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With more large, complex issuers using the offering memorandum (OM) exemption than originally intended, securities regulators are proposing new disclosure requirements for certain firms.

The Canadian Securities Administrators (CSA) are proposing a set of changes to the OM exemption requirements that set out new disclosure demands for issuers that are involved in real estate, and for “collective investment vehicles.”

The proposed changes expand and clarify the disclosure required from these types of issuers when relying on the OM exemption.

According to the regulators’ notice, the exemption was initially intended to help small upstart companies raise relatively small amounts of capital; however, in practice, larger, more complex issuers are increasingly raising money under the OM exemption.

A CSA review of exempt distribution reports found that in 2017 approximately 40% of issuers using the OM exemption had total assets of at least $100 million.

Additionally, the regulators found that 43% of OM issuers were operating “collective investment vehicles” engaged in activities such as mortgage lending, and another 17% were operating in the real estate sector.

“Compliance reviews have also indicated that under the current OM exemption requirements, it can be unclear to issuers what disclosure is required in order to provide investors with sufficient information,” the CSA said in its notice.

The proposed changes are designed to provide issuers with clearer, more tailored disclosure requirements while also ensuring that investors get more useful information.

For instance, real estate issuers will have to provide independent property appraisals in certain circumstances.

Collective investment vehicles will be required to make more disclosure about their investment decision-making processes, and about the composition and performance of their portfolios.

“The proposed amendments aim to provide more certainty to issuers as to what they must disclose to provide better information to investors,” said Louis Morisset, chair of the CSA and president and CEO of the Autorité des marchés financiers.

Comments on the proposals are due Dec. 16.