Provincial and territorial securities regulators, except those in Ontario and Newfoundland, are proposing a new exemption that would allow venture firms to raise additional capital from existing shareholders without filing a prospectus.
Regulators in all jurisdictions, apart from Ontario and Newfoundland, Thursday published for comment a proposed new exemption that would allow TSX Venture Exchange (TSXV) issuers to raise money by distributing securities to their existing security holders without filing prospectus, or relying on another sort of exemption.
Currently, issuers have to either use a prospectus, or an existing prospectus exemption that requires the firm to file a disclosure document, such as an offering memorandum or a rights offering circular, to distribute securities to existing shareholders that aren’t otherwise accredited investors.
The regulators say that venture issuers rarely raise money this way. Which also means that retail investors that want to increase their stake in a firm must trade in the secondary market, and pay brokerage fees, to do so. The proposed exemption is designed to give venture firms easier access to capital, and to give investors a cheaper way to acquire additional securities.
The proposed new exemption would limit investors to acquiring $15,000 worth of new securities, unless they get registered advice confirming suitability; and, investors would also have rights of action if an issuer’s continuous disclosure contains any misrepresentations.
“The proposed exemption would allow TSXV issuers to distribute securities to existing security holders, relying on their continuous disclosure record, thereby reducing the cost for investors and providing issuers with access to an additional source of financing,” said Bill Rice, chair of the Canadian Securities Administrators (CSA) and chair and CEO of the Alberta Securities Commission (ASC).
The proposal is out for comment until January 20, 2014.