On November 29, 2018, the Canadian Securities Exchange (CSE) proposed amendments (the Proposed Amendments) to its policies that would introduce a requirement for resale restrictions on securities issued by CSE-listed companies pursuant to the exemption in section 2.24 (the Consultants Exemption) of National Instrument 45-106 Prospectus Exemptions.
Currently, shares issued pursuant to the Consultants Exemption are generally free trading assuming the issuer has been a reporting issuer for at least four months. The CSE notes that it has identified instances of what it considers inappropriate use of the Consultants Exemption that have resulted in excessive dilution and increased selling pressure on listed securities.
If the Proposed Amendments are adopted, CSE policies would require a four month hold period on all shares issued pursuant to the Consultants Exemption, unless written approval to issue the securities without the hold period is obtained from the CSE. Resale restrictions would also have to be disclosed in a news release describing the share issuance.
The CSE is requesting comments on the Proposed Amendments, specifically: The Proposed Amendments will require prior approval from the CSE to issue shares under the Consultants Exemption without a hold period. Will the requirement for CSE approval adversely affect the use of that exemption?
Comments should be in writing and submitted no later than January 3, 2019 to the CSE with a copy to the Ontario Securities Commission. Contact information can be found here.
DISCLAIMER: This post is intended to convey general information about legal issues and developments as of the date above. It does not constitute legal advice and must not be treated or relied on as such.