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Notice 2020-007 - Guidance – Continued Listing Requirements

July 29 , 2020

The Canadian Securities Exchange (CSE, or Exchange) is issuing this notice to provide guidance and clarify the application of certain continued listing requirements.  The guidance reflects the intent and application of the current Policies and specifically applies to:

1)         Designation of an Issuer as an Inactive Issuer[1]

2)         Proposed Fundamental Changes for an Issuer that has not met or pursued its stated business objectives

1)  Designation of an Issuer as an Inactive Issuer

In addition to general compliance matters, certain specific continued listing requirements are described in Policy 2 Appendix A, section 2.9 (“CLR”). The application of those requirements is described in Policy 3 – Suspensions and Inactive Issuers (“Policy 3”). 

Policy 3 section 5.1, Notification provides for a nine-month period for an Issuer to meet CLR after being notified of a deficiency:

5.1 Notification

An Issuer, upon receiving notice from the Exchange that it does not meet a continued listing requirement, will have nine months from the date of the notice to meet the requirement(s). If, after the nine-month period, the Issuer has not demonstrated to the Exchange that it has met the requirements, the Exchange will:

a)   suspend the Issuer pending delisting in 90 days;

b)   assign the Issuer to a different industry classification; or

c)   designate the Issuer as inactive, with relevant disclosure on the Exchange website and a designation on the trading symbol of the issuer.

The CLR include specific thresholds or requirements for: public distribution, financial resources, assets and activity.  With respect to assets, the Exchange may determine that a Listed issuer no longer meets the continued listing requirements if the Issuer:

(i)    reduces or impairs its principal operating assets; or

(ii)   ceases or substantively reduces its business operations.[2]

The policy intent of the 9-month period is to permit the Issuer time to demonstrate that it is pursuing the business objectives as described in its disclosure document (i.e. Form 2A Listing Statement or prospectus) and that its failure to meet the CLR is a temporary one. An Issuer that discloses, directly or indirectly, that it is not pursuing its stated business objectives or actively operating its described business has acknowledged that it is inactive, and therefore the reason for the 9-month period does not apply.  In such cases, the inactive designation may be applied by Exchange immediately, or at any time following the Exchange becoming aware of the disclosure.

Examples of disclosure that confirms a Listed Issuer is not pursuing the business that qualified it for listing, so that it may be immediately designated inactive:

  • The issuer discloses it is “currently seeking opportunities to provide shareholder value” combined with a lack of meaningful continuous disclosure on its business activities, or with a failure to adequately update its Form 7 filings from month to month;
  • The issuer discloses discussions or an agreement or letter of intent to review or complete a transaction or opportunity that would be considered a fundamental change (including a change of business).

The clarification of this current practice will be included in upcoming policy amendments.

2) Proposed Fundamental Changes for an Issuer That Has Not Actively Pursued its Stated Business Objectives

Disclosure requirements in securities law and the policies of the Exchange are intended to provide comprehensive and continuous disclosure about listed issuers and their business operations.  The comprehensive disclosure provided at the time of listing, whether in a Form 2A Listing Statement or in a prospectus (either, a “Listing Disclosure Document”), describes the business objectives and milestones for an issuer and how available funds and management effort will be spent to achieve those objectives or reach those milestones.  Objectives and milestones should be detailed and quantifiable so that an investor may determine from ongoing disclosure an issuer’s progress towards those milestones.  Timely disclosure requirements and the CSE Monthly Progress report provide adequate opportunity for timely material updates and more detailed descriptions of a Listed Issuer’s business activities, or reasons for a lack of activity.

CSE does explicitly include in a listing approval a condition that an Issuer must pursue its objectives.  It is the position of the Exchange that an issuer that has applied and been granted a listing based on the disclosure in a Listing Disclosure Document should diligently pursue or engage in the business activities described in that document before considering any proposed transaction that may be considered a fundamental change (including a change of business).

The Exchange has established and will continue to maintain initial listing requirements that provide for the qualification of early-stage businesses.  This is especially applicable to early stage mineral exploration companies, given the well-understood comprehensive disclosure requirements of National Instrument 43-101 Standards of Disclosure for Mineral Projects (“NI 43-101”).  For an issuer listing as a mineral exploration company the objectives and milestones set out in the Listing Disclosure Document are clear, in that the issuer will follow the recommendations made by a Qualified Person in a technical report prepared in accordance with NI43-101.

CSE does not have and does not intend to introduce a capital pool or blind pool listing program and will continue to discourage applications that appear to be structured to meet the minimum listing requirements solely for the purpose of creating a listed issuer.

The Exchange will exercise its discretion and is likely to object to a fundamental change or change of business proposed by a Listed Issuer that has not, in the view of the Exchange, adequately pursued its stated business objectives.  In such cases the Issuer may have to delist from the Exchange to pursue the transaction, with no guarantee the issuer will requalify following the transaction.[3]

Clarification of the Exchange’s position and current practice will be included in upcoming policy amendments.

 

For questions about CSE Listings Policies or procedures, please contact:

Listings@thecse.com, or 416-367-7340.

Mark Faulkner, Vice President Listings & Regulation

Mark.Faulkner@thecse.com

 

[1] Policy 3 – Suspensions and Inactive Issuers, s5 Application of Continued Listing Requirements
[2] Policy 2 Qualifications for Listing, Appendix A s2.9(c).
[3] Calaveras Resource Corp – listed by way of IPO prospectus, September 26th, 2017.  Delisted February 9, 2018
Listing Bulletin - https://thecse.com/en/about/publications/bulletins/2017-0916-new-listing-calaveras-resource-corp-crc
News release with CSE imposed restrictions - https://webfiles.thecse.com/CRC-NR-2018-01-23-CSEBusiness.PDF
Delist Bulletin - https://thecse.com/en/about/publications/bulletins/2018-0209-delist-calaveras-resource-corp-crc
 
Cayenne Capital Corp – Listed by way of IPO prospectus, June 27th, 2017. Delisted May 18, 2018
Listing Bulletin - https://thecse.com/en/about/publications/bulletins/2017-0616-new-listing-cayenne-capital-corp-cyc
News release with CSE imposed restrictions - https://webfiles.thecse.com/Cayenne_-_News_Release_-_May_17_2018.pdf?o9u.4ZKl9DhoBIuIJ9J6H3G5rJtbHuue
Delist Bulletin - https://thecse.com/en/about/publications/bulletins/2018-0519-delist-cayenne-capital-corp-cyc
 

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