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Rights offerings to be streamlined, says CSA

by Greg Klein | September 24, 2015

Addressing complaints that “issuers seldom use the prospectus-exempt rights offering to raise capital because of the associated time and cost,” the Canadian Securities Administrators announced amendments on September 24. Provided ministerial approvals come through, the changes take effect December 8.

This streamlined exemption is designed to make prospectus-exempt rights offerings more attractive to reporting issuers while maintaining investor protection.—Louis Morisset, CSA chairperson

Gone will be the required regulatory review prior to using the rights offering circular. In its place will be “alternative investor protections including the addition of statutory secondary market civil liability” granting the right of action in case of misrepresentation.

The changes require issuers to file a new notice on SEDAR and send it to security holders telling them how to access the circular electronically. A new circular in Q&A format has been designed for relative ease of preparation and understanding. The dilution limit increases from 25% to 100%.

“The amendments also remove the ability of non-reporting issuers to use the rights offering exemption and update other elements of the rights offering regime,” the CSA added.

“Rights offerings can be a very effective way for issuers to raise capital while providing existing security holders with an opportunity to protect themselves from dilution,” said Louis Morisset, CSA chairperson and president/CEO of l’Autorité des marchés financiers. “This streamlined exemption is designed to make prospectus-exempt rights offerings more attractive to reporting issuers while maintaining investor protection.”

A copy of the amendments can be found on websites of the provincial and territorial securities commissions.

Read: “Scrap IIROC, fix the BCSC”: The Venture Capital Markets Association offers a rescue plan for junior financings.

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