TSX Amends Requirements for Closed-end Funds, Exchange Traded Products and Structured Products

Blake, Cassels & Graydon LLP

The Toronto Stock Exchange (TSX) has adopted amendments to the TSX Company Manual (Manual) concerning non-corporate issuers, effective September 17, 2015. The amendments generally codify existing practices of the TSX with respect to listing and other requirements for closed-end funds, exchange traded products (ETPs) and structured products (collectively, Non-Corporate Issuers), but certain new requirements have been added for these issuers, as discussed below. These requirements are generally consistent with current Ontario Securities Act requirements for these types of issuers.

The amendments were originally published by the TSX for public comment on January 15, 2015 (Initial Proposal). The amendments introduce a new section to the Manual (Part XI – Requirements Applicable to Non-Corporate Issuers) as, prior to these changes, the Manual was designed for corporate entities and did not address items and issues specific to Non-Corporate Issuers. 


Listing Requirements

I. Closed-end Funds

Based on comments received on the Initial Proposal, the TSX lowered the initial listing requirement for closed-end funds from C$20-million to C$10-million. In lowering the minimum market capitalization from C$20-million, which was included in the Initial Proposal, the TSX acknowledged that the C$20-million requirement may create a chilling effect on closed-end fund offerings and indicated that it is comfortable that the C$10-million requirement would ensure sufficient liquidity in the secondary market.

The TSX listing requirements for closed-end funds are as follows:

  • An initial public offering or market value of freely tradeable securities of at least C$10-million
  • At least 1 million freely tradable securities held by at least 300 public board lot holders (board lot is 100 units for securities with trading price of C$1.00 or more)
  • Net asset value (NAV) must be calculated no less frequently than required under applicable securities law (once a week if the fund does not use specified derivatives or sell securities short or once every business day if it does) and be made available on a publicly accessible website
  • The fund or its manager must have a CEO, CFO, secretary and an independent review committee (IRC)
  • A C$2-million market value and at least 100,000 securities held by at least 100 public holders, each holding one board lot or more, for a new class of securities that is convertible into listed securities


ETPs mean redeemable equity securities (an exchange traded fund) or debt securities (an exchange traded note) offered on a continuous basis under a prospectus, which give investors exposure to the performance of specific indices, sectors, managed portfolios or commodities through a single security. 

The following are the TSX listing requirements for ETPs:

  • C$1-million minimum market capitalization
  • NAV must be calculated at least each trading day and be available on a publicly accessible website
  • The issuer of an ETP, if not a financial institution, must have a CEO, CFO, secretary and IRC
  • An ETP issued by a financial institution is required to identify the individuals responsible for day-to-day management and operations of the ETP

For these purposes, a financial institution is defined as a financial institution regulated by the Office of the Superintendent of Financial Institution (OSFI) or, if a foreign financial institution, regulated by a regulatory body equivalent to OSFI with no less than C$150-million market capitalization. 

III. Structured Products

The TSX defines a structured product as a security generally issued by a financial institution under a base shelf prospectus and pricing supplement where an investor’s return is contingent on, or highly sensitive to, changes in the value of underlying assets, indices, interest rates or cash flows and includes securities such as non-convertible notes, principal or capital protected notes, index or equity linked notes, tracker certificates and barrier certificates.

The following are the TSX listing requirements for structured products: 

  • An initial public offering or market value of freely tradeable securities of at least C$1-million
  • NAV must be calculated on a weekly basis and available on a publicly accessible website
  • If a structured product is not issued by a financial institution, the issuer or its manager must have a CEO, CFO, secretary and two independent directors

The TSX recommends that non-financial institutions that propose to list structured products have preliminary discussions with the TSX in advance of filing a listing application.

IV. Additional Listing Requirements

The TSX has retained discretion to determine if an issuer or its manager has “appropriate experience in the asset management industry and with listed issuers.” 

Going forward, closed-end funds and structured products are required to provide immediate notification and obtain pre-approval by the TSX for any transaction involving the issuance of any securities other than unlisted, non-voting, non-participating shares and ETPs are required to provide immediate notification of any transaction involving the issuance of any new class of securities that is convertible into a listed class of securities.

Other Requirements 

The amendments also address a number of issues relating to changes in capital structure, dividends and other distributions, securityholder approval for amendments, termination/voluntary delisting, preclearance of materials with the exchange and continued listing requirements.

I. ETPs  Reporting

Based on comments received, the TSX revised the proposed rule to require that an ETP provide to the TSX, on a monthly basis, a Form 1 – Change in Outstanding and Reserved Securities, and on a quarterly basis, either:

A) A legal opinion that securities from the previous quarter have been issued as fully paid and non-assessable

B) If the constating documents include a provision stating that all securities must be issued as fully-paid and non-assessable, a certificate of a senior officer confirming the number of securities created and reported to the TSX in the previous quarter and that full consideration was received prior to, or concurrently with their issuance. 

In order to allow ETP issuers to rely on the new option (b), it is important that their constating documents include the prescribed language. 

II. Dividends and Other Distributions

The amendments provide a specific carve-out for Non-Corporate Issuers from the seven-day notice requirement regarding distributions paid entirely in securities that are immediately consolidated following the distribution (i.e., most typically, year-end distributions). For such distributions, the TSX requires issuers to press release the estimated distribution amount four days prior to the record date and, upon determination of the final amount of any estimated distribution, disseminate the final details by way of a press release.

In all other circumstances, issuers must provide notice to the TSX at least seven trading days in advance of the record date for a distribution. 

III. Securityholder Approval for Amendments

With respect to closed-end funds and ETPs, the amendments require that, in addition to the requirements for securityholder approval under applicable securities law, the TSX may require securityholder approval for:

  • Amendments to issuers’ constating documents that materially affect the rights of securityholders and which are not covered by the amendment provisions of such documents 
  • Extension of closed-end funds or ETPs beyond the originally contemplated termination date, unless securityholders are provided with: (a) the opportunity to redeem securities at NAV within three months of the originally contemplated termination date; and (b) notice of the extension at least 30 days prior to the redemption deadline

IV. Preclearance of Materials with the Exchange

Non-corporate issuers are now required to pre-clear with the TSX any information circulars and other material related to corporate actions to be delivered to securityholders at least five business days before finalizing such materials. 

V. Termination/Voluntary Delisting

Unless there is a fixed termination date, Non-Corporate Issuers must provide securityholders with at least 30 days’ notice prior to termination. This notice requirement is longer than the requirement under Canadian securities legislation applicable to closed-end funds, which requires notice not fewer than 15 days and not more than 90 days prior to termination. 

VI. Management Fees

Management fees payable by issuance of securities from treasury are subject to the TSX rules applicable to corporate issuers, including the requirement for securityholder approval.

VII. Continued Listing Requirements: Suspension or Delisting

i. Closed-end funds

The securities of a closed-end fund may be suspended or delisted from the TSX in the following circumstances:

  • The market value of the listed securities is less than C$3-million for over 30 consecutive trading days
  • The number of freely-tradable, publicly held securities is less than 500,000; or there are fewer than 150 public securityholders, each holding a board lot or more

ii. ETPs and Structured Products

The amendments stipulate that the securities of an ETP or structured product may be suspended or delisted if the TSX believes that the continued listing would be inconsistent with preserving market quality. Factors the TSX will consider in exercising its discretion include: 

  • The level of trading
  • The market value
  • The bid and ask spread 
  • In the case of exchange traded funds, the absence of a designated broker
  • In the case of structured products, where the financial institution issuing the structured product has ceased to act as a market maker

The TSX will consider each situation individually, referring to the criteria listed above only as a reference. As such, regardless of whether any of the criteria are applicable, the TSX reserves the discretion to suspend trading or delist securities if it believes that such action would be consistent with preserving the overall quality of the market, or if further dealings in the securities on TSX may be prejudicial to the public interest.

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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