FREQUENTLY ASKED QUESTIONS

Transcription

1 FREQUENTLY ASKED QUESTIONS The following Frequently Asked Questions (FAQ) are drafted based on TSX Private Markets current business model and operations. The responses to the FAQ are subject to change without notice. NOVEMBER 2014

2 2 CONTACT TSX PRIVATE MARKETS: FREQUENTLY ASKED QUESTIONS General 1. WHAT SERVICES DOES TSX PRIVATE MARKETS OFFER? TSX Private Markets is a TMX Group initiative focused on supporting capital formation and secondary trading within Canada s exempt market. The initial phase of TSX Private Markets offering encompasses a dealer-to-dealer voice-brokered service complemented by an informational website ( Platform ). Specifically, TSX Private Markets will enable: Exempt market capital raising for private and public companies Secondary trading of exempt market securities (including various categories of debt and equity) Facilitation of public company private placements Secondary trading of public company hold period securities, issued pursuant to a private placement 2. IS TSX PRIVATE MARKETS A MARKETPLACE? No. Although TSX Private Markets facilitates the purchase and sale of exempt market securities, it is not a marketplace as defined in National Instrument Marketplace Operation. TSX Private Markets is operated by Shorcan Brokers Limited, an exempt market dealer registered in all Canadian provinces and territories. 3. WHAT TYPES OF COMPANIES CAN BENEFIT FROM TSX PRIVATE MARKETS? TSX Private Markets permits private and public companies, domestic and international, to use the Platform for capital formation and secondary trading in the exempt market. Private companies may post their offerings on the Platform and TSX Private Markets will also facilitate secondary trading of the company s securities. Public companies may post private placements on the Platform and TSX Private Markets will also facilitate secondary trading of private placements during the four month hold period. To apply for use of the Platform, a company must complete and submit a TSX Private Markets application package. 4. WHAT TYPES OF DEALERS ARE PERMITTED TO ACCESS TSX PRIVATE MARKETS? Only TSX Private Markets Approved Participants can access the TSX Private Markets Platform. IIROC member dealers and exempt market dealers that are domiciled in Canada, as well as other registered firms as defined in National Instrument Registration Requirement, Exemptions and Ongoing Registrant Obligations, may apply with TSX Private Markets to become an Approved Participant. There is a comprehensive list of qualification criteria and a scoring system that TSX Private Markets applies to each applicant. The scoring system contemplates criteria such as: registration categories, jurisdiction, number of years in operation, dollar value of completed transactions and number of employees. Applicants who meet a minimum score requirement will be designated as Approved Participants. While all Approved Participants will be able to view capital formation and secondary market opportunities on the Platform, only IIROC member dealers and exempt market dealers are permitted to transact. Ultimately, all transactions must be made through an Approved Participant who is also an IIROC member dealer or an exempt market dealer. 5. DOES TSX PRIVATE MARKETS REVIEW OFFERINGS, THE COMPANIES AND APPROVED PARTICIPANTS THAT USE THE PLATFORM? Yes. Companies are reviewed at the point of admission to TSX Private Markets and at the point of offering. The review is not a substitute for investor or Approved Participant due diligence, but rather to assess whether the company is still suitable for the Platform. TSX Private Markets does not provide advice with respect to, or recommend, trades in securities or financial instruments.

3 3 CONTACT TSX PRIVATE MARKETS: CAN INDIVIDUAL INVESTORS PARTICIPATE IN TSX PRIVATE MARKETS? Individuals may participate in TSX Private Markets through an Approved Participant who is also registered as an IIROC member dealer or exempt market dealer. The Approved Participant must also determine that the individual investor meets the requirements of at least one of the applicable exemptions for the relevant securities available under National Instrument Prospectus and Registration Exemptions. Individual investors can contact TSX Private Markets to request an introduction to an Approved Participant. Individual investors may obtain partial access to TSX Private Markets by registering directly on tsxprivatemarkets.com. An individual investor s view will be limited to general company information. Detailed information is only available to Approved Participants. 7. CAN FOREIGN DEALERS AND INVESTORS TRANSACT ON TSX PRIVATE MARKETS? Foreign dealers and investors may participate in capital formation and/or secondary trading on TSX Private Markets, but must do so through an Approved Participant that is also an IIROC member dealer or exempt market dealer. 8. WHO HAS ACCESS TO THE POSTED COMPANIES INFORMATION ON THE PLATFORM? Approved Participants on the Platform will have access to the detailed company information, including tear sheets, offering memoranda, available offerings, secondary market quotes, and other associated documentation posted by the company. Individual investors and companies can access limited company information and will know if a posted company has a capital formation and/or secondary trading offering available, but will not be able to directly view details of those offerings.

4 4 CONTACT TSX PRIVATE MARKETS: FREQUENTLY ASKED QUESTIONS Capital Formation 1. HOW WILL COMPANIES BE VALUED ON TSX PRIVATE MARKETS? TSX Private Markets does not value companies or price securities. All bids and asks are provided to TSX Private Markets voice-brokers by Approved Participants that are also IIROC member dealers or exempt market dealers. TSX Private Markets will post up to three price levels of market depth associated volumes, as well as the last trade price and volume. 2. DOES TSX PRIVATE MARKETS RAISE MONEY ON BEHALF OF INDIVIDUAL COMPANIES? TSX Private Markets relies on a network of Approved Participants to raise capital on behalf of individual companies. 3. WHAT COMPANY INFORMATION IS VIEWABLE ON THE PLATFORM? The Platform (tsxprivatemarkets.com) provides Approved Participants with detailed company overviews, as well as downloadable company tear sheets and offering documents for any capital formation offerings. While audited or reviewed financials are required for the TSX Private Markets review process, the documentation is only made visible to Approved Participants at the posting company s discretion. Similarly, presentations, press releases, industry related reports and other company-specific documents are only made visible upon a posted company s approval. 4. DO PUBLIC COMPANIES NEED TO GO THROUGH A VETTING PROCESS OR WILL TSX PRIVATE MARKETS RELY ON THE PUBLIC RECORD ON SEDAR.COM TO APPROVE PUBLIC COMPANIES? Public companies that have already gone through the Toronto Stock Exchange or TSX Venture Exchange listing process do not need to go through the TSX Private Markets vetting process. Public companies wishing to post capital formation offerings on the Platform can contact TSX Private Markets directly. 5. WHAT IS THE ROLE OF THE SPONSORING APPROVED PARTICIPANT ON TSX PRIVATE MARKETS? A private company that wishes to post a capital formation offering on TSX Private Markets must first obtain the sponsorship of an Approved Participant. The sponsoring Approved Participant is responsible for conducting its own due diligence on the sponsored company. Companies who only wish to post their securities for trading do not require a sponsoring Approved Participant. Any agreements between the Approved Participant and a company are at the discretion of those two parties. 6. DOES THE SPONSORING APPROVED PARTICIPANT NEED TO BE BASED IN CANADA? A sponsoring Approved Participant must be registered either as an IIROC member dealer or exempt market dealer in the applicable Canadian jurisdictions, and their registration must be in good standing. 7. WHO CAN SUBSCRIBE TO THE CAPITAL FORMATION OFFERINGS ON THE PLATFORM? Only Approved Participants with transaction capabilities (i.e. Approved Participants that are also IIROC member dealers or exempt market dealers) can subscribe to capital formation offerings directly. Approved Participants without transaction capabilities may participate in the primary market offerings through participants with these capabilities.

5 5 CONTACT TSX PRIVATE MARKETS: FREQUENTLY ASKED QUESTIONS Secondary Trading 1. HOW DOES A SECURITY BECOME ELIGIBLE FOR SECONDARY TRADING? In order for a company s security to trade on TSX Private Markets, the company must complete a TSX Private Markets application package, including full disclosure on any terms and conditions governing the class of securities to be traded. This is to ensure that all securities can be legally transferred between Approved Participants and such securities are properly assigned International Security Identification Number (ISIN) or Committee on Uniform Securities Identification Procedures (CUSIP) identifiers. Once TSX Private Markets has reviewed the company s application package and issued formal approval, the company s security will be eligible to be posted on the Platform. 2. WHAT IS TSX PRIVATE MARKETS VOICE-BROKERED SERVICE? TSX Private Markets facilitates all secondary market transactions through its voice-brokered execution desk. All phone lines on the desk are recorded. TSX Private Markets voice brokers act as a central source of information for Approved Participants attempting to determine market dynamics. 3. HOW DOES AN APPROVED PARTICIPANT ENGAGE IN A SECONDARY TRADE? If a company s securities are posted with TSX Private Markets, Approved Participants may post firm bids and asks to the Platform by phoning the TSX Private Markets execution desk between 9:30am to 4:00pm ET. The submitted bid and ask will then be posted to the Platform. All Approved Participants will be able to view up to three levels of bid/ask market depth. 4. DO TRADERS REMAIN ANONYMOUS ON TSX PRIVATE MARKETS? If Approved Participants are trading a CDS-eligible security, trading counterparties will remain anonymous from one another. For clarity, Approved Participants clearing broker in CDS will see BMO Nesbitt Burns, TSX Private Markets clearing broker, as counter-party on either side of the trade. If Approved Participants are trading physically certificated securities, TSX Private Markets cannot guarantee anonymity, as counterparty names will ultimately need to be disclosed for settlement purposes. 5. HOW IS CANADIAN UNLISTED BOARD (CUB) REPORTING DETERMINED? To assess whether a CUB filing is required, an Approved Participant purchasing as a principal or on behalf of a client must advise TSX Private Markets prior to undertaking a trade through the Platform if the contemplated trade does not rely on an exemption set out in section 2.3 (Accredited Investor), 2.7 (Founder, control person and family Ontario), 2.8 (Affiliates), 2.10 (Minimum amount investment) or 2.15 (Issuer acquisition or redemption) of National Instrument Prospectus and Registration Exemption. If the contemplated trade is not in reliance on these exemptions, the Approved Participant will provide additional information to TSX Private Markets, as requested, which will be forwarded to the counterparty so that it can assess whether a CUB filing is required. 6. WILL INFORMATION BE AVAILABLE TO ASSESS WITHHOLDING TAX REQUIREMENTS UNDER SECTION 116 OF THE INCOME TAX ACT WITH RESPECT TO SECURITIES POSTED ON THE PLATFORM? Posted companies must self-identify if their posted securities are taxable Canadian property (as defined in the Income Tax Act (Canada)). Also, Approved Participants will not facilitate the sale of posted securities identified as taxable Canadian property by a client that is a non-resident of Canada (as defined in the Income Tax Act (Canada)) unless approved in advance by TSX Private Markets. Such approval will be subject to additional information being made available so that the counterparty may assess withholding tax implications.

6 6 CONTACT TSX PRIVATE MARKETS: FREQUENTLY ASKED QUESTIONS Clearing and Settlement 1. WHAT IS CDS? CDS Clearing and Depository Services Inc. (CDS) is Canada s national securities depository, clearing and settlement hub, with accountability for the safe custody and movement of securities, accurate record keeping, processing of post-trade transaction and the collection and distribution of entitlements relating to depository-eligible securities. 2. WHAT SERVICES DOES CDS PROVIDE FOR TSX PRIVATE MARKETS? All trades in CDS-eligible securities executed on TSX Private Markets are reported to CDS for settlement between CDS participants. On the settlement date, TSX Private Markets trades will settle with the exchange of cash for securities in a book entry mode (electronic) between the counterparties. 3. WHAT ARE THE STEPS TO MAKING A SECURITY ELIGIBLE FOR CLEARING AND SETTLEMENT BY CDS? Companies who wish to clear and settle their private securities through CDS are required to request depository eligibility of their securities directly with CDS. The company must first obtain an ISIN for each of their securities. Canadian companies must request the ISIN from CDS by submitting a request through the CDS Solutions site ( Non-Canadian companies may need to contact their local National Numbering Agency to obtain an ISIN. Valid supporting documentation, either in preliminary or final form, related to each specific issue of securities must accompany each request. The Issuer Services department at CDS will provide an ISIN confirmation to the requestor once each request is completed. Once the ISIN has been obtained, the company, or an appointed representative of the company, must submit their online depository eligibility request through Only final offering documentation will be accepted for review by CDS at this point. Each eligibility request must be submitted online a minimum of two full business days prior to, but not including, the targeted date when securities will first be issued in the depository system. Note: The ISIN is referenced in the depository eligibility system request as the security number (e.g. CA no spaces). 4. WHAT DOCUMENTS ARE REQUIRED TO REQUEST CDS DEPOSITORY ELIGIBILITY? CDS requires documentation in final form in order to conduct the eligibility assessment of each security. The required documentation must confirm the legal name, domicile and incorporation status of the company. The documentation must also describe the various security attributes, such as type of issue, form of certification, security holder options, security agents, critical dates, etc. There could be a combination of documents provided to CDS as part of the eligibility process. Typical documents provided to CDS include: Articles of Incorporation, Articles of Amendment, Subscription Agreements, Offering Memorandums, Management Information Circulars, etc. 5. WHAT ARE THE CERTIFICATION OPTIONS AVAILABLE FOR SECURITIES ON DEPOSIT WITH CDS? TSX Private Markets preference is for all securities of eligible private companies to be deposited within the CDS system in an electronic, non-certificated inventory (NCI) format. NCI (Non-BEO): Security is recorded electronically in the CDS system and on the books of the transfer agent; registration is not limited to CDS. NCI (BEO): Security is recorded electronically in the CDS system and on the books of the transfer agent; registration is limited to CDS as per the terms and conditions of the Book Entry Only Securities Services Agreement.

7 7 CONTACT TSX PRIVATE MARKETS: DOES TSX PRIVATE MARKETS REQUIRE POSTED COMPANIES TO TRANSFER AND DEPOSIT THEIR EXISTING PHYSICAL CERTIFICATES INTO CDS NOMINEE NAME WITHIN THE CDS DEPOSITORY SYSTEM? TSX Private Markets encourages companies to request depository eligibility with CDS for their securities in an electronic format. This will allow for deposited securities to be withdrawn and transferred to physical format at any time upon the instruction of the ultimate end-investor Alternatively, companies may elect to maintain their securities in physical, certificated format, in which case all secondary market trading will settle bilaterally among counterparties. 7. WHAT SERVICES DOES A TRANSFER AGENT PROVIDE? WHY ARE THEY NECESSARY WITHIN THE CDS SYSTEM? Transfer agents work with companies, law firms and financial advisors to facilitate applicable company and investor requirements, including stock transfer and corporate trust services. Transfer agents are responsible for maintaining a company s shareholder registry, issuing physical certificates (if requested) and disseminating company mailings, distributions, and other communication to both companies and beneficial security holders. The role of transfer agents within the CDS depository is to maintain the security holder records of the company, including managing CDS participants requests to confirm deposit of securities into the CDS system. A deposit of certificated securities is only confirmed when the transfer agent has received and accepted the security certificate. Transfer agents also act as the custodian of the securities upon closing of a capital formation offering. They are responsible for confirming that the treasury order direction received from the company reconciles with the deposit the company s sponsoring dealer has made in the CDS system. 8. HOW DOES A COMPANY KNOW WHO THE ULTIMATE HOLDERS OF ITS SECURITIES ARE? A company s transfer agent can provide the company with a shareholder list at the dealer level, upon request. If a company wishes to know its ultimate beneficial holders within CDS, the company can send a request to their transfer agent who will, in turn, request a list of non-objecting beneficial owners (NOBOs) from Broadridge. Note that the NOBO list is not a complete list of all beneficial holders. 9. WHAT SERVICES DOES A CDS PARTICIPANT PROVIDE? CDS participants have the ability to deposit securities into the CDS system and can create new ledger positions for any CDS-eligible securities through their CDS participant accounts. Approved Participants who are not CDS participants, wishing to clear and settle through the CDS system, will require a CDS participant to access the CDS system as their clearing broker. The CDS participant list can be found here on the CDS website.

8 tsxprivatemarkets.com CONTACT TSX PRIVATE MARKETS TSX Private Markets 20 Adelaide Street East Suite 1000 Toronto, ON M5C 2T6 T info@tsxprivatemarkets.com TSX Private Markets is operated by Shorcan Brokers Limited, a registered Exempt Market Dealer and inter-dealer broker. Shorcan has been an industry leader in the Inter-Dealer Bond brokerage business since TSX Private Markets provides services to dealers, permitted customers and posting companies only. TMX Group, Toronto Stock Exchange, TSX Venture Exchange, TSX and TSX Private Markets are trade-marks of TSX Inc. CDS is the trade-mark of The Canadian Depository For Securities Limited. Shorcan and Shorcan Brokers are the trade-marks of Shorcan Brokers Limited TSX Inc. Products and services subject to change without notice. Toronto Stock Exchange TSX Venture Exchange TMX Select Alpha Montréal Exchange BOX NGX Shorcan TSX Private Markets The Canadian Depository for Securities Limited Canadian Derivatives Clearing Corporation TMX Datalinx TMX Atrium TMX Technology Solutions TMX Equicom TMX Equity Transfer Services