The Canadian Securities Administrators (CSA) published proposed amendments Thursday to enhance foreign market access by introducing a new exemption that would allow investors to resell securities of a foreign issuer outside of Canada under a prospectus exemption, so long as the issuer is not a Canadian reporting issuer.
At the same time, the Ontario Securities Commission (OSC) published proposed revisions to its rules dealing with issuer access to foreign markets. Both sets of proposals are out for comment until Sept. 7.
The CSA proposals “are intended to address feedback we received that the ownership conditions in the existing exemption have become an impediment to participation by certain market participants in prospectus-exempt offerings by foreign issuers,” the CSA says in the notice issued on Thursday.
The CSA proposals would introduce a new definition of a foreign issuer to replace the current 10% Canadian ownership test. “With the increased globalization of capital markets, it may no longer be appropriate to determine minimal connection to Canada based solely on Canadian security holdings,” the CSA notice says.
The new approach “would be more straightforward and effective in today’s global market,” the CSA notice adds.
The CSA is also reviewing the existing resale regime, overall, to determine whether it remains relevant in today’s markets and to assess alternative approaches.
“The proposed amendments would facilitate access to global markets,” says Louis Morisset, chairman of the CSA and president and CEO of the Autorité des marchés financiers (AMF), in a statement. “Canadian investors are increasingly investing abroad, and we understand that some aspects of the current resale regime may pose challenges to participation in prospectus-exempt offerings by foreign issuers.”
The related proposals from the OSC deal with issuer access to foreign markets. Last year, the OSC published proposals that were designed to provide a regime for the distribution and resale of securities outside of Canada. Now, it’s revising and republishing its proposals in light of the CSA’s effort to modernize its approach to cross-border exemptions.
Meanwhile, the OSC’s new proposal aims tobring “greater certainty” to cross-border activities by clarifying whether a prospectus, or exemption, is required when distributing securities to a foreign investor.
The OSC proposal “would provide explicit prospectus and registration exemptions that would preserve current cross-border practices.” It would also harmonize the resale requirements in Ontario with the provisions of the new CSA rule that is being proposed.
“This rule is intended to provide certainty to Ontario issuers seeking to raise capital outside of Ontario,” says Huston Loke, director of corporate finance at the OSC, in a statement. “We have made certain revisions to the rule since its initial publication, including removing resale provisions, in the interests of harmonizing resale regimes across Canada for outbound securities.”
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