OSC plans to deliver new exemptions this fall

The OSC “intends to publish the OM exemption and crowdfunding regime in final form and deliver the rules to the Minister of Finance” this fall, the commission stated in conjunction with the release of the Corporate Finance Branch 2014-2015 Annual Report.

The report sketches out the expected features of the final exemptions.

The OM exemption will not limit the amount of capital an issuer can raise via the exemption, according to the report. However, different groups of investors will face separate capital limits: $10,000 in a 12-month period for non-eligible investors; $30,000 per 12-month period for eligible investors; and up to $100,000 in a 12-month period for eligible investors that also receive advice from a registrant.

The OM exemption will also require investors to sign a risk acknowledgement form, and it will impose ongoing disclosure requirements on issuers, among other things.

For the crowdfunding exemption, issuers will be limited to raising $1.5 million per year. Investors who do not qualify as accredited investors will be limited to $2,500 in a single investment and $10,000 per year, with higher investment limits for accredited investors, and no investment limits for permitted clients. This exemption will also require signed risk acknowledgement forms, set ongoing disclosure requirements, and require that investments be made through a registered funding portal.

In additional, the OSC is working with the rest of the Canadian Securities Administrators (CSA) to develop final amendments to the existing rights offering exemption, with the aim of publishing the final amendments in the fall, the commission says. The OSC expects to publish a harmonized report of exempt distribution, along with the rest of the CSA, in the summer of 2015, it adds.

The OSC also indicates that it is currently reviewing compliance with recent amendments to issuer disclosure requirements relating to women on boards and in executive officer positions; and, that it will publish the results of that review once it’s complete.

Along with providing updates on these policy initiatives, the report aims to provide insight and guidance that encourages compliance, improves the quality of disclosure in regulatory filings, and offers insights on regulatory trends. For example, the repost calls for improvements in certain aspects of prospectus disclosure, and notes that issuers should discuss certain aspects of disclosure with OSC staff before filing.

“We strongly encourage issuers, insiders and their advisors to review the report and to use the findings and guidance presented in the report to inform and strengthen their compliance with Ontario securities law,” said Huston Loke, director of the commission’s corporate finance branch.

As for its efforts at reviewing prospectuses during the past year, the reports notes that the corporate finance branch started to see offerings in new industries, such as medical marijuana and gaming. “These less mature industries often require enhanced disclosure due to regulation, differences in legal status across jurisdictions and other novel considerations that should be disclosed to investors,” the report states

The branch also saw its first initial public offering (IPO) prospectus from a special purpose acquisition corporation (SPAC) during the year, which obtained relief from certain elements of the TSX requirements for SPACs. “We have received four SPAC IPO prospectuses to date, all of which have received the same relief,” the report states.