Canadian Lawyer

June 2012

The most widely read magazine for Canadian lawyers

Issue link: https://digital.canadianlawyermag.com/i/67857

Contents of this Issue

Navigation

Page 43 of 47

LEGAL REPORT/SECURITIES LAW raising environment in Canada, says Gary Solway, secretary of Canada's Venture Capital and Private Equity Association and a partner at Bennett Jones LLP in Toronto. His organization, he says, has not seen any abuses or issues with the AI exemption that would suggest it needs to be changed. "Unless somebody can throw us a real good reason for changing it, we think any change to increase thresholds or make it more difficult Raising money privately is an important part of the capital- to PROFESSIONAL DIRECTORY Supreme Court of Canada Counsel and Agency Services Henry S. Brown, QC Brian A. Crane, QC Guy Régimbald Graham Ragan Matthew Estabrooks Eduard J. Van Bemmel, Law Clerk access the exemption will reduce access to capital for private equity funds, venture capital funds, and the companies looking to raise money, in Ottawa, says it is already fairly difficult for startup tech- nology companies to raise money, as venture capital is less available in Canada than it was in the early to mid-2000s. Anything that makes it more difficult for companies to raise money from angel investors, even if it's a question of having to comply with new technical requirements or accredited investors having to receive third-party certification, is another hoop that startup companies have to jump through, she says. "Investors have to be protected, but we're not sure that the investor protection, at least in this area, is really lacking at this point." Nicholas Fader, a partner at Bennett Jones in Calgary, says Andrea Johnson, a partner at Fraser Milner Casgrain LLP " he says. 160 Elgin StreetSuite 2600OttawaOntarioK1P 1C3T 613-233-1781 montréalottawatorontohamiltonwaterloo regioncalgaryvancouverbeijingmoscowlondon his firm is frequently closing private placements for startup oil and gas issuers, where it is often the case that financings are being done in reliance almost exclusively on the AI exemption. "I can think of a couple of companies that I act for that finance themselves exclusively, through their life cycle, based on private placements and probably 90 per cent of the investment money that rolled in, rolled in from accredited investors," says Fader, who is also in favour of leaving the thresholds as-is. Although it is advocating retaining existing limits for the ntitled-1 1 12-01-17 10:50 AM accredited investor exemption with the recommendation that those selling to retail investors should be IIROC registered, the Investment Industry Association of Canada is in favour of removing the current minimum investment exemption, says policy director Susan Copland. Essentially, the minimum amount exemption allows an investor to purchase a security at an acquisition cost of not less than $150,000 paid in cash at the time of purchase, according to the OSC. "To us, it looks like a recipe for abuse, because there just aren't enough safeguards around it. With the accredited investor, there's just a little bit more criteria that establishes suitability, Copland. While an investor using the minimum amount exemption is " says not necessarily sophisticated or able to withstand the total loss of their investment, says Paul Davis, a partner at McMillan LLP in Toronto, until stakeholders know how often the exemption is used, he would not want to advocate it be abolished at this time, given the fragility of the economy. At the same time, Davis says the availability of the offering memorandum (OM) exemption in many provinces, except Ontario, may neutralize the impact of any increases to the other thresholds in those jurisdictions. In B.C. for example, the exemption allows an issuer to sell its securities to anyone, regardless of their relationship, wealth, or the amount of securities purchased, provided they obtain a signed risk acknowledgement form from the purchaser and deliver them an offering memorandum. Brian Koscak, chairman of the Exempt Market Dealers Asso- ciation of Canada and a partner at Cassels Brock & Blackwell LLP in Toronto, says an increase to the thresholds "will have an 44 JUNE 2012 www. CANADIAN Lawyermag.com

Articles in this issue

Links on this page

Archives of this issue

view archives of Canadian Lawyer - June 2012