ASC CP11-701 Energizing Alberta’s Capital Market

September 9, 2019

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ASC CP11-701  Energizing Alberta’s Capital Market

Letter Summary:

The ASC is seeking comments on potential securities regulatory solutions to creating more vibrant public and private capital markets in Alberta and increase access to capital. This consultation is in addition to the existing burden reduction initiatives in the province, so the ASC is focused on comments relating to the private markets. The paper examines quantitative information about the Alberta market and a summary of themes collected from industry consultations and internal committees. The paper provides a number of “brainstorming ideas” to elicit comments, including potentially expanding the Accredited Investor prospectus exemption to investors with educational/investing experience, expanding dealer registration exemptions to help small business financings, facilitating alternative capital raising such as angel investment funds or public funds to invest in early stage businesses, and exploring secondary market liquidity options

Overview of the Council’s Comments:

With the support of a sub-committee, the council responded to seven questions within the consultation:

(a) Informational resource for Alberta start-ups and early stage businesses on capital raising options

• The council is supportive of an initiative to expand the ASC’s role in this area, and believe that given the ASC’s independence, there are a number of opportunities for the ASC to act as an informational resource in different contexts. As an example, entrepreneurs would benefit from interactive content such as videos and webinars hosted on the ASC website in an easily accessible format on common capital raising options. Additionally, while ASC staff certainly should not be expected to act as professional advisors to market participants, the ASC can act as a repository for industry approved resources.

 (b) Informational resource for investors investing in Alberta businesses

• We suggest the possibility of a “securities regulatory” helpline, where either ASC staff or a staff of a third party supported by the ASC act as a resource to small businesses and their investors. A group of this nature should be able to facilitate access to information and function at a lower cost than multiple individual professional advisors (although individual legal sign off should be recommended).

(c) Expanding the accredited investor exemption to include educated, experienced investors

• We generally support the potential of expanding the existing definition of an accredited investor. We would be open to alternative qualifications specifically limited to persons who have obtained one or both of the CIM or CFA designations, or alternatively other educational qualifications that would be required for an individual to obtain registration by the CSA as an adviser.

(d) Addressing the compliance challenges associated with confirming accredited investor status

• The council agrees that it would save resources for both issuers and investors if there was a secure central repository or other trusted central party where an individual’s status as a confirmed accredited investor was housed. We suggest that some electronic platforms that currently facilitate information gathering from accredited investors already exist, and thus regulators can and should play a leading role in bringing industry groups together to find a solution to this particular compliance challenge.

(e) Registration exemption for finders

• Consideration could be given to a registration exemption for capital raises by an issuer who has utilized the services of a finder under a specific threshold (e.g. $1 million) for sales to accredited investors, which would make the compliance burden of such an issuance considerably smaller for the issuer. 

(f) Reducing compliance costs for registered dealers when dealing with accredited investors

• We do not believe that a change to the qualification for a suitability waiver is necessary at this time. Our concern is that adding experience or other financial measures to the test would actually increase the compliance burden. 

(g) Addressing other registered dealer compliance burdens

• We agree that there could be time and cost savings if the ASC were to accept alternative means of demonstrating proficiency in the context of a registration application.

• We also support the suggestion to eliminate the requirement for dealers to provide similar documentation to different regulators at different times by developing a registration portal for information sharing purposes.

• We also understand that dealers and other registrants find the outside business activity reporting requirement particularly onerous, and it may be difficult for them to assess the actual level of risk and potential conflict associated with particular outside activities without further information from regulators.

• Some compliance burden could also be alleviated if regulatory forms could be better integrated with reputable accounting software.

• Another potential area to review relates to the prompt delivery requirement for trade confirmations by dealers. the requirement to provide a “prompt” trade confirmation may represent a significant cost and resource burden to the dealers with minimal benefits to clients.

• Additionally, if dealers or other registrants could be assigned a relationship manager, the individual at the ASC would be able to quickly get to know the registrant and work with them to establish best practices and act as a knowledge resource for best practices advice