Canadian securities regulatory authorities in all jurisdictions but Ontario and Newfoundland and Labrador today published for comment a draft prospectus exemption that would allow issuers listed on the TSX Venture Exchange to distribute securities to existing security holders. According to the CSA, the time and cost involved in preparing the required offering documents are currently preventing TSX-V issuers from conducting prospectus offerings or using prospectus exemptions to offer securities to retail investors.
Thus, under the proposal a new prospectus exemption would be available to TSX-V issuers if certain conditions are met, including that: (i) the issuer has a class of equity securities listed on the TSX-V; (ii) the issuer has filed all required timely and periodic disclosure documents; (iii) the offering consists only of the class of equity securities listed on the TSX-V or units consisting of the listed security and a warrant to acquire the listed security; (iv) the issuer issues a news release disclosing the proposed offering, including details of the use of proceeds; and (v) each investor confirms in writing to the issuer that, as at the record date, the investor held the type of listed security that the investor is acquiring under the exemption.
Investors would be limited to investing no more than $15,000 per year under the exemption unless suitability advice from a registered investment dealer is obtained. Further, investors would be provided with certain rights of action in the event of a misrepresentation in an issuer's continuous disclosure record or, if the issuer voluntarily provides one, an offering document. Securities issued under the proposed exemption would be subject to resale restrictions. In order to reinforce the goal of statutory insider trading prohibitions, the proposal requires that issuers represent to prospective purchasers in the subscription agreement that there are no material facts or material changes relating to the issuer that have not been generally disclosed.
The participating jurisdictions are accepting comments on the proposal until January 20, 2014. If implemented, the exemption would expire in some of the jurisdictions at the end of 2015, although the use of the exemption would be assessed for usefulness with the potential for extension. For more information, see Multilateral CSA Notice 45-312.