While we concur that the exemption should only be available if advice is received on the suitability of the investment from an investment dealer and should not be expanded to exempt market dealers, we note that even investment dealers would only be responsible for ensuring that their suitability, KYC and KYP obligations are fulfilled. We wish to stress the importance of implementing a statutory best interest standard on all registrants providing advice. Such a standard would help ensure that investment under the proposed exemption is in fact in a client’s best interests, and would help mitigate concerns relating to potential conflicts of interest in a private placement where the issuer is compensating the dealer for finding investors.
Overview of the Council’s Comments:
We support the efforts made by the securities regulatory authorities across Canada to streamline access to capital by issuers of all market capitalizations at a lower cost while endeavouring to ensure that investor protection remains a high priority. The exemption
may provide issuers with the ability to raise capital through a broader potential group of investors, albeit initially only in three provinces. We understand from the notice accompanying the Proposed Amendments that the proposed exemption is intended to
reflect the fact that retail investors are permitted to invest in listed securities on the secondary market without the benefit of any specific disclosure document and to allow such investors to benefit from the ability to participate in primary offerings where there
may be a discount to the market price or equity sweeteners offered.