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12. Financing And Listing Securities

An in-depth introduction to the processes involved in financing and listing securities, including government and corporate financing, the dealer's advisory relationship, prospectus systems, and the advantages and disadvantages of listing shares.

Financing and Listing Securities

In this chapter, you will learn about the process by which governments and corporations raise debt or equity capital and bring their securities to market. You will learn about prospectus requirements and the process of after-market stabilization. You will also learn about the means by which securities are distributed through the exchanges, as well as the methods of distributing securities other than on an exchange. Finally, you will learn about the listing process, including the advantages and disadvantages of listing and the circumstances under which trading privileges can be withdrawn.

  • Describe the process governments and corporations use to raise capital to finance funding requirements.

  • Describe the dealer’s advisory relationship with corporations.

  • Summarize the prospectus system and the after-market stabilization process.

  • Identify other methods of distributing securities to the public through stock exchanges.

  • Describe the advantages and disadvantages of listing shares.

  • Describe the circumstances under which exchanges can withdraw trading privileges.


1. Government and Corporate Finance

Governments and corporations use a variety of methods to raise capital to finance their operations or projects. This process often involves the issuance of debt (bonds) or equity (stocks). The focus will be on how these entities determine their funding requirements and the mechanisms they use to meet these needs.

2. The Dealer’s Advisory Relationship with Corporations

Dealers play a crucial role in advising corporations on financing strategies, helping them navigate the complexities of capital markets. This section will cover the role dealers serve, including underwriting, providing market insights, and structuring deals.

3. Bringing Securities to the Market

To bring securities to the market, entities must follow a regulatory process, starting with the creation of a prospectus. This document provides potential investors with comprehensive details about the security and the issuer. The process involves:

  • Preliminary Prospectus (Red Herring): An initial version filed with securities regulators.
  • Marketing the Security: Roadshows and analyst meetings to attract investors.
  • Final Prospectus: Submitted after incorporating feedback and securing firm commitments from investors.
  • After-Market Stabilization: Techniques to stabilize the security’s price after initial trading begins.

4. Other Methods of Distributing Securities to the Public

Beyond traditional IPOs, securities may be distributed through different methods such as:

  • Private Placements: Selling securities to a select group of investors.
  • Direct Listings: Selling existing shares directly to the public without underwriting.
  • Secondary Offerings: Issuance of additional shares by a company that is already publicly listed.

5. The Listing Process

Listing shares on a stock exchange offers various advantages such as increased liquidity and visibility, but it also comes with disadvantages like regulatory scrutiny and higher compliance costs. This section will discuss the full spectrum of the listing process, including what companies must prepare and consider.

6. Withdrawal of Trading Privileges

The extension of trading privileges can be revoked under certain conditions, such as violations of exchange rules, insufficient public float, or financial distress of the listed entity.


Key terms are defined in the Glossary and appear in bold text throughout the chapter.

  • After-market stabilization: Techniques used to minimize price volatility of a new security after it is issued.
  • Preliminary prospectus: An early version of the prospectus, sometimes referred to as a red herring.
  • Primary offering: The initial sale of securities to the public by the issuer.
  • Prospectus: A legal document detailing the security being offered, the issuer, and financial information.
  • Private placement: Sale of securities to a small group of investors, bypassing public offering.


Q1: What are the advantages of listing a company’s shares on a stock exchange?

A1: Listing shares increases liquidity, improves transparency and credibility, provides easier access to capital, and enhances the public profile of the company.

Q2: What roles do dealers play in the securities market?

A2: Dealers underwrite securities, advise companies on market conditions, assist in structuring deals, and facilitate the buying and selling of securities.

Q3: What is a prospectus and why is it important?

A3: A prospectus is a legal document required for most public while offering details about the security being issued and the issuing company, enabling investors to make informed decisions.


  • Governments and corporations raise capital by issuing debt or equity, requiring meticulous regulatory adherence to foster investor trust.
  • Dealers play a multifaceted role, offering strategic advice and underwriting services to facilitate capital formation.
  • The prospectus process involves multiple stages, culminating in a final document that must comply with stringent regulatory guidelines.
  • Alternative methods of securities distribution, like private placements and direct listings, offer flexible funding solutions but come with distinct advantages and disadvantages.
  • Listing on a stock exchange provides significant benefits such as increased liquidity and market trust but also imposes compliance and disclosure obligations.
  • Trading privileges can be revoked under certain conditions that breach exchange rules or signal financial instability.

This chapter prepares you for an in-depth understanding of how securities are financed, brought to the market, and the regulatory environment overseeing these processes.

Diagrams and Charts

Consider including the following diagram following explaining content of your information or tasks:

    graph TB
	    A[Initiate Financing Process] -->|Debt or Equity?| B[Issue Bonds]
	    A --> C[Issue Equity]
	    B --> D{Preliminary Prospectus}
	    D --> E[Red Herring Filed]
	    E --> F[Marketing Securities]
	    F --> G[Collect Commitments]
	    G --> H[Final Prospectus]
	    H --> I[Listing on Exchange]
	    C --> D

📚✨ CSC Exam Bank ✨📚

Welcome to the Knowledge Checkpoint! You'll find 10 carefully curated CSC exam practice questions designed to reinforce the key concepts covered. These questions will help you gauge your grasp of the material, identify areas that need further review, and ensure you're on the right track towards mastering the content for the Canadian Securities certification exams. Take your time, think critically, and use these quizzes as a tool to enhance your learning journey. 📘✨

Good luck!

## What is the primary purpose of the process described in Chapter 12? - [ ] To manage derivatives trading - [ ] To perform technical analysis of stocks - [ ] To evaluate credit ratings of bonds - [x] To raise debt or equity capital for governments and corporations > **Explanation:** The chapter focuses on how governments and corporations raise capital through debt or equity and the related processes. ## Which document is necessary for bringing new securities to market? - [x] Prospectus - [ ] Red herring prospectus - [ ] Qualifying transaction - [ ] Greensheet > **Explanation:** A prospectus is required to bring new securities to market, which includes all relevant information about the securities being offered. ## What role does a dealer play in the process of raising capital? - [x] Advisory relationship with corporations - [ ] Trading on the secondary market - [ ] Only executes trades for retail clients - [ ] Performs independent audits > **Explanation:** Dealers provide advisory services to corporations, helping them with the process of raising capital. ## What is the purpose of after-market stabilization? - [ ] To increase market volatility - [ ] To decrease the initial public offering price - [x] To maintain a stable market price for securities post-IPO - [ ] To liquidate holdings immediately > **Explanation:** After-market stabilization aims to keep the market price stable after an IPO, supporting the newly issued securities. ## Which of the following is NOT a method of distributing securities? - [ ] Private placement - [ ] Public float - [ ] Crowdfunding - [x] Primary offering through money market > **Explanation:** Primary offerings are usually not conducted through money markets but through capital markets like stock exchanges. ## What is a major advantage of listing shares on an exchange? - [x] Increased liquidity - [ ] Guaranteed returns - [ ] Reduced regulatory oversight - [ ] Higher risk > **Explanation:** Listing shares on an exchange provides increased liquidity as shares can be easily bought and sold. ## Under what circumstance can trading privileges be withdrawn? - [ ] When a company meets all disclosure requirements - [ ] When a company exceeds its market capitalization criteria - [x] When a company violates listing agreement - [ ] When a company opts out of issuing dividends > **Explanation:** Exchanges can withdraw trading privileges if a company fails to adhere to its listing agreement and other exchange rules. ## What is a preliminary prospectus also known as? - [ ] Blue skyed - [ ] Greensheet - [x] Red herring prospectus - [ ] Final prospectus > **Explanation:** A preliminary prospectus is commonly known as a red herring prospectus and contains all essential information except the final price. ## How do companies distribute securities outside of stock exchanges? - [x] Through private placements and direct bonds - [ ] Only through primary offerings - [ ] Exclusively using government securities - [ ] Using short-selling techniques > **Explanation:** Companies can distribute securities through means like private placements and direct bond offerings, bypassing stock exchanges. ## What is meant by 'material fact' in this context? - [x] Any information that could affect an investor’s decision - [ ] Only information related to technical analysis - [ ] Information specific to government bonds - [ ] Confidential company data > **Explanation:** A material fact is any information that would be important for an investor to know and could impact their investment decision.

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In this section

  • 12.1 Introduction
    Introduction to the process by which companies list their securities on stock exchanges and the necessary regulatory requirements.
  • 12.2 Government And Corporate Finance
    Comprehensive overview of the processes governments and corporations use to raise capital, including methods, differences, and implications.
    • 12.2.1 Investment Dealer Finance Department
      Comprehensive guide on the role and responsibilities of the finance department within investment dealers, focusing on both government and corporate finance.
    • 12.2.2 Canadian Government Issues
      An in-depth look at Canadian Government Issues, including the competitive tender system for marketable bonds and Treasury bills, types of bonds, bid structures, and the example auction process.
    • 12.2.3 Provincial And Municipal Issues
      An in-depth look at the issuance, management, and characteristics of provincial and municipal bonds in Canada. Understand the roles of financial agents, syndicate groups, and institutional portfolios in these securities.
    • 12.2.4 Corporate Financing
      Comprehensive guide on corporate financing including equity and debt financing in Canada. Explore types of securities, share capital, market capitalization and public float with real-world examples.
  • 12.3 Dealer’s Advisory Relationship With Corporations
    Explore the intricate advisory relationship between dealers and corporations in the context of financing and issuing securities. Learn about the roles, advisory services, key considerations, and protective provisions involved in these financial transactions.
    • 12.3.1 Method Of Offering
      Explore the different methods of offering securities in corporate financing, including private placement, public offerings, and the distinctions between primary and secondary offerings.
  • 12.4 Bringing Securities To Market
    Learn the key steps and regulatory requirements involved in bringing securities to the market, including the prospectus system and after-market stabilization.
    • 12.4.1 When Prospectus Is Required
      Learn about when a prospectus is required for the distribution or sale of securities, including scenarios for new issues and obligations in various provinces in Canada.
    • 12.4.2 Preliminary Prospectus
      A comprehensive guide to understanding the Preliminary Prospectus in Canadian securities regulations, including its definitions, requirements, and the Passport System.
    • 12.4.3 Permitted Activities During Waiting Period
      A detailed guide on the activities permitted for underwriters and dealers during the waiting period between the preliminary prospectus and final prospectus in the Canadian Securities Course.
    • 12.4.4 Final Prospectus
      Understand the complete details provided in a final prospectus, including the requirements for material facts, cover page, summary, issuer information, securities data, and more.
    • 12.4.5 Short Form Prospectus System
      An in-depth guide to understanding the Short Form Prospectus System in Canada, including its uses, conditions, and distinctions from the long form prospectus.
    • 12.4.6 After-market Stabilization
      A comprehensive guide to understanding after-market stabilization in securities offerings, including greenshoe options, penalty bids, and stabilizing bids.
    • 12.4.7 Securities Distributions Through Exchanges
      An in-depth guide to securities distributions through exchanges, focusing on the approval process, requirements, and exemptions for issuers.
  • 12.5 Other Methods Of Distributing Securities To Public
    Explore alternate methods of distributing securities to the public in Canadian stock exchanges, such as junior company distributions, treasury shares, CPCs, the NEX board, and crowdfunding.
    • 12.5.1 Junior Company Distributions
      An in-depth exploration of junior company distributions, focusing on the capital raising strategies of junior mining and oil companies. Aimed at helping candidates prepare for the Canadian Securities Course (CSC) certification exam.
    • 12.5.2 Options Of Treasury Shares And Escrowed Shares
      An in-depth guide to understanding the options and features of treasury shares and escrowed shares, including their benefits, restrictions, and the impact on secondary market performance.
    • 12.5.3 Capital Pool Company Program
      Comprehensive guide to the Capital Pool Company (CPC) Program designed by the TSX Venture Exchange for small and emerging businesses to obtain early-stage financing.
    • 12.5.4 Nex Board
      A comprehensive guide to understanding the NEX Board on the TSX Venture Exchange, including its purpose, types of issuers, benefits, and FAQs.
    • 12.5.5 Crowdfunding
      Explore the mechanism and regulatory aspect of crowdfunding in raising start-up capital through online platforms.
  • 12.6 Listing Process
    Detailed overview of the listing process for securities on recognized exchanges, including the associated advantages, disadvantages, and regulatory compliance.
    • 12.6.1 Advantages And Disadvantages Of Listing
      Detailed analysis and comparison of the advantages and disadvantages of listing a public company on a major stock exchange, exploring impacts on prestige, market visibility, management controls, and market dynamics.
    • 12.6.2 Withdrawing Trading Privileges
      Understand the processes and reasons behind the withdrawal of trading privileges on stock exchanges, including temporary interruptions and delisting procedures.
  • 12.7 Summary
    Comprehensive summary of Chapter 12 focusing on financing and listing securities in capital markets, including federal and provincial financing, corporate capital raising, the Passport System, short form prospectuses, continuous disclosure requirements, after-market stabilization, and pros and cons of listing shares on an exchange.
Tuesday, July 23, 2024