Opening up the exempt market to more investors through the Ontario Securities Commission’s (OSC) proposed prospectus exemptions will do a lot for Ontario’s economy and for investors, according to panelists speaking at the Exempt Market Dealers Association’s annual conference in Toronto on Thursday.
However, the panelists added that the OSC needs to co-ordinate with other provincial regulators for the exemptions to work properly.
“We’re going in the right direction with a lot of these proposals and many regulators are aware that the world has changed and there is a need to provide funding to smaller emerging innovative companies,” said Michael Sharp, partner, Blake, Cassels & Gradon LLP. “They’ve also realized that if you’re protecting investors from losing their money you’re also preventing them from getting in on a Google or an Apple at the ground floor.”
The OSC released a consultation paper in 2012 to discuss the possible introduction of new prospectus exemptions, such as the offering memorandum and crowdfunding exemptions.
In some cases, exemptions – such as the offering memorandum exemption – have already been implemented in other provinces. However, that doesn’t mean that Ontario should go it alone, according to the panelists, in terms of creating its own rules around prospectus exemptions. Instead, it’s important that regulators create harmonized policies around the exemptions.
While there was some co-operation amongst regulators in the past, said Sharp, recently provinces have been more inclined to strike out on their own. The problem with doing so, he said, is that if the OSC decides to go one way or another on its own with respect to a prospectus exemption, the issue will be considered finished and will not be addressed again for years.
Fellow panelist, Sean Sadler, a partner with McCarthy Tétrault LLP, sees prospectus exemptions as helping small businesses seeking capital. However, he said that when there are different rules for exemptions, that can lead to higher legal fees and costs.
“I really think it’s a shame that we can’t seek reform in a harmonized fashion,” said Sadler. “It’s just not serving the interest of investors.”