Re: CDNX Tier 3 companies.
CDNX integrates Canadian Dealing Network quoted securities
167 former CDN companies now trading on CDNX
CALGARY, AB — Today marks the first day of trading on the Canadian Venture Exchange (CDNX) for 167 companies previously listed on the quoted issuer market of the Canadian Dealing Network (CDN), a subsidiary of the Toronto Stock Exchange (TSE).
As part of the reorganization of Canada’s securities marketplace initiated last year, CDNX was to become the sole junior exchange in Canada. As a result, eligible CDN companies that have made application to CDNX moved off the CDN at market close Friday, Sept. 29, and onto a newly created Tier 3 category at CDNX.
"With the opening of a Toronto office and the integration of CDN companies, many of which are headquartered and have shareholder bases in Ontario, the Canadian Venture Exchange is delivering on its promise to become a truly national exchange for venture capital securities," said Gerry Romanzin, CDNX Executive Vice-President. "This is another step in our mission to enhance the North American marketplace for venture capital and we are pleased to welcome these companies to CDNX."
The 167 quoted issuers that began trading today on TradeCDNX represent those companies that met a September 15 deadline to become listed on Tier 3. A second tranche that met a later September 29 deadline will be assessed and put onto Tier 3 commencing October 10.
Tier 3 was established as a transitional step to move CDN quoted companies to Tiers 1 or 2 on CDNX’s prescribed auction market. The transfer of these quoted companies from CDN to CDNX was agreed to as part of the overall Canadian securities market restructuring. As a result, these issuers were moved to CDNX outside of the normal listing and sponsorship processes that companies must successfully complete to become listed on CDNX’s Tiers 1 and 2. CDNX plans to put the Tier 3 quoted companies through a complete review by the end of the year to ensure they are able to meet the tier maintenance requirements of Tier 2 companies. Tier 3 companies that don’t meet Tier 2 maintenance requirements will have up to 18 months following a review to take the necessary steps to meet these requirements.
Many of these CDN quoted issuers were classified under Canada’s tax laws as private corporations or Canadian-controlled private corporations and qualify for small business tax deductions or credits. CDNX and CDN have been working with the federal Department of Finance to preserve, for a period of time, this beneficial tax treatment for CDN quoted companies that list on Tier 3 of CDNX. Discussions with the federal Department of Finance are ongoing.
In the event that CDNX is successful in securing the relief sought from the Department of Finance, investors should bear in mind that Tier 3 quoted companies may not qualify for certain types of investments for the purposes of the federal Income Tax Act. Specifically, the securities of Tier 3 companies may not constitute a qualified investment for registered retirement savings plans (RRSPs), registered retirement income funds (RRIFs) and other types of deferred income plans.
For these reasons, investors can identify Tier 3 stocks with root symbols beginning with the letter ‘Y’ in the three-letter trading symbols.
"There’s no question that the new Tier 3 CDNX companies will benefit from enhanced credibility and visibility that the world’s only well-regulated, sophisticated venture capital exchange can provide," said former CDN Director and new CDNX Vice-President for Ontario, Kevan Cowan.
Cowan noted that shareholders of the new Tier 3 CDNX companies also will benefit from the trading advantages and technical sophistication of a pure auction market like the CDNX. "These 167 companies also represent approximately $2 billion in market capitalization (excluding debentures)," he added.
The Canadian Dealing Network also has provided for the reporting of trading in unlisted, unquoted equity securities in Ontario. While awaiting final regulatory approval, it’s expected that CDN will discontinue operating the reported market on Friday, Oct. 6 and the new Canadian Unlisted Board (CUB) will commence operations of a web-based trade reporting system starting Monday, Oct. 10. CUB will maintain these CDN "reported" trades in its capacity as agent for the Ontario Securities Commission (OSC). CUB will provide monitoring and surveillance services to the OSC for trading in securities reported through the over-the-counter (OTC) system; however, enforcement will remain with the OSC.
The Canadian Venture Exchange (CDNX) was launched in November 1999 with some 2300 listed companies active in the technology, resource, industrial and manufacturing sectors. As the country’s venture capital marketplace, CDNX provides emerging companies with improved access to capital while providing investors with a well-regulated market in which to make venture investments.
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