CSA adopts streamlined capital-raising option for issuers

The Canadian Securities Administrators (CSA) have adopted a new prospectus exemption for issuers listed on a Canadian stock exchange aimed at providing a more efficient way for them to raise capital.

The listed issuer financing exemption will reduce costs for issuers raising smaller amounts of capital through the public markets, the CSA said in a release. The exemption will also allow smaller issuers greater access to retail investors, and provide those investors with broader choice.

“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 chair and CEO of the Alberta Securities Commission, in the release. “This exemption will reduce regulatory burden for small offerings while maintaining investor protection.”

During the consultation process, concern arose about investor protection, including that unsophisticated investors would be exposed to offerings not subjected to regulatory scrutiny.

As a result of comments received, changes were made to increase investor protection, the CSA said, including imposing primary offering statutory liability in the event of a misrepresentation in the issuer’s offering document or certain continuous disclosure. The proposal had previously imposed only secondary market liability.

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

The exemption will be in effect on Nov. 21, when the associated amendments come into force.

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