April 21st, 2017
OSC publishes existing security holder prospectus exemption
OSC News Release | Nov 27, 2014
TORONTO – The Ontario Securities Commission (OSC) today published an existing security holder prospectus exemption for reporting issuers listed on the Toronto Stock Exchange, TSX Venture Exchange, Canadian Securities Exchange or Aequitas NEO Exchange (upon the effective date of its recognition order). The exemption is the first of several new exemptions to facilitate capital raising by businesses at different stages in their development, while maintaining an appropriate level of investor protection. Subject to Ministerial approval, the exemption will come into effect on February 11, 2015.
The exemption balances interests of issuers and investors. Once in effect, the exemption will allow listed reporting issuers (excluding investment funds) to raise capital from existing security holders on a cost effective basis. The exemption will also enable existing retail security holders to acquire securities of the issuer directly, rather than through the secondary market.
The exemption also includes a number of investor protection measures, including that issuers relying on the exemption must make the offer to all existing security holders as of the record date and investors will be subject to investment limits unless they obtain advice regarding the suitability of the investment. Further, issuers will be subject to liability for, among other things, a misrepresentation in their disclosure record.
A similar exemption has been adopted in other Canadian jurisdictions.
“The exempt market is a crucial source of capital for growing companies, and it is critical that it is globally competitive and that investors can participate in the market with confidence,” said Howard Wetston, OSC Chair and Chief Executive Officer. “This new prospectus exemption is the first of several exemptions we are considering, which are expected to help streamline capital raising for businesses in the exempt market.”
The exemption represents one of four new, potential capital raising tools, which were published for comment by the OSC in March 2014. Three exemptions – a family, friends and business associates prospectus exemption; an offering memorandum prospectus exemption; and a crowdfunding prospectus exemption together with a registration regime for online funding portals – remain under consideration.
The comment period for these exemptions closed in June 2014. The OSC received approximately 815 comment letters and is considering the feedback received from stakeholders. This work is a priority for the OSC. The OSC’s objective is to publish these three exemptions in final form or, if necessary, for a second comment period as soon as reasonably practicable in the new year.
The OSC is the regulatory body responsible for overseeing Ontario’s capital markets. The OSC administers and enforces Ontario’s securities and commodity futures laws. Its mandate is to provide protection to investors from unfair, improper or fraudulent practices and to foster fair and efficient capital markets and confidence in capital markets.
The objective of the exempt market reform initiative is to facilitate capital raising for start-ups and small and medium-sized enterprises and to modernize Ontario’s exempt market regulatory regime, while adequately protecting investors.
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