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Notice 2018-008 - Form 9 Notice of Proposed Issuance of Listed Securities and Policy 6 Distributions - Request for Comment

August 31, 2018

DESCRIPTION OF THE PROPOSED AMENDMENTS

Background

CNSX Markets Inc. (“CNSX” or the “Exchange”) is proposing amendments to Form 9 – Notice of Proposed Issuance of Listed Securities (the “Form”) that will repeal the requirement for CNSX Issuers to post to the CNSX website (the “Website”) certain information related to purchasers in an exempt distribution. The Amendments will require that only investors that are Related Persons, as defined in Policy 1, be identified in the Form. There are related changes proposed to Policy 6 – Distributions (the “Policy”) to clarify filing procedures.

The revised Form includes a summary table of the jurisdictions in which funds were raised and the total from each jurisdiction, similar to forms for exempt distributions filed pursuant to National Instrument 45-106. The current table, requiring the identity of each purchaser, would be completed for Related Parties only.

Further changes to the Form will include the addition of information regarding pricing of securities, specifically to determine whether the price was established by the announcement of the issuance or a previous confidential request for price protection.

Details of the Changes

Form 9

The Form will be renamed to confirm it applies to both a proposed issuance and an issuance of listed securities. Minor changes are proposed in the introductory section of the Form. A new heading, “Pricing” precedes the date of announcement and market price of securities, and new lines will include the date of a request for price protection and the market price before that request. Additional fields for the number of securities to be issued and the total issued and outstanding post-closing appear on the first page.

A new section, “Instructions” provides specific guidance on the completion of the tables and schedule. The direction to proceed to Part 2 of the Form to complete details of an acquisition has been moved from the heading “1. Private Placement” and included in “Instructions”.

Part 1 Private Placement

Instructions have been added above the new Table 1A – Summary. Table 1A must be completed with summary information for all purchasers except those that received an agent’s fee, commission, bonus, finder’s fee, or other compensation. Such disclosure is still required elsewhere in the Form (Item 8). Table 1A – Summary includes the number of purchasers, price per security and total dollar value raised in each jurisdiction. Table 1B – Related Persons is the table used in the current version of the Form, with minor changes:

  • “Residential Address” has been changed to “Municipality of Residence” of placee
  • “No. of Securities directly or indirectly, Owned, Controlled or Directed” has been changed to “Total Securities Previously Owned, Controlled or Directed”
  • The column to indicate if placee is a Related Person has been removed

The requirement to attach a debt agreement has been changed to “provide details of” a debt agreement.

“Part 2. Acquisition” replaces the previous heading “2. Acquisition”, and the table in Part 2 has been amended to reflect the change made in Part 1 of the Form for the total securities owned, and question 8 has been amended to be consistent with Part 1 question 8.

Appendices “A” and “B” show the Form with the Amendments indicated, and with Amendments incorporated.

Consequential Amendments to Policy 6 – Distributions

Section 2.5 is amended to clarify that a Form 9 need not be posted prior to a news release or when an Issuer has requested price protection on a confidential basis.

Sections 2.6, 2.7 and 2.8 are combined into two sections 2.6 and 2.7.

The amendments to 2.6 include the repeal of the requirement to post the completed form 1 day prior to closing.

Blacklined version indicating changes to existing Version indicating changes incorporated
2.5   Subject to Timely Disclosure Requirements and Section 2.4, above, aA Listed Issuer that has agreed announced an intention to do a complete a private placement must immediately post notice of proposed private placement (Form 9) on the Exchange website. 2.5   Subject to Timely Disclosure Requirements and section 2.4, above, a Listed Issuer  that has announced an intention to complete a private placement must immediately post notice of the proposed private placement (Form 9 - Notice of Proposed Issuance  of Securities) on the Exchange website.

2.6  At least one full Business Day prior to Upon closing of the proposed private placement the Listed Issuer must post:

(a) an amended For 9, if applicable.; and

(b) an executed Certificate of Compliance (Form 6) from the Listed Issuer that it has complied and is in compliance with Ontario securities law and Exchange Requirements.

2.7  Forthwith upon closing, the Listed Issuer must postprovide the Exchange with the following documents:

(a) a letter from the Listed Issuer confirming receipt of proceeds; and

(b) an executed Certificate of Compliance (Form 6) from the Listed Issuer that it has complied and is in compliance with Ontario securities law and Exchange Requirements.

(b) an opinion on counsel that the securities issued in connection with the private placement (including any underlying securities, if applicable) have been duly issued and are outstanding as fully paid and non-assessable shares; and

(c) A copy of the Form 9, as posted, with an appendix containing the information set out in Table 1B of the Form 9 for all placees in the financing.

2.8  In addition, forthwith upon closing, the Listed Issuer must provide the Exchange with an opinion of counsel that the securities issued in connection with the private placement (including any underlying securities, if applicable) have been duly issued and are outstanding as fully paid and non assessable shares.

2.6  Upon closing of the proposed private placement the Listed Issuer must post:

(a) an amended Form 9, if applicable; and

(b) an executed Certificate of Compliance (Form 6) from the Listed Issuer that it has complied and is in compliance with Ontario securities law and Exchange Requirements.

2.7  Forthwith upon closing, the Listed Issuer must provide the Exchange with the following documents:

(a) a letter from the Listed Issuer confirming receipt of proceeds;

(b) an opinion of counsel that the securities issued in connection with the private placement (including any underlying securities, if applicable) have been duly issued and are outstanding as fully paid and non-assessable shares; and

(c) A copy of the Form 9, as posted, with an appendix containing the information set out in Table 1B of the Form 9 for all placees in the financing.

 

 

 

 

 

 

 

 

 

EXPECTED IMPLEMENTATION DATE

The amended Form will be effective upon notice of OSC approval.

EXPECTED IMPACT OF THE AMENDMENTS ON MARKET STRUCTURE, MEMBERS, INVESTORS, ISSUERS, AND THE CAPITAL MARKET

CNSX Issuers will still be required to make the same disclosure pursuant to NI 45-106, however, the names of parties at arm’s length receiving shares will not be available on the Website. Only the identities of investors that are Related Parties to the  CNSX Issuer will be available directly on the Website.

EXPECTED IMPACT ON CSE’S COMPLIANCE WITH ONTARIO SECURITIES LAW (INCLUDING FAIR ACCESS AND MAINTENANCE OF FAIR AND ORDERLY MARKETS)

The proposed amendments are not expected to impact the Exchange’s compliance with Ontario securities law, including the requirements for fair access or the maintenance of fair and orderly markets.

TECHNOLOGY CHANGES

No technology changes will be required as a result of the proposed amendments.

EXISTING RULES IN OTHER MARKETS OR JURISDICTIONS

No other Canadian stock exchange requires public posting of the identity of arm’s length investors on the internet. NI 45-106 requirements include filing, through SEDAR, of reports of exempt distributions, which include the summary tables on which the proposed changes are based. Investor information is not kept in the public files..

COMMENTS

Comments on the proposed amendments should be in writing and submitted no later than October 1, 2018 to:

Mark Faulkner
Vice President, Listings and Regulation
CNSX Markets Inc.
220 Bay Street, 9th Floor
Toronto, ON, M5J 2W4
Fax: 416.572.4160
Email: Mark.Faulkner@thecse.com

A copy of the comments should be provided to:

Market Regulation Branch
Ontario Securities Commission
20 Queen Street West, 20th Floor
Toronto, ON, M5H 3S8
Fax: 416.595.8940
Email: marketregulation@osc.gov.on.ca

 

The text of the Form amendments is attached in Appendices A and B

PDF icon Appendix_A_-_Amendments_to_the_Form_9.pdf

PDF icon Appendix_B_-_Amended_Form_9.pdf

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