The British Columbia Securities Commission (BCSC) is joining several other provincial regulators in proposing a new prospectus exemption that aims to facilitate capital raising by small firms.
Late last year, a number of regulators proposed a variation on the offering memorandum (OM) exemption that would allow firms to raise capital without filing audited financial statements, subject to several restrictions.
Provinces adopt new offering memorandum exemption
On Tuesday, the BCSC published for comment a proposed new exemption that would allow issuers to include unaudited financial statements prepared using private enterprise GAAP.
The proposed exemption is limited to issuers that raise up to $500,000; no investor invests more than $2,000 in any 12-month period; the issuer is not a reporting issuer, investment fund, mortgage investment entity or real estate issuer; it does not distribute complex securities; and, contains a bold warning on the front page of the offering.
In its notice, the BCSC says that the current OM exemption is not widely used by issuers in the biotech, exploration, forestry, industrial or technology industries. “One possible barrier to using the exemption is the cost of complying with the financial statement requirements,” it says. “The proposed new exemption is one way of addressing this possible barrier while limiting risk to investors.”
Comments on the other regulators’ proposals are due by February 20. The BCSC proposal is out for comment until April 12.