SECURITIES REGULATION AND IR

Over the last several years, the TSX Venture Exchange (“TSXV”) has faced increasing competition from various alternative exchanges. In December 2015, following extensive consultation and collaboration with venture industry participants, the TSXV released a white paper describing certain initiatives aimed at revitalizing the TSXV. Specifically, the white paper outlines the TSXV’s strategy for making a positive tangible impact in three important areas: 

• reducing issuers' administrative and compliance costs without compromising investor confidence;

• expanding the base of investors financing companies and generally enhancing liquidity; and

• diversifying and growing the stock list to increase the attractiveness of the marketplace overall.

Certain of the initiatives, especially those relating to the TSXV policies and significant changes to TSXV practices, are subject to securities commission approval. 

The TSXV intends to introduce the following changes to meaningfully reduce administrative and compliance costs: 

• Eliminate the general requirement for sponsorship. In those limited cases where certain material aspects of a company’s disclosure document are not independently verified, the TSXV may request a focused independent review of the new listing application;

• Revise the TSXV’s shareholder approval requirements so that they will not generally apply to inactive companies completing an arm’s length transaction such as a change of business or a reverse take-over;

• Recognize active and proven directors and officers of TSXV listed companies by employing a new NEXUS-type of status;

• Extend the interval to renew a Personal Information Form from three years to five years;

• Provide automated online filings. The TSXV currently offers this service for private placement transactions and plans to expand this service for additional types of transactions;

• Implement a more responsive system to accelerate transaction processing so that issuers can expect comments within a specified number of days; and

• Eliminate the TSXV’s escrow requirements and apply only National Policy 46-201 – Escrow for Initial Public Offerings.

In order to attract more investors and increase public venture market liquidity, the TSXV intends to: 

• Bolster its business development programs to create more positive awareness of Canada’s public venture market and to showcase TSXV listed companies to fund managers, retail investors, investment advisors, investment bankers and research analysts;

• Lead an action team of industry experts and diverse TMX Group representatives with a goal to reduce the barriers to U.S. investors wishing to participate in the Canadian market;

• Work to facilitate more direct communication between issuers and investors;

• Introduce a Market Making program on the TSXV by facilitating arrangements between issuers and qualified market makers under the high governance and monitoring standards of the TSXV;

• Introduce new investor analytic programs and research products;

• Engage with the Investment Industry Regulatory Organization of Canada (“IIROC”) to obtain clarity regarding the application of IIROC’s suitability standards;

• Amend and simplify the continued listing requirements of the TSXV and provide additional tools for companies to reactivate from NEX;

• Advocate for additional prospectus exemptions for public companies such as the recently introduced ‘existing shareholder’ exemption and the proposed dealer exemption; and

• Partner with a Canadian financial technology company to enhance its programs promoting financial literacy in capital markets education in universities and colleges.

In order to diversify and grow its stock list, the TSXV intends to: 

• Hire a dedicated team to bring new companies to their marketplace from diverse industries and help these companies to secure financings;

• Revise the capital pool company policy to make the program more flexible and attractive to companies in all industry sectors;

• Tailor TSXV policies further to reflect the needs of non-resource companies;

• Increase its efforts to ensure private equity firms, venture capital firms and angel investors consider the TSXV as an effective exit strategy for early stage companies;

• Explore alliances with other exchanges that could benefit its clients, similar to the relationship between the TSXV and the Santiago Stock Exchange, which provides qualified TSXV listed companies with complementary dual listings;

• Engage with exchange traded fund firms to develop more investment products that may include baskets of TSXV listed companies; and

• Advocate for early stage public companies to be fully eligible for the refundable investment tax credit under the federal Scientific Research and Experimental Development Program.

Two of the key takeaways from the white paper are as follows: 

• The TSXV is willing to propose significant changes to its policies and practices, such as eliminating the general requirement for sponsorship and the requirement for shareholder approval for inactive companies completing arm’s length transactions, during these difficult financial markets; and

• The TSXV is proposing to diversify and reduce its dependence on the resource industry by attracting more non-resource issuers. Currently, 71% of all TSXV listings are resource companies, many of which have experienced significant economic hardship over the last several years, which in turn has also negatively impacted the TSXV.

Hellen Siwanowicz is a Partner at McMillan LLP.