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On November 5, 2015 securities regulatory authorities in Manitoba, Ontario, Quebec, New Brunswick and Nova Scotia (Participating Jurisdictions) published in final form the long awaited crowdfunding regime: Multilateral Instrument 45-108 Crowdfunding (Crowdfunding Regime) which includes a crowdfunding prospectus exemption (Crowdfunding Exemption) and a registration framework for funding portals. The

Background

On December 18, 2014, the Investment Industry Regulatory Organization of Canada (IIROC) published its final guidance note outlining common due diligence practices and suggestions for IIROC dealer members (Dealer Members) in underwritten public offerings of securities.  The guidance note follows IIROC’s March 6, 2014 proposed guidance and a three month public comment period.

The guidance note urges Dealer Members to take an approach to due diligence that goes beyond the mere avoidance of liability and mitigation of risk to the underwriter as Dealer Members play a role in protecting investors, fostering fair and efficient capital markets and creating and maintaining confidence in the capital markets.

The guidance note was prepared specifically to address Dealer Members involved in public offerings of securities. Although the March 6, 2014 proposed guidance indicated that some aspects of the guidance may be helpful to Dealer Members in the context of private placements, such reference to private placements was removed in the final guidance note.

Nine Principles of Underwriting Due Diligence

The guidance note is designed to promote consistency and enhanced underwriting due diligence standards among Dealer Members.  It sets out nine principles which underwriters should consider in the context of their due diligence of the issuer. These are:
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On March 20, 2014, the Ontario Securities Commission (OSC) published a Notice and Request for Comment proposing four new capital raising prospectus exemptions in Ontario.  As previously discussed in Timely Disclosure, the OSC initiated a consultation process in December 2013 to consider prospectus  exemptions to facilitate capital raising.

One of the new exemptions proposed is the crowdfunding exemption that would allow businesses to raise capital from a potentially large number of investors through an online portal registered with the securities regulators (Crowdfunding Exemption). The Crowdfunding Exemption, along with offering memorandum exemption, friends, family and business associates exemption, and existing securityholder exemption, were proposed by the OSC in an effort to provide startups and small and medium sized enterprises (SMEs) with greater access to capital markets.
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On March 13, 2014, Canadian securities regulators in all jurisdictions except Ontario and Newfoundland adopted a prospectus exemption that will allow issuers listed on the Toronto Stock Exchange (TSX), the TSX Venture Exchange (TSXV) and the Canadian Securities Exchange (CSE) to raise money by issuing securities to existing security

Overview

On January 29, 2014 the TSX Venture Exchange (TSXV) published a bulletin providing some guidance to facilitate the listing process for issuers intending to list on the TSXV in the “Industrial, Technology and Life Science” category (Non-Resource Issuers).  The TSXV’s guidance is focused on two areas:

  1. clarifying the “history of operations/validation of business” initial listing requirement (Operations ILR) for Non-Resource Issuers; and
  2. enhancing the utility of pre-filing applications for all issuers by assessing an issuer’s ability to satisfy the Operations ILR at an earlier stage in the listing process.

Interpretative Guidance for “History of Operations/Validation of Business” Initial Listing Requirement

The bulletin clarifies the Operations ILR applicable to Non-Resource Issuers pursuant to section 2.6 of Policy 2.1 – Initial Listing Requirements.  The policy currently provides minimal guidance in this area, stating that in order to meet the standard for “Prior Expenditures and Work Program”, Tier 1 and Tier 2 issuers must have a “history of operations or validation of business”. The TSXV now clarifies what this means.


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On November 21, 2013, Canadian securities regulators in all jurisdictions except Ontario and Newfoundland published for comment CSA Notice 45-312, which outlines a draft prospectus exemption for distributions to existing security holders (the Proposed Exemption).  The Proposed Exemption would provide issuers listed on the TSX Venture Exchange (TSXV) the ability to