Ontario gains at the expense of other provinces

Six provinces have finalized memorandum exemptions. Why did Ontario emerge as the clear winner?

It was mixed emotions for the exempt market after the securities regulators in six provinces finalized offering memorandum prospectus exemptions.

“In aggregate, this is a very good day for both issuers and dealers operating in the exempt market but the limits that look to be coming to other provinces do ultimately put a dampener on the news,” said Craig Skauge, president and chair of the National Exempt Market Association.

The amendments will introduce an offering memorandum prospectus exemption in Ontario and will modify the existing offering memorandum exemption in Alberta, New Brunswick, Nova Scotia, Québec and Saskatchewan.

“With this welcome news of expansion in Ontario there is a simultaneous contraction for non-accredited investors outside of Ontario due to the limits expected to be imposed in Alberta, Saskatchewan, and Quebec in the second quarter of 2016,” said Skauge. “While our industry is receptive of the harmonization efforts being made, the retraction of historical investor rights in these other provinces will not sit well and may be subject to some opposition.”

The offering memorandum exemption was designed to facilitate capital-raising by allowing issuers to solicit investments from a wider range of investors than they would be able to under other prospectus exemptions, provided that certain conditions are met.

“It became evident very early on in the consultation process that the OSC wasn't comfortable adopting the operating memorandum exemption without investment limits due to investor protection concerns,” Skauge says. “In an effort to harmonize, the other jurisdictions have agreed to adjust their limits to the same levels as they don't feel it will have a large impact on the amount of capital raised with this exemption and will protect investors in those cases where there were concerns about too much money being placed in alternative investments by retail investors.”