Securities regulators are contemplating whether to introduce new prospectus exemptions, as they mull whether to preserve the existing exemptions.
The Ontario Securities Commission (OSC) Thursday announced that it is expanding its existing review of the exempt market to consider whether new kinds of exemptions are needed to facilitate capital raising. Late last year, the Canadian Securities Administrators (CSA) initiated a consultation on two of the primary exemptions used — the minimum amount exemption and the accredited investor exemption. Today, the OSC said that, in the wake of feedback it received on that consultation, it’s expanding its review to consider the exempt market regulatory regime more generally.
The commission says that it will continue to assess whether the existing minimum amount and accredited investor prospectus exemptions are appropriate, or whether changes should be made. And, it will now entertain the idea of new exemptions too.
In the coming year, the OSC says that it will publish a second consultation note concerning the exempt market regulatory regime; that it will hold further public consultation sessions following the publication of the second consultation note; and that it will consider the exemptions available in other jurisdictions, both within Canada (such as the offering memorandum and ‘friends and family’ exemptions) and in other countries (such as the recently-passed JOBS Act in the U.S., which introduces a new crowdfunding exemption).
Additionally, the OSC says that it will establish an ad hoc advisory committee, comprised of investors, issuers, registrants and legal and other advisors, to help educate its staff on the views of the exempt market to various regulatory approaches.
“Given the importance of the exempt market, we are broadening the scope of our review in order to strike the right balance between investor protection and efficient capital raising for businesses in Ontario,” said Howard Wetston, chair and CEO of the OSC.
Separately, the CSA released its own staff notice sketching out the results of the initial consultation. However, it doesn’t provide any firm policy direction either, saying that the regulators need more time to complete their analysis.
“Given the number of comments and the diversity of the feedback provided, staff will need further time to complete their review and consider the feedback,” it says, adding that it intends to analyze data from exempt distribution reports before finalizing its review and publicly reporting its conclusions later this year.