Canada’s public venture market has traditionally served as a catalyst of growth for many small-cap and early-stage companies. However, it has experienced a recent decline due to various factors, including a sustained collapse in commodity prices. In December 2015, the TSX Venture Exchange (TSXV) released a white paper outlining a revitalization plan to address weaknesses that have limited the success of the public venture market in Canada. The white paper was followed by a series of town hall meetings across the country. In the white paper, and as further described at the town hall meetings, three main goals were identified: (a) reducing costs without compromising investor confidence; (b) expanding the investor base and enhancing liquidity; and (c) diversifying and growing the stock list. Proposed initiatives in support of these goals are summarized below. The TSXV has already begun to execute some of these initiatives and has assigned aggressive timelines for the implementation of those that remain to be implemented.
Reducing costs without compromising investor confidence
The TSXV has proposed changes to decrease administrative and compliance costs for issuers without jeopardizing investor integrity. Some of the initiatives proposed to achieve this goal include eliminating the sponsorship and shareholder approval requirements for inactive companies completing arm’s length transactions. The interval to renew a personal information form will be extended from three to five years and recognized active and proven directors and officers of TSXV-listed companies will have their ongoing requirements minimized. There are also proposed measures to reduce processing time, such as by providing automatic online filings and implementing a more responsive system for transaction processing. The TSXV’s current escrow requirements will be replaced by the Canadian Securities Administrator’s national policy on escrow.
Expanding the investor base and enhancing liquidity
To attract investors and thereby enhance liquidity, the TSXV aims to facilitate more direct interaction between investors and issuers to expand sources of capital, implement an action team of industry experts to make trading easier for U.S. investors, and strengthen business development and capital markets education to increase awareness of the TSXV. Different programs will be introduced, including new investor analytics programs to enable greater investor participation and a market making program to simplify arrangements between issuers and market makers. The TSXV will engage with the Investment Industry Regulatory Organization of Canada (IIROC) to clarify IIROC’s suitability standards, which will be further detailed in an upcoming FAQ document. Other proposed measures include the simplification of the TSXV’s Continued Listing Requirements and the promotion of additional prospectus exemptions, such as the existing security holder exemption and proposed dealer exemption.
Diversifying and growing the stock list
The TSXV has proposed changes to further diversify the stock list to increase the exchange’s resilience to sector specific market cycles. To attract new issuers, a SME Sales Team will seek to bring new companies to the exchange and policies, such as the capital pool company policy, will be amended to seek to attract more non-resource companies. There will be more effort to demonstrate to private equity firms, venture capitalists and angel investors the value of the TSXV as an effective exit strategy for early-stage companies. The TSXV will advocate for early-stage public companies to be eligible for the refundable investment tax credit under the (somewhat controversial) federal Scientific Research and Experimental Development Tax Incentive program. The TSXV will also explore forming partnerships with other exchanges that could lead to increased access to capital and liquidity and work with exchange traded fund firms to develop more investment products that include baskets of TSXV-listed companies to interest more investors.