Proposed Amendments to Transform the CSE Senior Tier into a Non-Venture Exchange

Proposed Amendments to Transform the CSE Senior Tier into a Non-Venture Exchange

On August 1, 2024, the Canadian Securities Administrators (the “CSA”) published a Notice and Request for Comment[1] on proposed amendments and changes to certain national instruments and policies (the “Proposed Amendments and Changes”). The Proposed Amendments and Changes are intended to address a number of recent developments including the creation by the Canadian Securities Exchange (“CSE”) of the CSE senior tier for “non-venture” issuers (the “CSE Senior Tier”).

The CSE Senior Tier was implemented on April 3, 2023 for larger and later stage issuers. However, despite having initial and continued listing requirements comparable to issuers listed on other non-venture exchanges, CSE Senior Tier issuers are still considered “venture issuers” under Canadian securities legislation. The Proposed Amendments and Changes are expected to address this disparity.

For more information on the initial and continued listing requirements for the CSE Senior Tier, please see our bulletin: The New CSE Senior Tier.

Proposed Amendments and Changes

The CSA seeks to revise the current definition of “venture issuer” in securities legislation to exclude CSE Senior Tier issuers. Currently, a “venture issuer” means a reporting issuer that does not have any of its securities listed on the Toronto Stock Exchange, the NEO Exchange (now known as Cboe Canada), a U.S. marketplace (such as the New York Stock Exchange or NASDAQ), or a marketplace outside of Canada and the United States other than the AIM of the London Stock Exchange or the PLUS markets (now known as the AQSE Growth Market).[2] The revised definition would alter securities legislation requirements for CSE Senior Tier issuers to align with those for other non-venture issuers.

The Proposed Amendments and Changes also include the following as a result of the modifications to the CSE listing policies relating to the creation of the CSE Senior Tier:

• Employee, Executive Officer, Director or Consultant Exemption – An amendment to National Instrument 45-106 – Prospectus Exemptions to include the CSE to the definition of “listed issuer”. This amendment would ensure that issuers listed on the CSE can rely on the exemption from prospectus requirements for distributions of securities to employees, executive officers, directors and consultants.
• Short Form Prospectus Eligibility Requirement – An amendment to National Instrument 44-101 – Short Form Prospectus Distributions to include a provision allowing issuers listed on the CSE to meet short form prospectus qualification requirements by relying on a CSE Listing Statement filed in connection with a fundamental change instead of an Annual Information Form. This amendment would align the qualification requirements for venture issuers listed on the CSE with those of venture issuers listed on the TSX Venture Exchange.
• Exemption from Escrow Requirements – A change to National Policy 46-201 – Escrow for Initial Public Offerings to revise the definition of “exempt issuer” to include certain CSE Senior Tier issuers, as well as to revise the definition of “established issuer” to include CSE Senior Tier issuers that are not “exempt issuers”. This change would align escrow requirements and the escrow release schedule for CSE Senior Tier issuers to current exempt issuers and established issuers.
• Protection of Minority Security Holder Exemptions Not Available – An amendment to Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions to include CSE Senior Tier issuers as a category of issuers for which certain exemptions from the formal valuation and minority approval requirements are not available. This amendment would align the exemptions available to CSE Senior Tier issuers to those of issuers listed on certain specified non-venture exchanges.

Comments on the Proposed Amendments and Changes may be submitted in writing to the CSA on or before October 30, 2024.

For More Information

If you have any questions regarding the CSE Senior Tier, or any of the Proposed Amendments and Changes, please contact a member of our Capital Markets & Securities group at McMillan LLP.

[1] See Notice and Request for Comment (August 1, 2024).
[2] National Instrument 51-102 – Continuous Disclosure Requirements, s 1.1.

by Grant Wong and Julia Currie

A Cautionary Note

The foregoing provides only an overview and does not constitute legal advice. Readers are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained.

© McMillan LLP 2024