Browse Corporation

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.

Overview

Securities distributions through exchanges, such as the TSX Venture Exchange, involve a specialized process overseen by the exchange itself rather than a provincial securities commission. In this section, we’ll explore the specific requirements for prospectus exemptions, their conditions, and the additional documentation needed for approval.

Key Requirements for Securities Distributions

A different form of prospectus, known as an exchange offering document, may be used when shares are distributed through the facilities of the TSX Venture Exchange. The prospectus must align with the requirements set forth by both the exchange and applicable national instruments.

Qualifications for Prospectus Exemption

Issuers who meet the following criteria may qualify for a prospectus exemption:

  • The issuer has filed an Annual Information Form (AIF), is a reporting issuer, and is a SEDAR filer.
  • The securities are listed securities or units of securities and warrants.
  • The issuer has filed with the TSX Venture Exchange an exchange offering document, which incorporates by reference the AIF, the most recent financial statements, and material change reports. This document must be provided to purchasers.
  • The number of securities offered does not exceed the number previously outstanding.
  • The gross proceeds do not exceed $2 million.
  • No more than 20% of the offering is sold to any single purchaser.

Distribution Process

The exchange reviews the submitted prospectus and approves or disapproves it based on the adherence to established guidelines. The process ensures investor protection while facilitating capital-raising activities for issuers.

Documentation

The core document for distribution approval through the exchange is the exchange offering document, which includes:

  • Annual Information Form (AIF)
  • Most recent financial statements
  • Material change reports

This compiled document must be delivered to purchasers as part of transparency and compliance.

Additional Resources

Delve deeper into this subject by consulting the following documents:

  • TSX Corporate Finance Manual—Policy 4.6: Public Offering by Short Form Offering Document
  • National Instrument 45-106: Benefits and Respective Part 5

For those looking for graphical representations, the following flowchart outlines the process.

    graph TD
	A[Issuer meets criteria] --> B[Preparation of Exchange Offering Document]
	B --> C[Submission to TSX Venture Exchange]
	C --> D{TSX Review}
	D -- Fine --> E[Approval]
	D -- Corrections needed --> F[Disapproval]

Glossary

  • Annual Information Form (AIF): A disclosure document that provides material information about the company for regulatory authorities and investors annually.

  • SEDAR: System for Electronic Document Analysis and Retrieval; a mandatory document filing and archiving system for Canadian public companies.

  • Material Change Report: A report filed by public companies to disclose any significant changes that might affect the valuation or operations.

FAQs

Q: What happens if the number of securities offered exceeds the number previously outstanding?

A: The issuer would have to comply with additional regulatory requirements outside the scope of the exchange offering document and may not qualify for the prospectus exemption.

Q: Who primarily reviews and approves the prospectus used for securities distributed through exchanges?

A: The TSX Venture Exchange conducts the review and approval process, not the provincial securities commission.

Key Takeaways

  • The TSX Venture Exchange oversees the review and approval of the prospectus for securities distributions through its facilities.
  • Issuers must meet strict criteria including filing an AIF, being a reporting issuer, and being a SEDAR filer to use the prospectus exemption.
  • The distribution process ensures compliance with both exchange and national instruments’ requirements, providing transparency and protection for investors.
  • The gross proceeds from the distribution must not exceed $2 million, and no more than 20% of the offering can go to a single purchaser.

Feel free to consult the relevant policies and instrumental documents for a more comprehensive understanding. This section has laid out the basics for effective securities distribution through the exchanges.


CSC® Exams Practice Questions

📚✨ CSC Exam Questions ✨📚

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!

## Who reviews and approves the prospectus for securities distributed through the TSX Venture Exchange? - [ ] Provincial securities commission - [ ] Federal securities regulator - [x] The TSX Venture Exchange - [ ] The Canada Revenue Agency (CRA) > **Explanation:** The TSX Venture Exchange reviews and approves the prospectus rather than a provincial securities commission. ## What additional document must issuers file with the TSX Venture Exchange to distribute securities through the exchange? - [ ] Detailed Business Plan - [x] Exchange offering document - [ ] Tax Clearance Certificate - [ ] Legal Compliance Report > **Explanation:** Issuers must file an exchange offering document, which incorporates by reference the AIF, the most recent financial statements, and material change reports. ## Which of the following is NOT a requirement for an issuer to be eligible to distribute securities through the TSX Venture Exchange? - [ ] The issuer must be a SEDAR filer. - [ ] The issuer must be a reporting issuer. - [ ] The securities offered exceed the number previously outstanding. - [x] The issuer must be a private company. > **Explanation:** The issuer must be a SEDAR filer, a reporting issuer, and the securities offered must not exceed the number previously outstanding. The issuer cannot be a private company. ## What is the maximum gross proceeds allowed from a securities distribution through the TSX Venture Exchange? - [ ] $1 million - [ ] $1.5 million - [x] $2 million - [ ] $5 million > **Explanation:** The gross proceeds from the securities distribution must not exceed $2 million. ## What document must be delivered to purchasers during the distribution of securities through the TSX Venture Exchange? - [ ] Shareholders Agreement - [x] Exchange offering document - [ ] Investor Pitch Deck - [ ] Stock Certificate > **Explanation:** The exchange offering document, which includes references to the AIF, must be delivered to purchasers. ## How much of the offering can be allocated to a single purchaser? - [ ] 10% - [ ] 15% - [x] 20% - [ ] 25% > **Explanation:** No more than 20% of the offering can be allocated to one purchaser. ## In the context of securities distributions via the TSX Venture Exchange, what does AIF stand for? - [ ] Annual Investment Filing - [x] Annual Information Form - [ ] Annual Institutional Report - [ ] Annual Income Filing > **Explanation:** AIF stands for Annual Information Form, which must be filed by the issuer. ## Where can more detailed information on securities distributions through the TSX Venture Exchange be found? - [ ] TSX Real Estate Guide - [ ] National Instrument 31-103 - [x] TSX Corporate Finance Manual—Policy 4.6 - [ ] National Instrument 81-102 > **Explanation:** More detailed information can be found in the TSX Corporate Finance Manual—Policy 4.6 Public Offering by Short Form Offering Document. ## Which provincial instrument is relevant to securities distributions through the TSX Venture Exchange? - [ ] Instrument 51-102 - [ ] Instrument 31-103 - [ ] Instrument 81-101 - [x] National Instrument 45-106 > **Explanation:** National Instrument 45-106 is relevant to securities distributions through the TSX Venture Exchange. ## What type of securities must be listed for an issuer to be eligible to distribute through the TSX Venture Exchange? - [ ] Bonds - [x] Listed securities or units of securities and warrants - [ ] Preferred Shares - [ ] Convertible Debentures > **Explanation:** The securities must be listed securities or units of securities and warrants.

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Sunday, July 21, 2024