CSE proposes new acquisition approval process

The Canadian Securities Exchange (CSE) is proposing changes to its listing rules that would introduce a new approval requirement for “major acquisitions” by listed companies that don’t otherwise trigger either exchange or shareholder approval requirements.

The CSE’s operator, CNSX Markets Inc., is seeking public comment on the proposed adoption of a specific process for approving “major acquisitions” that is separate from the existing requirement for transactions defined as a “fundamental change.”

Currently, only transactions that count as a “fundamental change” require both shareholder and exchange approval. Acquisitions that don’t meet that definition don’t need exchange approval, and they only need shareholder approval if they involve share issuance that exceeds certain dilution limits.

The exchange said this approach means there are “potential gaps in the disclosure requirements for acquisitions that are material to an issuer…” but don’t meet the definition of a fundamental change or the dilution tests for shareholder approval.

As a result, it’s proposing to introduce a new approval process for these kinds of transactions.

“CSE is committed to upholding investor confidence and market integrity by ensuring that investors have access to relevant disclosure about listed issuers and the value of acquired assets,” it said. It added that the proposed exchange approval requirement “seeks to address risks and public interest concerns associated with the materiality of transactions that meet the definition of a major acquisition.”

The Canadian Securities Administrators (CSA) also recently flagged a concern about certain acquisitions taking place in venture markets involving transactions at inflated valuations that may mislead investors or involve market manipulation.

The CNSX’s proposals are out for comment until Aug. 16.

It noted that the proposed reviews may be subject to a fee, which would be introduced in a separate filing.

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.