The Canadian Securities Administrators (CSA) has finalized proposed changes to the little used rights offering exemption to make it easier for companies to raise capital in the exempt market.

Specifically, the CSA is adopting revisions to the rights offering exemption that aim to speed up the offering process by: removing the requirement for regulatory approval of rights offering circulars; making the exemption more attractive by increasing the dilution limit; and providing investors with the ability to sue over any misrepresentations in the circular.

The amendments aim to address concerns that issuers rarely use the prospectus-exempt rights offering to raise capital because of the time and cost involved, the CSA says in a notice issued on Thursday: “The amendments are designed to make prospectus-exempt rights offerings more attractive to reporting issuers while maintaining investor protection.”

The CSA reports that its research found that the average length of time to complete an exempt rights offering was 85 days and the average length of time between filing of the draft circular and notice of acceptance by the regulator was 40 days.

“CSA staff heard that the length of time to complete an offering results in lack of certainty of financing and increased costs,” the CSA’s notice says.

In addition, the regulators report that market participants also complained that the dilution limit was too low and that it “greatly restricted” the ability of issuers with small market caps to make these sorts of deals worthwhile.

The changes announced on Thursday are designed to address these concerns by removing the requirement for a regulatory review prior to using the rights offering circular and replacing it with the addition of statutory secondary market civil liability and raising the dilution limit to 100% from 25%.

“Rights offerings can be a very effective way for issuers to raise capital while providing existing security holders with an opportunity to protect themselves from dilution,” says Louis Morisset, the CSA’s chairman and president and CEO the Autorité des marchés financiers. “This streamlined exemption is designed to make prospectus-exempt rights offerings more attractive to reporting issuers while maintaining investor protection.”

The changes, which still require ministerial approval, are slated to come into force on Dec. 8.