Canadian Securities Regulators Take Further Incremental Steps to Promote Access to Capital Markets

[co-author: Kendall Pearce - Articling Student]

Against the current backdrop of global market uncertainty, on April 17, 2025, the Canadian Securities Administrators (CSA) announced new incremental measures aimed at reducing regulatory burden for reporting issuers, facilitating capital raising for new reporting issuers and supporting the competitiveness of Canadian capital markets (collectively, the CSA Measures). Through immediately effective coordinated blanket orders, the provincial and territorial regulators of the CSA have adopted the following measures:

1. Prospectus exemption for new reporting issuers: A new prospectus exemption has been created for issuers with recent underwritten initial public offerings (IPOs) that wish to raise additional funds of up to C$100 million under a subsequent offering for up to 12 months following an IPO, subject to restrictions on the minimum offering price and use of proceeds (among others).
2. Exemptions from certain prospectus and disclosure requirements: A new exemption has been created to allow issuers to forego the requirement to provide third-trailing year audited financial statements in connection with certain transactions and to streamline certain prospectus-related disclosure requirements.
3. Exemption from the investment limit under the offering memorandum prospectus exemption to exclude reinvestment amounts: Amendments have been made to the offering memorandum prospectus exemption to exclude reinvestment amounts from the offering memorandum investment limit to a maximum of C$100,000, for certain eligible investors who are individuals and received advice on investment suitability.

CSA Measures

1. Prospectus Exemption for New Reporting Issuers

An immediately effective blanket order provides a new prospectus exemption for issuers with recent underwritten IPOs, allowing for a maximum amount of C$100 million to be raised in a subsequent offering for up to 12 months following such an IPO.

The new exemption has certain similarities with the Listed Issuer Financing Exemption (LIFE) established in 2022 to facilitate additional capital raising, but allows for a larger maximum offering size among other key differences.

Similarities include:

• Reliance on continuous disclosure records, supplemented by a short offering document: The issuer must have filed all required continuous disclosure documents. This is supplemented by a news release and offering document, containing details of the offering and certain prescribed disclosure requirements.
• Available funds: The issuer must reasonably expect to have available funds to meet its business objectives and liquidity requirements for 12 months following the offering.
• No hold period: Distributed securities are freely tradable.
• Use of proceeds: Issuers cannot use the proceeds to fund a restructuring transaction or any other transaction that requires securityholder approval.
• Forty-five days to close: Issuers must close the offering within 45 days of the news release announcing the offering.

Key differences from the LIFE include:

• New issuers: The exemption only applies to new IPO issuers. The issuer must have received a receipt for a final long form prospectus in connection with an underwritten IPO in the last 12 months; the exemption cannot be used by reporting issuers that went public via a reverse-takeover, non-offering prospectus or other business combination.
• Class and price of security: The security distributed must be of the same class qualified for distribution pursuant to the issuer's long form IPO prospectus. The offering price cannot be lower than the price per security distributed under the IPO prospectus.
• Larger offering size: The maximum offering size under the new exemption is C$100 million, a significant increase to the LIFE maximum offering size (the greater of C$5 million or 10 percent of the issuer's market capitalization, to a maximum of C$10 million). The maximum offering size considers all prior offerings under this exemption in the prior 12-month period.
• Twenty percent of market value: The aggregate market value of distributed securities under the exemption cannot exceed 20 percent of the aggregate market value of the issuer's outstanding listed equity securities. This is a smaller limit than the LIFE, which limits the number of securities that can be distributed in reliance on the exemption to 50 percent of the issuer's outstanding listed equity securities.
• Control restrictions: The distribution cannot result in a new control person, or a beneficial owner that would be entitled to elect most of the issuer's directors.
• No sales to insiders: The distribution cannot be made to a person who is an insider, employee or consultant of the issuer.

This new exemption provides certain issuers with greater flexibility to raise additional capital for the year following an underwritten IPO. The new exemption is designed to promote IPOs and follow-on offerings by allaying concerns issuers may have about cost and/or access to follow-on public offerings after an IPO.

2. Exemptions from Certain Prospectus and Disclosure Requirements

A second blanket order expands the existing exemption for third-trailing year audited financial statement that has historically been required. The exemption now applies to all companies and aims to streamline related disclosure requirements.

(a) Third-Year Historical Financial Statements

Issuers filing a prospectus, information circular, material change reports related to a restructuring transaction, take-over bid circular or issuer bid circular, were generally required to include annual audited financial statements for the three most recently completed financial years. A previous limited exemption reducing the historic period from three years to two years has now been extended to exempt all issuers from this requirement.

(b) Pricing Information During the Waiting Period

During the prospectus waiting period (the time between filing of a preliminary prospectus and receiving a receipt for a final prospectus) a new exemption provides that if a news release containing specified pricing information is issued before a standard term sheet or marketing materials with pricing information is provided to a potential investor, the issuer does not have to disclose such specified pricing information in the preliminary prospectus or any amendment to the preliminary prospectus.

(c) Promoter Certificates

Lastly, issuers in most provinces and territories are now exempt from the requirement to include a promoter certificate in a prospectus, provided that either (1) the promoter is an individual who has signed a certificate in another capacity (such as a director or officer of the issuer) included in the same prospectus, or (2) the issuer has been a reporting issuer for at least two years, the prospectus is not for asset-backed securities, and the promoter is not a control person, director or officer of the issuer.

Notably, the British Columbia Securities Commission's blanket order excludes the second exemption category for promoter certificates.

3. Exemption from the Investment Limit under the Offering Memorandum Prospectus Exemption to Exclude Reinvestment Amounts

A final blanket order excludes ‘reinvestment’ amounts from the offering memorandum investment limit for certain eligible investors who are individuals and who have received advice on investment suitability, to a maximum of C$100,000.

For individual investors relying on the "offering memorandum" prospectus exemption under National Instrument 45-106 – Prospectus Exemptions, the existing investment limits are limited to, in a 12-month period, the following amounts:

• C$10,000 for non-eligible investors;
• C$30,000 for eligible investors; and
• C$100,000 for eligible investors who receive advice from a portfolio manager, investment dealer or exempt market dealer that the investment is suitable for such an eligible investor.

This new exemption relates to the third category of eligible investors above, permitting reinvestment of an additional C$100,000 from "realizable proceeds of disposition" of securities of the same issuer.

This exemption was implemented in Alberta, New Brunswick, Nova Scotia, Ontario, Quebec and Saskatchewan. The other Canadian jurisdictions do not have a corresponding investment limit to begin with.

Implementation

The CSA Measures were implemented by way of coordinated blanket orders made by the securities regulators of Canada's provinces and territories. The CSA Measures were effective starting on April 17, 2025. In certain jurisdictions, the blanket orders include an expiry date based on the term limits for blanket orders in such jurisdictions, which are generally set at 18 months from the effective date, unless extended.

Key Takeaways

The CSA Measures are the latest incremental step taken by Canadian securities regulators to reduce regulatory burden and increase access to capital markets. Bennett Jones previously profiled past CSA actions aimed at regulatory burden reduction in the following blog posts:

Efforts in this regard by the CSA are part of a long-running policy program of promoting the Canadian capital markets to prospective issuers while maintaining the strong regulatory framework for which the regime is known.

These latest CSA Measures apply to relatively limited categories of capital markets participants and in narrow circumstances. It remains to be seen who will benefit from the new measures and any resulting impact on the market, including whether the CSA Measures may factor into companies' decision-making on whether to pursue access to the Canadian capital markets through an IPO.