Proposed Prospectus Exemption for Distributions to Existing Security Holders of TSXV Issuers


On November 21, 2013, Canadian securities regulators in all jurisdictions but Ontario and Newfoundland and Labrador published for comment a proposed prospectus exemption for issuers listed on the TSX Venture Exchange (TSXV issuers) that would, subject to certain conditions, allow them to obtain additional financing by distributing securities to their existing security holders.


TSXV issuers generally do not use prospectus offerings or prospectus exemptions to sell to retail investors due to the costs involved in preparing the required offering document and instead typically raise funds through offerings to "accredited investors". As a result, when acquiring securities of TSXV issuers, retail investors are often required to purchase the shares on the TSXV and pay associated brokerage fees, without receiving any "sweetener" such as warrants or a discount to the market price typically available in private placements to "accredited investors". The proposed exemptions would increase the opportunity for retail investors to participate in offerings by TSXV issuers and lower the cost of such offerings.

Proposed Exemption

The proposed exemption will not require a TSXV issuer to provide additional continuous disclosure, such as an annual information form, to take advantage of the proposed exemption.

Securities distributed under the proposed exemption would have to meet certain conditions, including:

  • the issuer must have filed all continuous disclosure documents on SEDAR;
  • the offering can consist only of the class of equity securities listed on the TSXV or units consisting of the listed security and a warrant to acquire the listed security;
  • the issuer must issue a news release disclosing the proposed offering, including details of the use of proceeds;
  • each investor must confirm in writing to the issuer that as at the "record date" (which will be a date prior to the date of the announcement of the offering) the investor held the type of listed security that the investor is acquiring under the proposed exemption;
  • unless the investor has obtained advice regarding the suitability of the investment from a registered investment dealer, the aggregate amount invested by the investor in the last 12 months under the proposed exemption is not more than $15,000; and
  • an investor must be provided with certain rights of action in the event of a misrepresentation in the issuer's continuous disclosure record.

The first trade of a security acquired under the proposed exemption will be subject to a four-month restricted period.

Next Steps

The comment period for the proposed exemption closes on January 20, 2014. Bennett Jones is able to assist clients in submitting their comments on the proposed exemption.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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