Is the Toronto Stock Exchange eyeing a move into equity crowdfunding? It certainly looks like it.
Less than a week after the Ontario Securities Commission released its proposed rules for equity crowdfunding, along with several other exemptions to prospectus requirements, the TMX Group announced that it’s launching a new business to facilitate private, or exempt, market trading. The TMX group is the company that runs the TSX, the TSX Venture Exchange along with a couple other markets.
TMX says its new business will help startups raise money and will work with companies as they go from the statup stage to the IPO process.
“Working with registered dealers, the launch of TSX Private Markets will assist private companies in accessing capital in the key early stages of their development,” Kevan Cowan, the president of TSX Markets and group head of equities at the TMX Group, said in a press release. “On the execution side, we believe that private markets in Canada stand to benefit from and complement the proven success of our premier public markets.”
According to its website, “TSX Private Markets will be actively engaging registered dealers in order to assist in building liquidity and price discovery for investors of securities in the exempt market, while assisting companies with access to the capital they need throughout their business lifecycles.”
The new company will be run by Shorcan Brokers Limited, a TMX subsidiary and inter-dealer bond broker. TMX says the customers of its new business will “include registered dealers, accredited investors and other exempt investors.” But with the Ontario’s securities laws that govern the exempt market—the trading of securities that don’t require a prospectus—about to loosen, that potential customer base is set to grow.
The proposed rule changes provide new exemptions for the friends and family of a startup’s owners and what’s called an offering memorandum, a financial disclosure that’s slightly less rigorous that a full prospectus - both exemptions that exist in other provinces already. As well, they will allow companies that are already publicly to issue more securities without an additional prospectus.
TSX Private Markets appears likely to participate in those sorts of transactions, particularly when it comes to securities issued under the offering memorandum exemption and the public companies exemption - TMX has specifically said the new business will work public companies to conduct private placements.
But with equity crowdfunding on the cusp of approval, that looks to be the logical next step for the new business. While the company is still playing somewhat coy, Cowan told the Canadian Press that if the rule changes come into effect “TMX can look at expanding its TSX Private Markets offering to retail investors,” it does seem likely that launching an equity crowdfunding portal could be in the works.