Photo of Joe BrennanBy Joe BrennanFebruary 01 2016
Business Law

New “Investment Dealer Prospectus Exemption” in Canada

Companies Now Have Easier Access to Retail Investors

Recently, the securities regulators in British Columbia, Alberta, Saskatchewan, Manitoba and New Brunswick adopted a new prospectus exemption that will allow public companies listed on any of the Toronto Stock Exchange, the TSX Venture Exchange, the Canadian Securities Exchange, or Aequitas Neo Exchange to more easily raise money from retail investors by distributing securities without the need for a prescribed offering document.

In order for a company to utilize this exemption to raise capital:

Suitability Advice

An investor must obtain advice regarding the suitability of the investment from a registered investment dealer. This is a key condition for investor protection, as the investment dealer must meet its know-your-client and know-your-product obligations when determining the suitability of the investment.

Public Listed Company

The company must be a “reporting issuer” under Canadian securities laws in at least one jurisdiction of Canada and have securities listed on any of the Toronto Stock Exchange, the TSX Venture Exchange, the Canadian Securities Exchange, or Aequitas Neo Exchange Inc.

Continuous Disclosure Up-to-Date

The exemption is only available to reporting issuers whose continuous disclosure is up-to-date and in compliance with applicable Canadian securities legislation.

News Release

The company must issue a news release containing information about the proposed distribution and use of proceeds, and a statement that there is no material fact or material change about the company that has not been generally disclosed.

Rights of Action for Misrepresentation 

In British Columbia, Saskatchewan, Manitoba and New Brunswick, the investor must be provided with a contractual right of action in the event of a misrepresentation in the company’s continuous disclosure record (i.e. in the subscription agreement). In Alberta, purchasers are afforded a statutory right of action under Part 17.01 of the Securities Act (Alberta).

Note that this prospectus exemption is not available for selling securities to investors in Ontario, Quebec, Nova Scotia, PEI, Newfoundland and Labrador or any of the 3 territories in Canada.

Invitation for Discussion:

If you would like to discuss the topics raised herein or any other business law matter, please do not hesitate to contact one of the lawyers in the Business Law group at Nerland Lindsey LLP.

Disclaimer:

Note that the foregoing, and the attached document, are for general discussion purposes only and should not be construed as legal advice to any one person or company. If the issues discussed herein affect you or your company, you are encouraged to seek proper legal advice.

Related Insights

  • Canadian Companies Need to Assess Their “Foreign Private Issuer” Status for SEC Reporting Purposes
  • CSA Staff Says Most Coin/Token Offerings Are Securities
  • Letter of Credit Security and the “Autonomy Principle”
  • OSC Provides Guidance on Hostile Take-Over Bids
  • Trust Residency Post-Fundy
  • Coming Soon – Mandatory Privacy Breach Reporting and Record-Keeping
  • A Reminder for D&O’s re: Civil Liability for Secondary Market Disclosure
  • Canadian Disclosure Requirements for US Marijuana Issuers