Subject to our comments above, we agree. Each individual
investor has a different risk profile including investment objectives and
risk tolerance which must be considered in its totality by a registrant
who provides such suitability advice. Even though the Proposed
Exemption does not impose a limit where an investor receives such
advice, we believe a limit will be imposed based on the advice provided
by a registrant albeit appropriately tailored to that investor.
6. Do you agree that being a current security holder of an issuer
enables an investor to make a more informed investment decision
in that issuer?
The ability of investors to make informed investment decisions
is dependent on a number of factors, and being a current security
holder can be one of them. However, it is not necessarily a sufficient
condition and other factors such as the size of the position and the
time period during which it was held must also be given weight and
consideration. However, the ability of an existing security holder
to access a reporting issuer’s public disclosure record on SEDAR
and make their own investment decision is a significant factor. The
veracity of the information is important and the safeguards under
the Proposed Exemption increase the likelihood that there are no
material facts or material changes relating to the issuer that have
not been generally disclosed. The Proposed Exemption requires
this to be represented by an issuer in its subscription agreement
while also providing an investor with a right of action under the
statutory secondary market liability regime in securities legislation.
We believe that investors want the choice to make their own investment
decisions today and have the tools and resources available to help
them. We also recognize that issuers need an easier and less costly
way to raise capital from existing security holders who already have a
relationship with and are familiar with the issuer.
7. What is the appropriate record date for the exemption? Should it
be one day before the announcement of the offering or should it be
a more extended period? If you think it should be a more extended
period, what would be the appropriate period of time?
The ability of an issuer to quickly access capital is important
and a long record date would cause difficulty. The PCMA does not
recommend a specific record date, but believes it should be longer
than one day for the reasons set out in the Multilateral CSA Notice.
The imposition of a sunset clause allows the CSA time to monitor
how the Proposed Exemption is being implemented and to deal with
any issues or concerns.
8. We are currently proposing the exemption be subject to the
same resale restrictions as most other capital raising exemptions
(i.e., a four month restricted period). However, there are some
similarities between the proposed exemption and the rights
offering exemption, which is only subject to a seasoning period.
(a) Do you agree that a four-month hold period is appropriate
for this exemption?
Yes. The PCMA favours the adoption of consistent and
uniform securities laws across Canada, reason enough to adopt
a four month hold period for the Proposed Exemption as currently
drafted. Although the rights offering exemption is similar to the
Proposed Exemption, it is also different in many important ways,
including with respect to the disclosure requirements.
(b) Should we require issuers to provide additional continuous
disclosure, such as an annual information form?
No, not if the policy rationale is cost and time burden. We
would not anticipate widespread adoption of the Proposed
Exemption if such a requirement were imposed.
(c) If we were to consider a seasoning period for this
exemption, should we consider some of the restrictions that apply
under a prospectus-exempt rights offering, such as “claw-backs”
limiting insider participation?
No comment since we do not support a seasoning period.
(d) If securities offered under the exemption were only subject
to a seasoning period, would there be a greater need to ensure
investors are made aware of and have an opportunity to participate
in the offering?
No comment since we do not support a seasoning period.
9. We have not proposed any conditions regarding the structure
of the financing, i.e., minimum or maximum price, maximum
dilution, or period in which an offering must be completed. We
contemplate that the proposed financing would be conducted
under the standard private placement rules of the TSXV which,
among other things, allow pricing at a discount to the market price.
Is this appropriate or are there other structural requirements that
we should make a condition of the exemption?
We believe that the Proposed Exemption should follow the
private placement rules of the applicable stock exchange. Existing
security holders should be treated the same as other investors in a
private placement, where an issuer has the right to accept or reject
a subscription, in whole or in part, from any investor. Requiring an
issuer to allocate securities pro-rata among security holders who
are interested in participating in a rights offering under the Proposed
Exemption would unnecessarily add to the cost and burden of such
an exemption especially where this is done on a non-brokered basis.
The CSA may also wish to clarify whether the Proposed
Exemption could be used to facilitate an “equity-line” type of
financing and whether this is desired. For example, in an equity-line structure a party who is the financier could hold one share of
the issuer, and on that basis, propose a financing commitment
where it would obtain discounted shares relative the VWAP of such
shares. We would appreciate if the CSA can provide additional
guidance explaining whether this would be permitted or not under
the Proposed Exemption.
We believe the Proposed Exemption strikes the right balance
in protecting investors while providing for fair and efficient capital
markets subject to our comments above. Many exchange-listed
reporting issuers cannot raise capital in this economic climate in
a cost effective manner and the Proposed Exemption seeks to
accomplish this, while allowing members of the retail public to
participate in such offerings in a manner that provides appropriate
We thank you for the opportunity to provide you with our comments
on the Proposed Exemption and welcome any opportunity for further
dialogue on this matter.