Capital Market Reforms

Canada is a top global centre for mine equity financing, with the TMX accounting in 2020 for more than 50% of all global mining financing transactions and 33% of the value raised. To ensure that we maintain our globally dominant status, PDAC works with securities commissions and stock exchanges on various reforms that will:

  • Expand access to wider & new pools of capital
  • Reduce the costs of capital-raising in Canada
  • Maintain investor confidence in Canadian capital markets through improved enforcement.

Securities in Canada are regulated by the Canadian Securities Administrators (CSA) members - provincial securities regulators that make sure market participants adhere to relevant provincial and national instruments (NIs). When updating these rules, CSA members conduct public consultations from time to time, and PDAC responds to these consultation when relevant in order to accomplish the goals listed above. Below are a few of the relevant recent consultations and the PDAC responses to them.

Responses to recent public consultations

Proposed Amendments to National Instrument 45-106 Prospectus Exemptions to introduce the Listed Issuer Financing Exemption (October 26, 2021)

On July 28, 2021, The Canadian Securities Administrators (CSA) published notice and request for comments on CSA’s proposed amendments to NI 45-106 and related instruments to introduce a new prospectus exemption available to reporting issuers that are listed on a Canadian stock exchange.

The proposed exemption relies on the issuer's continuous disclosure record, as supplemented with a short offering document, and would allow these issuers to distribute freely tradeable listed equity securities to the public.

Issuers would generally be limited to raising the greater of $5,000,000 or 10% of the issuer's market capitalization to a maximum total dollar amount of $10,000,000. In order to use the exemption, the issuer must have been a reporting issuer for at least 12 months.

The offering document would be a "core document" under Canadian securities legislation, forming part of the issuer's continuous disclosure record for purposes of secondary market civil liability.

 

   

PDAC Recommendations 

PDAC welcomes CSA's Listed Issuer Financing Exemption proposal as it can address challenges that small-cap issuers face in raising small amounts of capital. We highlight ways CSA can ensure unnecessary burdens are not adopted in the exemption and support allowing issuers to use the proposed mechanism for continuous distributions. 

Read our full response  



Proposed Amendments to National Instrument 51-102, Annual and Interim Filings, and a Proposed Framework for Semi-Annual Reporting (September 17, 2021)

On May 20, 2021, CSA published notice and request for comments to address proposed amendments to NI 51-102 and other changes related to an issuer's continuous disclosure obligations. Key topics of the consultation included:

  1. Risk disclosure requirements
  2. Consolidation of various continuous disclosure documents  
  3. Consent provided by a qualified person (QP) for updated technical reports 
  4. Proposal for a voluntary semi-annual reporting framework for some venture issuers

For the first two topics above - risk disclosure and document consolidations, CSA presented proposed amendments that are expected to come into force in the end of 2023. However, CSA didn't provide in this consultation any timeline or proposed amendments to address changes related to QPs consent or semi-annual reporting. 

   

PDAC Recommendations 

We recommend that companies must retain the ability to rank and group risks as they deem appropriate for public disclosure, and that non-author QPs can provide consent for technical reports in short form prospectus offerings. We also support the elimination of repetitive continuous disclosure obligations, and a voluntary semi-annual reporting regime for companies with no significant revenue, irrespective of listing exchange.

Read our full response  



Proposed British Columbia Instrument 51-519 Promotional Activity Disclosure Requirements (July 29, 2021)

On May 26, 2021, the British Columbia Securities Commission (BCSC) published a Notice and Request for comments on its proposed British Columbia Instrument 51-519 Promotional Activity Disclosure and related Companion Policy 51-519 Promotional Activity Disclosure Requirements (See link to the BCSC notice).

In the notice, the BCSC stated that: “The proposed Instrument would establish a tailored framework for promotional activity disclosure in British Columbia, and is one component of a larger initiative we are pursuing to address problematic promotional activity. The Instrument would provide investors with improved transparency about the source and reliability of promotional activity, enabling them make more informed investment decisions. The disclosure would also assist the BCSC to identify and hold responsible those issuers and persons who conduct problematic promotional activity."

   

PDAC Recommendations

 

In this letter we recognized the importance of regulating promotional activities in order to maintain market integrity, and supported the efforts of the British Columbia Securities Commission (BCSC) to introduce relevant regulation. However, we noted several areas of concern regarding the proposal, including where the proposed regulations may cause unintended consequences for mineral industry issuers. Read our full response  


    

Consultation Paper 25-403 - Activist Short Selling (March 19, 2021)

On December 3, 2020, CSA published Consultation Paper 25-403 – Activist Short Selling, with the purpose of addressing concerns of issuers regarding activist short sellers in Canadian markets. 

Short selling activity is seen as an integral part of a healthy market, providing additional liquidity for smaller companies, and a means to effect normal price discovery. In contrast, “activist” short sellers telegraph market positions and can exploit inherent uncertainties to amplify short theses publicly, without being based on concrete facts. Therefore, the nature of activist short selling should be monitored and well understood to ensure market imbalances do not manifest.


 

PDAC Recommendations

 

We recognized the importance of regulating promotional activities in order to maintain market integrity, and supported the efforts of the British Columbia Securities Commission (BCSC) to introduce relevant regulation. However, we noted several areas of concern regarding the proposal, including where the proposed regulations may cause unintended consequences for mineral industry issuers. Read our full response  


    

Ontario's Capital Markets Modernization Taskforce's Consultation Report (September 7, 2020)

On July 9, 2020, a taskforce appointed by the Ontario government to modernize the province's capital markets published a comprehensive consultation report.

The report contained nearly 50 topics in various areas, grouped by the following categories:

  • Improving Regulatory Structure
  • Regulation as a Competitive Advantage
  • Ensuring a Level Playing Field
  • Proxy System, Corporate Governance and Mergers and Acquisitions (M&A)
  • Fostering Innovation

 

PDAC Recommendations

 

We provided feedback on 15 proposals made by the Taskforce that were identified as relevant to PDAC members. Among other comments, we supported semi-annual reporting by companies without revenue from regular operation, the creation of an alternative offering model for reporting issuers and consolidation of reporting and regulatory requirements. In addition, we stressed the need to comprehensively address activist short selling in Canadian markets.


  Read our full response  


    

Proposed Amendments to Shelf Distributions Rules to Enable At-The-Market (ATM) Offering in Canada (August 7, 2019)

On May 9, 2019, CSA proposed amendments to NI 44-102 Shelf Distributions and to its companion policy (44-102CP), in order to enable ATM offering in Canada. The purpose of the proposed changes is to codify the requisite exemptive relief into the securities law so that active requests will no longer be required.

What is ATM offering?

  • Alternative way to raise capital whereby a company issues shares directly into the market at prevailing market prices on an incremental basis
  • Company determines maximum number of shares to be issued the beginning of an offering
  • Share issuances are based on minimum price, volume and timing parameters set by company
  • Allows issuer to maximize market liquidity and minimize shareholder dilution during fundraising

ATM offerings represent an attractive capital-raising option for issuers seeking to protect themselves from the many inefficiencies found in more traditional underwritten issuance model. An ATM offering may have many advantages for an issuer, including increased timing and liquidity-related flexibility, reduced costs, and less management resources (e.g. marketing, road show). The requirement to actively obtain exemptive relief from prospectus-related requirements makes the current ATM financing regime is impractical in Canada, and changing that is the purpose of the consultation.

 

 

PDAC Recommendations

 

We recommended that ATM issuances should not be limited by a 25% Daily Cap (based on average volume traded) proposed by CSA, as it would result in excessively protracted timelines to raise capital for mineral industry companies, particularly for small-to-mid sized issuers. In addition, we suggested CSA to consider the possibility of creating an ATM prospectus exemption.  Read our full response