CSA proposes streamlined capital raising

The Canadian Securities Administrators (CSA) have proposed a new prospectus exemption so issuers on Canadian stock exchanges can raise capital more efficiently.

The proposed exemption would reduce costs for issuers raising smaller amounts of capital through public markets and provide them with greater access to retail investors, the regulators said in a release on Wednesday. In turn, retail investors would have a broader choice of investments.

“We’ve heard from market participants that the time and cost to prepare a short form prospectus is a barrier to capital raising for many smaller issuers,” said Louis Morisset, CSA chairman and president, and CEO of the Autorité des marchés financiers, in the release.

“The proposal would reduce regulatory burden, while maintaining robust investor protection.”

Eligible issuers would file a short offering document and the securities they issue would be freely tradable, the release said. Issuers could raise up to the greater of $5 million or 10% of their market capitalization, to a maximum of $10 million annually.

The exemption wouldn’t be available to companies that have been reporting issuers for less than 12 months or to issuers that haven’t filed their continuous disclosure documents, the release said.

The proposed exemption is in response to comments received from CSA Consultation Paper 51-404 Considerations for Reducing Regulatory Burden for Non-Investment Fund Reporting Issuers. It also reflects research on capital raising requirements in other countries and additional stakeholder feedback on the prospectus system.

The proposal would amend National Instrument 45-106 Prospectus Exemptions. The comment period ends Oct. 26.

Staff

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