ARTICLE FOR AME BC MONTHLY NEWSLETTER BCSC REDUCES REGULATORY BURDEN FOR RESOURCE COMPANIES As the capital markets regulator for British Columbia, the BC Securities Commission (BCSC) is keenly aware that public resource companies are struggling with capital raising and regulatory burden. The good news is that the BCSC is spearheading a series of initiatives aimed at lightening the load. Capital Raising The BCSC has recently adopted or proposed three significant changes to capital raising rules: Existing security holder prospectus exemption: This new rule allows companies listed on a Canadian exchange to raise capital from their existing security holders without preparing an offering document. Investors are limited to acquiring $15,000 worth of securities from the issuer in a 12-month period, but can exceed this limit if they receive suitability advice from an investment dealer. We hope this exemption will help companies secure survival funding and keep their regulatory filings up to date. This exemption is now available in all jurisdictions of Canada. Investment dealer prospectus exemption: On April 16, 2015, BC, Saskatchewan and New Brunswick published for comment a new rule that would allow a company listed on a Canadian exchange to raise capital from any investor in any amount without a disclosure document provided the investor receives suitability advice from an investment dealer. If an investor can buy shares on the stock exchange with no advice, why can they not provide funding directly to the company, especially with advice from a professional? For more details, please see https://www.bcsc.bc.ca/45-315_[Multilateral_CSA_Notice]_04162015/. We encourage you to comment on the proposal. Rights offering prospectus exemption: All jurisdictions of Canada have proposed a streamlined rights offering regime for public companies that would significantly reduce the time to conduct a rights offering. Rights offerings are one of the fairest ways to raise capital because they allow all investors to retain their proportionate share of a company. Key aspects of the proposal are securities regulators would no longer review rights offering circulars the dilution limit would be increased from 25% to 100% issuers would be required to send to security holders only a brief form of notice issuers will be required to file (but not send to security holders) a new brief, user-friendly disclosure document the issuer would be liable for the accuracy of its continuous disclosure including the circular These proposals were published for a 90-day comment period at the end of November 2014. Subject to commission and ministerial approvals, we anticipate the amendments will be adopted in late 2015. Disclosure Burden Effective June 30, 2015, the BCSC will implement new streamlined and tailored disclosure requirements for all issuers listed on the TSX Venture Exchange and Canadian Securities 2 Exchange. The changes are intended to focus disclosure on information that investors need while eliminating disclosure that may be less valuable to them. The key changes are: Quarterly highlights disclosure: All venture issuers will have the option of providing a short “quarterly highlights” document instead of interim MD&A for their first three quarters, The quarterly highlights will consist primarily of a short discussion about the issuer’s operations, liquidity and capital resources. We anticipate that a small mining issuer with a limited number of properties could meet the quarterly highlights requirement by providing a 1-2 page discussion. This option is available for financial years beginning on or after July 1, 2015. New venture issuer executive compensation disclosure form: All venture issuers will have the option of using a new executive compensation disclosure form that reduces the number of individuals for whom disclosure is required from a maximum of five to a maximum of three (the CEO, CFO and one additional highest-paid executive officer) reduces the number of years of disclosure from three to two eliminates the requirement for venture issuers to calculate and disclose the grant date fair value of stock options and other share-based awards in the summary compensation table. Instead, venture issuers would disclose detailed information about stock options. Business acquisition reports (BARs): The threshold above which venture issuers will have to file a BAR will be increased from 40% to 100% significance. This means that venture issuers will only have to file BARs, including audited financial statements, for acquisitions that are 100% significant to them. In addition, we are eliminating the requirement for pro forma financial statements to be included in a BAR. IPOs for venture issuers: Venture issuers filing initial public offerings (IPOs) will only have to provide two (instead of three) years of audited financial statements in their IPO prospectus. Two other key changes for venture issuers are: Audit committees: Audit committees of venture issuers will be required to have a majority of members that are not executive officers, employees or control persons of the issuer or its affiliate. This is not a new requirement for TSXV-listed issuers as it is already required as part of the Exchange’s policies. This requirement will apply for financial years beginning on or after January 1, 2016. Executive compensation filing deadline: All venture issuers will be required to file their executive compensation within 180 days of their financial year-end. The executive compensation disclosure for most venture issuers is included in their information circular. We understand that most venture issuers file their information circulars within 180 days of year-end. This will result in no change for those issuers. If an issuer does not file their information circular within 180 days of year-end, the issuer will need to file their executive compensation disclosure in a separate filing. This deadline will apply for financial years beginning on or after July 1, 2015. If you would like more information on any of the above initiatives, please contact the BCSC Inquiries line at 1-800-373-6393 or visit http://www.bcsc.bc.ca/.
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