Canadian Securities Administrators adopts streamlined capital-raising option for listed issuers

Exemption to reduce costs for issuers raising smaller amounts of capital through public markets

Canadian Securities Administrators adopts streamlined capital-raising option for listed issuers

The Canadian Securities Administrators (CSA) recently adopted a new prospectus exemption for issuers listed on the Canadian stock exchange to provide them with a more efficient way to raise capital.

The “Listed Issuer Financing Exemption” will reduce costs for issuers raising smaller amounts of capital through the public markets. The exemption will also allow smaller issuers greater access to retail investors and provide those investors with a broader choice of investments.

“We heard that the time and cost of preparing a short form prospectus was a barrier to capital-raising for smaller issuers,” said Stan Magidson, CSA chair and Alberta Securities Commission chair and CEO. “This exemption will reduce regulatory burden for small offerings while maintaining investor protection.”

The CSA developed the exemption in response to comments from a consultation paper entitled “Considerations for Reducing Regulatory Burden for Non-Investment Fund Reporting Issuers.” The CSA also said the approach reflects research on capital-raising requirements in other countries and stakeholder feedback about the prospectus system.

As a result of comments received, the CSA made changes to increase investor protection, including imposing primary offering statutory liability in the event of a misrepresentation in the issuer’s offering document or certain continuous disclosure.

To be eligible for the exemption, issuers must have been a reporting issuer in a Canadian jurisdiction for at least 12 months and have filed all continuous disclosure documents required under Canadian securities legislation. Eligible issuers may raise the greater of $5 million or 10 percent of the issuer’s market capitalization annually to a maximum of $10 million. Securities issued under the exemption will be freely tradeable.

The CSA said that once it obtains all necessary ministerial approvals, the exemption would take effect on November 21.

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