Exempt Market Update | Spring 2012 | www.emdacanada.com 12
and deep understanding of policy, regulation and the exempt
market industry are the hallmarks of our national voice.
The EMDA push for a comprehensive exempt market review
A consistent message the EMDA has been delivering is the
need for a more comprehensive review of the exempt market
and its purpose. Through all our recent written submissions to
regulators (which we post on the EMDA website) and in every
in-person meeting we have with securities regulators across
Canada, the EMDA makes the case for an inclusive policy
approach founded on research and facts. Nowhere is this more
evident than the EMDA’s response to the recent Minimum Amount
and Accredited Investor Exemption review by the Canadian
Securities Administrators (CSA).
The proposal to significantly change or repeal important
capital raising exemptions was critical for its potential to
change what we do, but also for its notably absent public policy
rationale, lack of context and limited understanding of the size
and scope of the exempt market. Bad press and the desire to
‘crack down’ are poor motivations for serious policy reforms, and
many commentators pointed that out. But what the EMDA did
was something much more.
The EMDA built the case to expand the prospectus
Over the course of several months the EMDA set in motion
an extensive consultation process to build our case, both against
the proposed changes, and in favour of a more inclusive approach
to reforming our capital raising tools across Canada. We did this
through multiple Town Hall meetings in western Canada, a cross-Canada online survey, vigorous policy discussions with securities
regulators in public and private meetings in western, central
and eastern Canada. The EMDA consistently demonstrated its
commitment to leading the debate. Reacting to change with empty
statements of disagreement or attempting to embarrass Ontario for
not adopting the Offering Memorandum (OM) exemption are not
successful strategies for long-term influence. Mass rhetoric does
not change the minds of regulators, and does not provide them
with solutions to long intractable policy problems. What provokes
change are passionate and reasoned voices that make an impact
through thoughtful, well researched positions capable of pushing
policy debate in a new direction. The EMDA again demonstrated
our ability to come to the table with a better way forward – that is
what effective advocacy looks like.
How the EMDA got the OM exemption on Ontario’s agenda
Our approach to the CSA’s limited prospectus exemption
review contributed to several key changes to their approach and
a significant broadening of the review, particularly in Ontario. The
most important change was getting the OM exemption now on
the agenda in Ontario – finally! This change didn’t come about
because of noise and rhetoric pushing for Ontario to ‘get onboard’.
That noise has existed for years, and always failed to persuade the
cautious Ontario Securities Commission (OSC). The EMDA pushed
for change by getting to the root of why Ontario had stayed out of
the OM regime for all these years. This element was key because
the EMDA also knew what was coming – a serious statement of
concern by the regulators in the jurisdictions which adopted the
OM exemption about the quality of the OMs they were seeing. In
late April securities regulators released their concerns with a notice
highlighting 19 significant and common deficiencies of OMs filed
in their jurisdictions. No wonder Ontario wasn’t jumping on board.
Striking a Balance - the EMDA framework for change
What the EMDA has done is acknowledge the longstanding
and legitimate OSC concerns about weaknesses in the two OM
exemptions and we showed them a way it could be done better.
In effect, striking the right balance between an efficient capital
market for issuers and investors, and the need for adequate and
even enhanced investor protections. By setting out the framework
for a new, national and harmonized ‘Eligible Investor Exemption’
with safeguards for investors, public disclosure, suitability and
KYC protections, we demonstrated that the exempt market in
Ontario could find a new and better balance between market
efficiency and protection of investors. Having made the point in
our submission that 98% of investors in Ontario are locked out of
the exempt market, and that a reasonable OM regulatory regime
was possible, we are not at all surprised by the OSC decision to
finally put the OM exemption on the table. We are also pleased
to see the OSC strike a new Exempt Market Advisory Committee
to guide them through the year ahead - which incidentally the
regulators are now calling ‘the year of the exempt market’. That is
what I call progress.
What lays ahead?
The challenges laying ahead for the exempt market are only
rising – but the EMDA is determined to meet those challenges.
How our prospectus exemptions and our dealer and adviser
registration framework evolve across Canada will significantly
impact the exempt market and the economic health of Canada.
Making sure we are able to influence how they evolve, matter to all
of us: the investors who purchase exempt market securities, the
dealers who sell them, the issuers and companies who rely on them
to raise capital, and the governments who need strong economic
growth. The EMDA’s work in leading change and helping develop
the exempt market in Canada is really just beginning.
The EMDA’s submissions to securities regulators on several
of the topics discussed here can be found on our website www.
emdacanada.com under “Speaking Up For EMDs”.
For more information contact: