TORONTO – (Reuters) – Canada’s main stock exchanges are pushing for regulatory changes that could make it easier for retail investors to participate in small financings long deemed too risky for the general public, a move that could help shore up the country’s hard-hit junior mining sector.
John McCoach, president of market operator TMX Group Ltd’s small-cap TSX Venture Exchange, said his organization has asked Canada’s securities regulators to consider allowing a public company’s existing shareholders to participate in private placements.
Private placements are share issues that are offered to select buyers such as institutional investors and wealthy individuals who qualify as “accredited investors,” and not to the general public.
The TSX Venture Exchange, the main trading venue for hundreds of small Canadian-listed mining and energy companies, wants to expand the qualifying group.
Under its proposal, investors who have held stock in the issuer or 60 days or more would qualify to be included in private placements, but their investments would be capped at C$10,000 ($9,800) per company per year.
The rules limiting access to the exempt or “closed” market were designed to protect small investors, who may be less sophisticated, from the risks of sinking their savings into stocks that can be highly speculative.
McCoach said Canada’s securities commissions are considering the proposal. He said he has been informed that regulators in some of the country’s provinces have already drafted exemptions, but would not say which provinces are moving on the idea.
“It gives listed companies another tool to access capital,” McCoach said of the proposal. “But even more importantly, it allows existing shareholders to participate in the growth of the companies they are already shareholders in.”
The Ontario Securities Commission and the British Columbia Securities Commission, primary regulators for the vast majority of junior mining companies in Canada, did not immediately respond to requests for comment.
HELP FOR JUNIOR MINERS
A drop in the price of commodities and a spike in costs has drained money from the mining sector, especially Venture Exchange-listed exploration companies that rely on equity financing. Over the past year, dozens of cash-strapped companies have closed tiny private placements at rock-bottom prices, hoping to ride out the tough market.
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