An EMD is a regulated intermediary and given the size of the
exempt market, a significant intermediary.
At its root, an EMD is an intermediary between retail and
institutional buyers with capital, and issuers requiring capital. An
EMD must comply with client suitability and know your product
obligations amount other things. EMD’s are in a special or unique
relationship; to buyers, an EMD is a “Trusted Advisor” and to
issuers a “Corporate Advisor”.
EMD’s generally perform the Trust Advisor role well and as
consideration for performing this role; EMD’s receive commissions.
However, a revenue stream and branding opportunity sometimes
overlooked by EMDs is the role of Corporate Advisor.
I encourage EMD’s to move towards performing more
focused due diligence of issuers and providing advice to issuers.
Focused due diligence allows an EMD to select issuers that will
perform as represented and reduce the risk of harm to an EMD
and its advisors, as investments may be difficult to liquidate prior
An EMD should consider each issuer as a potential advisory
client. Specifically, EMDs should view this as an opportunity to
provide advisory services to assist an issuer, as many issuers will
look to an EMD as its advisor in achieving its fund raising goals.
This concept isn’t new; this is one of the main sources of revenue
of an IIROC dealer and it generally only takes a few well performing
issuers for an IIROC dealer to generate above average returns.
Given the current revenue models of EMDs, most EMDs don’t
have the internal resources to undertake the role of Corporate
Advisor on their own. However, instead of directing an issuer
to other service providers and allowing others to brand and be
compensated directly, EMDs should first consider engaging
outside professionals to assist in fulfilling corporate advisory
mandates under the EMDs brand.
EMDs are best to stay within an issuer size they are
comfortable with and grow its advisory business on an
The following are some corporate advisory areas to consider:
•;Financial;modeling;— help an issuer build an interactive
financial model to make business decisions. This is key to
management in making business, transaction and capital
•;Finance;advisory — Review of different financing options,
including debt and equity along with registered and
non-registered account funds. An EMD should recommend
the best direction.
• Transaction advisory — Review of transaction and
preparation of a plan that suits and issuer’s needs.
For more information contact:
Find your comfortable issuer size;
your brand will grow along with