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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.

4. Identify Other Methods Of Distributing Securities To the Public Through Stock Exchanges

Though we’ve extensively discussed the more conventional methods companies employ to introduce securities to the market, there are alternative routes to distribute securities to the public, including:

Junior Company Distributions

Junior companies, often in the mining or tech sectors, can distribute securities to raise capital. These companies are typically in the early stages of exploration and operation, offering potential for high return albeit with higher risk.

Options of Treasury Shares and Escrowed Shares

Treasury shares, also known as treasury stock, refer to shares that were once part of the float and outstanding shares but were later reacquired by the issuing company. Companies often issue options on these shares as part of management incentive programs.

Escrowed shares are held in escrow until certain conditions, often performance milestones or time-based thresholds, are met. Upon meeting these criteria, shares are released exponentially, ensuring that company insiders have a prolonged interest in the well-being of the attributed entity.

Capital Pool Companies (CPC)

A Capital Pool Company (CPC) is a unique listing vehicle on the TSX Venture Exchange. It allows experienced board members to raise a pool of capital with the intent of completing a qualifying transaction, typically acquiring an operating company.

CPC Process Flowchart

    flowchart LR
	    A[Seed Capital] --> B[Initial IPO]
	    B --> C[Trade as CPC]
	    C --> D[Identify Acquisition]
	    D --> E[Qualifying Transaction]

The NEX Board

NEX is a unique trading board for companies that no longer meet the listing requirements of the TSX Venture Exchange. NEX offers a streamlined and effective path for companies to raise capital and maintain a public listing.


Crowdfunding allows companies, particularly startups, to raise small amounts of money from a large number of people, typically via internet platforms. It democratizes the investment process by allowing retail investors to participate in early-stage funding opportunities.

Crowdfunding Process

	    participant Investor
	    participant Platform
	    participant Company
	    Investor->>Platform: Browse investment opportunities
	    Platform->>Company: Facilitates funding
	    Investor->>Company: Provides capital

Key Takeaways

  • Junior Company Distributions: High-risk, high-reward investments typically in the mining or tech sectors.
  • Treasury and Escrowed Shares: Incentive tools for management with conditional or performance-based release schedules.
  • Capital Pool Company (CPC): A TSX Venture Exchange mechanism for raising capital and completing qualifying transactions.
  • NEX Board: A trading board for companies not meeting TSX Venture Exchange listing criteria, helping to maintain public listings and raise capital.
  • Crowdfunding: Democratized investment opportunities via online platforms, pooling capital from numerous small investors.


  • Junior Company: An early-stage company, often in high-risk, high-reward industries such as mining or technology.
  • Treasury Shares: Shares reacquired by the issuing company, often used for employee compensation or other incentive programs.
  • Escrowed Shares: Shares held in escrow until certain criteria are fulfilled, ensuring continued vested interest in company performance.
  • Capital Pool Company (CPC): A TSX Venture-specific investment vehicle created to pool funds for acquisition and qualifying transactions.
  • NEX Board: A trading platform for lo wer-activity companies that have fallen below the main exchange’s listing requirements.
  • Crowdfunding: A method of raising capital by sourcing small amounts of money from many individuals via online platforms.

Frequently Asked Questions (FAQs)

What is the primary function of a Junior Company in securities distribution?

Junior companies primarily utilize funds raised from their security distributions to advance early-stage projects, with an expectation of higher returns.

How do treasury and escrowed shares help companies in terms of employee incentives?

Treasury shares provide immediate, often retention-focused incentives for employees, while escrowed shares release over time or milestones, ensuring longer-term goal alignment.

Can anyone invest in Capital Pool Companies?

Generally, CPC investments are suited to experienced investors familiar with the involved risks, although initial underwriting can be open to accredited investors and the public during IPO.

How does the NEX board benefit companies?

Providing liquidity and a pathway to maintain a public listing status while raising capital, even when transitioning due with organized market activity.

What regulations govern crowdfunding in Canada?

In Canada, National Instrument 45-110 governs crowdfunding, including investment limits and registration requirements for funding portals.

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!

## Which is a method of distributing securities to the public through stock exchanges? - [ ] Employee stock ownership plan - [ ] Mutual funds - [x] Junior company distributions - [ ] Bond issuance > **Explanation:** Junior company distributions involve smaller or newly established companies issuing securities to the public. ## How can companies distribute treasury shares to the public? - [ ] By dividends - [ ] By splitting shares - [x] By issuing options of treasury shares - [ ] By repurchasing shares > **Explanation:** Companies can distribute securities by offering options on previously issued but unsold treasury shares. ## What is a Capital Pool Company (CPC)? - [ ] A type of dividend reinvestment plan - [ ] A retirement fund - [x] A special-purpose vehicle created to secure capital for future mergers or acquisitions - [ ] An exchange-traded fund (ETF) > **Explanation:** A Capital Pool Company (CPC) is an initiative to raise funds for mergers or acquisitions without having any commercial operations. ## What is the NEX board? - [ ] A standard stock exchange market - [x] A unique trading board for companies that have fallen below TSX Venture Exchange listing standards - [ ] An interest rate index - [ ] A derivative market > **Explanation:** The NEX board is part of the TSX Venture Exchange where companies that no longer meet the TSX listing requirements are traded. ## In which of the following ways can a company utilize crowdfunding? - [ ] Issuing government bonds - [ ] Creating mutual funds - [x] Raising small amounts of capital from a large number of people, typically through the internet - [ ] Issuing large debt offerings > **Explanation:** Crowdfunding allows companies to raise small amounts of capital from a large number of investors, typically through online platforms. ## Which of the following does NOT involve distributing securities via stock exchanges? - [ ] NEX board - [ ] Junior company distributions - [ ] Crowdfunding - [x] Private placements > **Explanation:** Private placements involve selling securities directly to a small number of selected investors rather than through public stock exchanges. ## What type of company primarily uses the NEX board for trading? - [ ] Blue-chip companies - [ ] Startups - [ ] High-growth potential firms - [x] Companies that no longer meet TSX Venture Exchange standards > **Explanation:** Companies that fail to meet the continuous listing standards of the TSX Venture Exchange use the NEX board. ## Which method involves the public purchase of shares from previously existing shareholders rather than from the company? - [ ] Treasury shares options - [ ] Capital Pool Company - [x] Secondary market transactions - [ ] NEX board > **Explanation:** Secondary market transactions involve investors buying shares from other investors rather than from the issuing company. ## Which among the following is NOT considered a public method of distributing securities? - [ ] Junior company distributions - [ ] Capital Pool Company (CPC) - [ ] NEX board - [x] Employee stock purchase plans > **Explanation:** Employee stock purchase plans are internal programs that allow employees to buy shares at discounted prices and are not publicly offered. ## How do Junior company distributions differ from large-cap company offerings? - [ ] Their shares are more liquid - [x] They generally attract more speculative investors due to potential high growth but higher risk - [ ] They are usually safer investments - [ ] They generally offer lower returns > **Explanation:** Junior company distributions are popular among speculative investors due to the high growth potential and higher associated risks.

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In this section

  • 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.
Sunday, July 21, 2024