk market,” concluded Leong.
What is the exempt market?
The “exempt market” is where all securities are sold that are not offered by prospectus, and it covers everything from private start-up venture capital companies to established companies. B.C.’s exempt market is an important source of financing for BC companies; all successful companies start in the exempt market. Using capital-raising exemptions, companies can raise money from the public without providing a prospectus. It is important to note that “exempt market” does not mean it is exempt from regulation – merely that the prospectus and registration requirements do not apply to them.
Why is the BCSC making this new information available to investors?
While the exempt market in BC is an important source of financing for start up and established companies, investing in the exempt market can represent higher-risk for investors. Exempt securities, especially in private companies, lack transparency, are high risk, and cannot be easily resold. With the new disclosure requirements, individuals investing in private companies will have access to disclosure about the company’s insiders, promoters and investors.
Under the new form (45-105 F6):
- Private companies will disclose similar information about their insiders and promoters that public companies disclose in other filings under the Securities Act, such as their names, securities owned and the price paid for those securities
- Both private and public companies will disclose whether any finders and purchasers are insiders or registrants
Where can people find this information?
- Non-individual purchaser information, such as purchases by corporations and trusts, will be available on the BCSC website, www.bcsc.bc.ca
- Individual purchaser information, except for contact and financial information, will only be available at the BCSC offices. The information is only for research concerning the company.
The B.C. Securities Commission is the independent provincial government agency responsible for regulating trading in securities within the province.
If you have questions, contact Richard Gilhooley, media relations, 604-899-6713. For public inquiries, call 604 899 6854 or 1 800 373 6393 (toll free).
Learn how to protect yourself and become a more informed investor at www.investright.org