Notice 2021-005 - Request for Comments - Proposed Policy Amendments
Notices
Notice 2021-005 - Request for Comments - Proposed Policy Amendments
December 9, 2021
CSE Notice 2021-005 - Request for Comments - Proposed Policy Amendments
CNSX Markets Inc. (“CSE” or the “Exchange”) is publishing, in accordance with the schedules to its recognition orders, as amended (the “Protocol”), proposed amendments (“Amendments”) to its policies and related forms for listed issuers (“Policies” and “Forms”). The proposed amendments are comprehensive, including significant changes subject to public comment and extensive housekeeping and consequential revisions. The public comment period will be 60 days.
In addition to general comments on the Amendments the Exchange is seeking specific comments on a number of the proposed significant changes, as well as other matters for which changes have not been proposed but are under consideration for future implementation. Please see Comments section for details.
Description of the Public Interest Rule
These Amendments will introduce qualifications and requirements and financial reporting obligations that reflect requirements for non-venture issuers. The designation as “NV Issuer” and requirements would apply to Listed Issuers (Venture Issuers as defined in National Instrument 51-102 Continuous Disclosure Requirements) as if those issuers were listed on the Toronto Stock Exchange or NEO Exchange (i.e., a “non-venture” exchange). While it is the intention of the CSE to seek amendments to the relevant instruments to exclude these issuers from the definition of “venture issuer”, the Exchange requirements would apply to designated issuers upon implementation. These requirements would be imposed over and above those set out in applicable securities law.
The Policies and CSE’s Recognition Orders[1] permit listing of securities of reporting issuers in Canada. The Amendments include the introduction of requirements and provisions for listing Special Purpose Acquisition Corporations (“SPAC”), and Exchange Traded Funds including Closed End Funds.
The Amendments also introduce additional corporate governance requirements for listed issuers, including security holder approval requirements. These additional requirements are consistent with requirements of other Canadian exchanges for venture issuers and non-venture issuers.
The significant changes include:
1) Listing qualifications and specific reporting requirements for “NV Issuers”
2) Listing criteria and requirements for closed end funds and exchange traded funds
3) Listing criteria and requirements for Special Purpose Acquisition Corporations
4) Explicit requirements for restricted securities and Take-over Bid Protections
5) New requirement for securityholder approvals of certain transactions or developments
6) Exchange Reviews of certain transactions
7) New requirements for Normal Course Issuer Bids (“NCIB”)
8) Filing requirements for Shareholder Rights Plans
9) Shareholder approval and policy requirements for Security Based Compensation plans
Background
Launched as a quotation and trade reporting system in 2003, CSE was recognized as an Exchange in 2004. Comprehensive amendments to the CSE listing policies (“Policies”) were completed in 2008, and additional significant changes have been made in recent years to introduce new requirements for listed issuers. The CSE model for regulation has historically been based primarily on public disclosure by the listed issuers, rather than “review and approval” by the Exchange. The model has been referred to a “reliance model” and incorporates applicable corporate and securities law by reference into the Policies; the Policies are intended to provide specific listing requirement that supplement the legal obligations for public companies that are set out under applicable securities and corporate law.
CSE has listed almost 800 companies since launching, and there has been a significant increase in the listing of more established businesses over the past several years. It has become evident that certain regulatory principles and guidance would be more effectively applied at the exchange level. Some of these additional requirements are applicable to more established issuers which could be distinguished from the entrepreneurial enterprises for which the CSE model was originally intended.
Housekeeping Rule Amendments
Extensive typographical, formatting, renumbering and other non-material changes support the significant changes and provide consistency and simplification throughout.
New Forms
Several new forms have been introduced to support new requirements.
Details of the Changes
The amendments are described in order in which they appear in the existing policies with descriptions intended to provide context for both housekeeping and significant changes.
Comparison of Proposed Significant Changes: All CSE Listed Issuers vs. NV Issuers
[1] OSC CSE Recognition Order varied and restated on August 31, 2020; and BCSC CSE Recognition order dated April 25th 2019.
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POLICY 1 - INTERPRETATION AND GENERAL PROVISIONS |
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No Significant changes to Policy 1 |
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POLICY 2 - QUALIFICATIONS FOR LISTING |
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Proposed Significant Changes |
Description of Change Applicable to Existing CSE Issuers |
Description of Change Applicable to NV Issuers
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Eligibility Review – Issuers applying for listing concurrently with or immediately following the filing of a prospectus must first confirm listing eligibility with the Exchange |
Applies to all applicants
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Treasury Orders – Every Listed Issuer must require that its transfer agent provide to the Exchange, a copy of each treasury order. |
Applies to all applicants |
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APPENDIX 2A – EQUITY SECURITIES |
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Pursuit of Objectives and Milestones |
Applies to all applicants |
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Initial Listing Requirements |
No change to existing qualifications
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Proposed additional criteria are included in chart “Key Initial Listing Criteria”. |
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NOTE: The Exchange is seeking specific comment on certain existing initial requirements and the proposed requirements for NV Issuers. Please see “Comments” for details.
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Restricted Securities |
Applies to all applicants, however the Exchange will generally object to the distribution of Superior Voting Securities of a Listed Issuer that is not an NV Issuer |
Applies to all applicants |
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Introduction of Closed end Funds & ETFs |
N/A |
Proposed float and reporting requirements, issuers will be designated as NV Issuers. |
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Continued Listing Requirements |
No change to existing requirements |
Proposed additional requirements for NV issuers. |
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APPENDIX 2B: DEBT SECURITIES |
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There are no significant changes to Appendix 2B |
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NEW APPENDIX 2C: SPECIAL PURPOSE ACQUISITION CORPORATIONS |
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Proposed Significant Changes |
Description of Change Applicable to Existing CSE Issuers |
Description of Change Applicable to NV Issuers
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SPAC requirements are intended to be in all material aspects the same as existing requirements on other Canadian exchanges |
N/A – |
SPAC Issuers will be designated as NV Issuers. |
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POLICY 3 – SUSPENSIONS AND INACTIVE ISSUERS |
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There are no significant changes to Policy 3 |
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POLICY 4 - CORPORATE GOVERNANCE AND MISCELLANEOUS PROVISIONS |
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Proposed Significant Changes |
Description of Change Applicable to Existing CSE Issuers |
Description of Change Applicable to NV Issuers
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Securityholder Approvals |
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Issuance of Securities |
Approval required for greater that 50% with a new control position, or issuance of 100%. |
Approval required for greater than 25%. |
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Acquisitions |
Approval required if the number of securities to be issued is greater than 50% of outstanding accompanied by the creation of a new Control Person, or 100% of the outstanding. |
Approval required if the number of securities to be issued is greater than 25% of outstanding or if related person has 10% or greater interest in assets and securities to be issued are greater than 5% of outstanding. |
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Dispositions Security holders must approve a disposition that is more than 50% of the assets, business or undertaking of the Listed issuer |
Approval Required |
Approval Required |
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NOTE: The Exchange is seeking specific comments on the thresholds for Exchange or security-holder approval for share issuances, acquisitions, and dispositions. Please see “Comments” for details.
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Shareholder Rights Plans |
Approval Required |
Approval Required |
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Rights Offering approval is required where securities offered by way of rights offering are offered at a price greater than the Maximum Permitted Discount to the market price |
Approval Required |
Approval Required |
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Security based compensation plans |
Approval Required |
Approval Required |
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Consolidations Approval required for ratio greater than 1 new for 10 old. |
Approval Required |
Approval Required |
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Majority Voting Requirement for election of directors |
N/A |
Required |
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POLICY 5 - TIMELY DISCLOSURE, TRADING HALTS AND POSTING REQUIREMENTS |
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Proposed Significant Changes |
Description of Change Applicable to Existing CSE Issuers |
Description of Change Applicable to NV Issuers
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Annual Form 2A Listing Statement |
Option of posting proposed CSE Form 5A Annual Listing Summary or Form 51-102 F2 Annual Information Form |
Must file Form 51-102 F2 Annual Information Form |
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Form 7 Monthly Progress Report |
No change to requirement |
Form 7 not required |
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Deadlines for filing Quarterly Listing Statement and Annual Listing Summary or AIF |
No changes to requirements |
Quarterly Listing Statement and unaudited interim financial statements and MD&A required no later than 45 days from the last day of the relevant quarter. AIF to be filed no later than 90 days from the NV Issuer’s financial year end. |
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POLICY 6 – DISTRIBUTIONS AND CORPORATE FINANCE |
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Proposed Significant Changes |
Description of Change Applicable to Existing CSE Issuers |
Description of Change Applicable to NV Issuers
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Advance (5-day) public notice of financing or acquisition |
Applies to all Listed Issuers |
Applies to all Listed Issuers |
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Requirements for financings below 5 cents (consistent with current practice, will require Exchange approval rather than exemption) |
Applies to all Listed Issuers |
Applies to all Listed Issuers |
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Control Block Distributions Additional guidance and specific filing requirements that are consistent with other exchanges |
Applies to all Listed Issuers |
Applies to all Listed Issuers |
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Shareholder Rights Plans introduces specific filing and Posting requirements, including public disclosure, shareholder approval and certain restrictions, similar to existing requirements of other exchanges |
Applies to all Listed Issuers |
Applies to all Listed Issuers |
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Takeover Bids and Issuer Bids introduces guidance, filing and disclosure requirements intended to align with securities law and the existing requirements on other exchanges |
Applies to all Listed Issuers |
Applies to all Listed Issuers |
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Normal Course Issuer Bids includes reporting requirements and specific trading restrictions and allowances that are consistent with other exchanges. |
Applies to all Listed Issuers, block exemption not available. |
Applies to all Listed Issuers |
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Exchange Traded Fund Unit Creation and Redemption requires an ETF to file a Notice of Creation or Redemption, within 10 days of the end of each month or more frequently in a format acceptable to the Exchange |
Not applicable, issuers will be designated as NV Issuers |
Applies to ETF issuers. |
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POLICY 7 – (renamed) INVESTOR RELATIONS, PROMOTIONAL ACTIVITY, AND OTHER SIGNIFICANT TRANSACTIONS |
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Proposed Significant Changes |
Description of Change Applicable to Existing CSE Issuers |
Description of Change Applicable to NV Issuers
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Compensation – to be paid in cash rather than shares. Options permitted if permitted by law, up to 2%. |
Applies to all Listed Issuers |
Applies to all Listed Issuers |
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Disclosure Requirements - Specific disclosure requirements have been added to emphasize existing CSE Form and Timely Disclosure requirements |
Applies to all Listed Issuers |
Applies to all Listed Issuers |
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POLICY 8 – FUNDAMENTAL CHANGES AND CHANGES OF BUSINESS |
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There are no significant changes to Policy 8 |
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POLICY 9 – (renamed) CORPORATE ACTIONS |
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There are no significant changes to Policy 9 |
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POLICY 10 – SPECIALIST SECURITIES |
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Proposed Significant Changes |
Description of Change Applicable to Existing CSE Issuers |
Description of Change Applicable to NV Issuers
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Section 1 is amended to “where the securities to be listed are held out as being in compliance with specific, non-exchange mandated requirements, the Listed Issuer must disclose how compliance has been established and, if germane to the compliance determination, who has established that the securities are in compliance with the stated requirements. The Exchange proposes to repeal the remining sections. |
Applies to all Listed Issuers |
Applies to all Listed Issuers |
Complete details including the following appendices are in the attached Notice.
Appendix A – Details of the Housekeeping Changes
Appendix B – Blacklined Text of the Policies
Appendix C – Proposed Policies
Appendix D – Proposed New Forms
CSE Notice 2021-005 - Request for Comments - Proposed Policy Amendments
Comments should be in writing and submitted no later than February 7, 2022 to:
Mark Faulkner
Vice President, Listings and Regulation
CNSX Markets Inc.
100 King Street West, Suite 7210,
Toronto, ON, M5X 1E1
Fax: 416.572.4160
Email: Mark.Faulkner@thecse.com
A copy of the comments should be provided to:
Market Regulation Branch
Ontario Securities Commission
20 Queen Street West, 22nd Floor
Toronto, ON, M5H 3S8
Fax: 416.595.8940
Email: marketregulation@osc.gov.on.ca
Larissa M. Streu
Senior Legal Counsel, Corporate Finance
British Columbia Securities Commission
701 West Georgia Street
P.O. Box 10142, Pacific Centre
Vancouver, BC, V7Y 1L2
Email: lstreu@bcsc.bc.ca
Questions
Questions about this Notice or CSE Policy may be directed to Listings@thecse.com or:
Mark Faulkner
Vice President, Listings and Regulation
CNSX Markets Inc.
100 King Street West, Suite 7210, Toronto, ON, M5X 1E1
Email: Mark.Faulkner@thecse.com
