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This document and the information contained herein are provided "as is" for information purposes only, and are not intended to substitute for competent professional advice. Neither TMX Group Inc. nor any of their affiliated companies or entities guarantees the completeness, currency or accuracy of the information contained in this document and expressly disclaim any and all express or implied representations or warranties regarding this document or the information contained herein.
Obtaining an exemption from blue sky laws is a complex process - one that is unique to each business. The information provided here should serve solely as a general guide to assist in understanding that process. No action should be initiated without obtaining professional advice from qualified legal, accounting and financial advisors.
Use of this document and information is at your own risk. You assume full responsibility and risk of loss resulting from the use of or reliance on this document or information. None of TMX Group Inc., or any of their affiliated companies or entities will be liable for any direct, special, indirect, incidental, consequential, or punitive damages or any other damages whatsoever, whether in an action of contract, statute, tort (including, without limitation, negligence), or otherwise, relating to the use of or reliance on this document or information.
What are state blue sky laws?
What is "manual exemption"?
What is meant by a self executing exemption?
Why do I need manual exemption?
Why should I use the S&P/TMX Market Access Program?
What about the other states/jurisdictions that do not recognize S&P Corporation Records?
Can a company obtain state exemption on its own?
Does S&P/TMX Market Access replace a U.S. listing?
Does quotation on the Pink Sheets or the OTCBB market negate the need for manual exemption?
Are there benefits from the S&P/TMX Market Access Program for U.S. domicile companies solely listed on Toronto Stock Exchange or TSX Venture Exchange?
Will my stock be quoted in USD?
Does my company now have to be SOX compliant?
Can I lose my blue sky/manual exemption?
What is "mutual recognition" and what would be the impact to issuers?
Blue sky laws are state or jurisdictional laws in the U.S. that regulate the offering and sale of securities in order to protect the public investors from fraud. These laws vary among states. States may require securities to be registered at the state level or to have an available exemption from registration. Without compliance with, or exemption from, blue sky laws, the statutes can prevent brokers from soliciting interest in your company from their clients.
The majority of the U.S. states/jurisdictions have written into their statutes a provision for a "manual exemption" that may exempt a company from state registration if it is covered in a "Recognized Securities Manual" such as Standard & Poor's (S&P) Corporation Records.
Generally "self executing" means taking effect immediately without implementing legislation. With the S&P/TMX Market Access Program, once a company is approved for publication into S&P Corporation Records, the manual exemption self executes in many U.S. states/jurisdictions. Although it should be noted that S&P/TMX Market Access Program provides eligibility for manual exemption blue sky compliance in up to 38* states, some of the 38* states have additional parameters for company qualification before exemption can be applied (i.e. exemption is available if the class of securities has been outstanding in the hands of the public for at least 90 days).
Currently Toronto Stock Exchange and TSX Venture Exchange are not considered by the SEC as a "recognized exchange" and therefore companies listed on Toronto Stock Exchange or TSX Venture Exchange are not considered to have securities registered in a U.S. state/jurisdiction. Without state/jurisdiction exemption or registration, brokers cannot recommend/solicit a security to their clients, hindering your company's positioning and marketability to the U.S. retail market.
Manual exemption is available if the issuer of the securities publishes certain continuous disclosure information on an ongoing basis in a recognized manual such as S&P Corporation Records. Manual exemption through the S&P/TMX Market Access Program (which includes publication in S&P Corporation Records) is viewed as an affordable alternative to state by state registration or U.S. inter-listing.
The S&P/TMX Market Access Program is designed to increase your company's visibility to the U.S. retail investor community.
With publication into S&P Corporation Records (included in the S&P/TMX Market Access Program), companies are eligible for manual exemption "blue sky" compliance requirements in up to 38* states. Thus manual exemption often represents a low cost alternative for companies who would otherwise need to undertake state by state registration or U.S. inter-listing in order to enable brokers to solicit their clients' interest in your company.
Additionally the S&P/TMX Market Access Program provides free access to an S&P profile on your company for your website and key industry websites and financial portals such as:
There are a few remaining states that do not recognize S&P Corporation Records as a self executing manual exemption. Assistance with exemption for the remaining states is available from other service providers such as Blue Sky MLS.
While there are other ways to obtain state exemptions or registration, the cost and time to undertake this process may exceed the cost of S&P/TMX Market Access Program.
The answer depends on the reason for listing in the U.S. S&P/TMX Market Access Program may help your company's visibility to the U.S. retail investor market by helping to unlock the broker restrictions leading hopefully to improved liquidity and an expanded investor base. Inter-listing on a major U.S. exchange has the same effect but is more resource intensive and costly for this purpose.
No. Quotation on any electronic bulletin board allows brokers to trade securities listed but does not allow brokers to recommend/solicit the retail market for interest in these securities. Furthermore, unsophisticated investors are deterred from trading securities quoted on these facilities.
Yes, U.S. companies still require state registration or exemption if they are not listed on a SEC "recognized exchange" such as NASDAQ or NYSE. U.S. domicile companies listed on Toronto Stock Exchange or TSX Venture can subscribe to the S&P/TMX Market Access Program to obtain the same visibility and benefits available to Canadian companies.
No. Manual exemption has no bearing on the structure of your security.
No. The S&P/TMX Market Access Program does not require the company to be SOX compliant. SOX compliance is required for SEC reporting companies.
There are ways to become ineligible for manual exemption and ways to end your exemption.
Reasons for ineligibility for manual exemption include failing to meet the blue sky/manual exemption criteria which can vary state to state, or failure to report information that would keep your profile in S&P Corporation Records current and accurate.
The S&P/TMX Market Access Program is an annual subscription. Companies choosing to end their subscription would no longer be published in S&P Corporation Records and no longer be considered blue sky exempt in eligible states.
Mutual recognition refers to the recognition between countries of their national (or in Canada's case, provincial) securities regulatory regimes. The impact of mutual recognition between Canada and the U.S. would be greater cross-border market efficiency. However current discussions on mutual recognition do not include the topic of changes to U.S. state (blue sky) laws.
* It is recommended that an issuer consult legal counsel before relying on a particular exemption