Notice 2023-005 - Amendments To CSE Listing Policies - Summary Of Comments And Notice Of Approval
March 30, 2023
In accordance with the Process for the Review and Approval of Rules and the Information Contained in Form 21-101F1 and the Exhibits Thereto, CNSX Markets Inc. (“CSE”) has proposed, and the Ontario Securities Commission and British Columbia Securities Commission have approved significant changes (the “Amendments”) to the CSE Listing Policies and Forms.
On December 9, 2021, CSE published Notice 2021-005 - Request for Comments - Proposed Policy Amendments (“Notice”), proposing the Amendments and requesting public comment on the specific Amendments and additional policy changes under consideration. The Amendments introduced qualifications, requirements and financial reporting obligations that reflect requirements for non-venture issuers that would apply to Listed Issuers designated by the CSE as “NV Issuers”.
The Amendments include the introduction of requirements and provisions for listing Special Purpose Acquisition Corporations (“SPAC”), and Exchange Traded Funds including Closed End Funds.
The Amendments also introduce additional corporate governance requirements for all CSE Listed Issuers, including security holder approvals, and specific requirements related to restricted securities and take-over bid protections, normal course issuer bids, shareholder rights plans and security-based compensation plans. These additional requirements are consistent with requirements of other Canadian exchanges for venture issuers and non-venture issuers.
The comment period expired February 7, 2022. A Summary of Comments is attached as Appendix A. Additional housekeeping and significant changes resulting from the comments received are described in Appendix B.
The new Policies and Forms are available on the CSE Website:
The Amendments will be effective April 3, 2023. Please see “Notes on Implementation”.
Additional housekeeping and significant changes were made following the comment period. The significant changes are identified in the Comment Summary and more fully described below.
In the Notice, The Exchange requested comments on the proposed amendments and on additional policy matters for which no specific changes had been proposed. As a result of comments received, , the Exchange made additional changes to the public float requirements and the minimum listing requirements for mineral exploration companies. The additional changes are consistent with the principles described in the Notice and the public comments received and have not been therefore not published separately for comment.
Public Float and Capital Structure
CSE maintains that a prescriptive arbitrary number of holders currently required by each Canadian exchanges does not, itself, address concerns related to liquidity, volatility and price discovery. Recognizing, however, that a smaller public float can potentially create such concerns, we have increased the public float requirement to 20%.
- In 2A.2(1) the number of securities required in the Public Float has been increased from 500,000 to 1,000,000 and the percentage from 10% to 20%. Related changes were made to 2A.5(5) Substantial Float to increase the number of shares and capital raised from 1,000,000 shares and $1,000,000 to 2,000,000 shares and $2,000,000. The 20% float threshold has been deleted from the Substantial Float description.
The Exchange did not propose in the Notice changes to the Builder Share requirements. Following further consideration of the policy objectives and changes to the float requirements, the 18-month limitation on shares issued for less than $0.005 has been increased to 24-months in 2A.5(3):
For Listed Issuers not yet generating revenue from business activity, the Exchange will not consider an application where Builder Shares have been issued for less than $0.005 in the previous 24-month period.
The increase reflects the policy objective of discouraging the issuance of shares for less than $0.005, while accommodating operating companies with a shorter development period.
CSE recognizes that current thresholds for prior expenditures and proposed work programs may no longer be reflective of actual costs. We have increased the basic requirements while still allowing for the listing of companies with early-stage projects, albeit with significant restrictions.
In 2A.4 Basic Qualifications, we have amended paragraph (6)(a) to:
- Refer to companies as mineral exploration companies, rather than mineral resource companies
- Increase qualifying expenditures by 100% to $150,000, and clarify the expenditures must be made by the issuer, rather than a previous owner of a subject property
- Increase the required exploration budget by 150% to $250,000
Paragraph (6)(b) has been amended to “Additional Considerations for Mineral Exploration” and provides for the listing of issuers that meet the thresholds of $75,000 in expenditures and a $100,000 exploration budget, with reference to a clarified description of qualifying expenditures. The following additional escrow conditions have been introduced as 2A.5(8)(e):
For a Listed Issuer approved pursuant to 2A.4(6)(b) Additional Considerations for Mineral Exploration the following additional escrow requirements apply:
- All Builder Shares are subject to escrow, regardless of the holder of such shares
- The initial release from escrow is subject to Exchange approval and must be no earlier than 10 days following public announcement of the results of the first phase program described in the Listing Statement.
- Transfer of shares within escrow as described in NP46-201 s. 6.3(1)(a), (b), or(c) is not permitted without Exchange approval. The Exchange will generally not approve transfers associated with incoming or outgoing officers or directors of a Listed Issuer
- The terms of the escrow agreement must irrevocably authorize and direct the escrow agent to immediately cancel all remaining escrowed securities upon delisting from the Exchange or the announcement of a change of business or a definitive agreement for a transaction that would constitute a Fundamental Change.
Notes on Implementation
The Amendments are effective April 3, 2023, subject to the considerations below.
Current Listed Issuers will not be designated as NV Issuers, nor will a Listed Issuer be subject to the additional requirements as an NV Issuer, prior to a review and advance notification from the Exchange.
Listed Issuers will be reviewed on an annual basis following the filing of audited financial statements and if applicable, the NV designation will be effective for an Issuer’s Q2 interim filings. It is anticipated that the Exchange will initiate reviews of Listed Issuers on or about April 30th, 2023 for Listed Issuers with a financial year end of December 31st, 2022.
A Listing applicant that qualifies as an NV Issuer will be designated as such at the time of listing, subject to the applicant receiving adequate notice by the Exchange.
Any Listed Issuer, including an NV Issuer, may request a review at any time, with such review to be based on available financial information and the designation applied or removed as required.
Shareholder Approvals for Listed Issuers
Shareholder approvals introduced in the Amendments, such as approval of transactions, corporate actions, or corporate governance matters will be required where the matter to be approved is proposed or announced after the Effective Date.
Questions about this notice may be directed to:
Mark Faulkner, Senior Vice President Listings & Regulation,
[email protected], or 416-367-7341
Appendix A - Summary of Comments:
Appendix B – Additional Amendments: