The securities regulatory authorities in BC, Alberta, Saskatchewan, Manitoba, and New Brunswick (the participating jurisdictions) have each adopted a prospectus exemption that subject to certain conditions, lets issuers who are listed on a Canadian exchange raise money by selling securities to investors who have been advised on the suitability of the investment by an IIROC dealer.
The purpose of the exemption, as detailed in Multilateral CSA Notice 45-318, Prospectus Exemption for Certain Distributions Through an Investment Dealer, is to make capital raising easier for listed issuers and to encourage retail investors to invest in private placements, while maintaining appropriate investor protection. The exemption was adopted concurrently by the participating jurisdictions on January 14th, 2016.
Under the exemption:
- 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 the 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:
- dsclose, 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 Part 17.01 of 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.
Issuers will have to file a report of exempt distribution within 10 days after each distribution under the exemption.
For more information, please call Barbara Hendrickson at BAX Securities Law (416.601.1004).
This publication is not intended to constitute legal advice. No one should act on it or refrain from acting on it without consulting with a lawyer. BAX does not warrant or guarantee the accuracy or currency or completeness of the publication. No part of this publication may be reproduced without the prior written permission of BAX Securities Law.