The School of Public Policy Releases Report on the Vital but Ill-Defined Exempt Market in Canada: Broader Debate over Regulations Needed

CALGARY, March 12, 2015 /CNW/ - There is a massive and vital capital market at work in Canada for which several market regulators are preparing new rules, yet the remarkable thing is how little we know about it. Data about the so-called exempt market are so lacking that if regulators were contemplating new exempt-market regulations to proceed, they would be creating policies based on anecdotal and potentially incorrect evidence.

According to a report released today by The School of Public Policy and author Vijay Jog - the estimated Canadian exempt market provides in excess of $100 billion in gross capital flow every year and continues to grow. While it may be natural to assume that the exempt market is used primarily by small and medium-sized enterprises, it seems it is primarily used by the financial services industry. These institutions appear to rely on the exempt market to raise potentially short-term debt capital relatively free of burdensome information-disclosure requirements. According to the report "the data about the exempt market is so incomplete, that we lack information on the type of issuers, investors and securities, or the volume and duration of the securities and the level of redemptions."

How can this be rectified?  Provincial jurisdictions and major market participants should co-operate to form an "exempt market data repository" to collect structured data, funded through a small fee, based on the size and type of issue. This repository should allow for segmentation by industry, size of issuer, and by whether it is a reporting issuer or not. It should also provide detail on the size of each issue, the types of security, the intended use of the capital, as well as the liquidity and duration of the security and notification of redemptions.

There must be a broader debate over the very role of a securities regulator when it comes to regulating capital flows between investors and issuers. At the very minimum, regulators should make available to investors useful information about how a market operates. Unfortunately, when it comes to the exempt market, that responsibility is the very area where Canadian regulators have proved to be remiss.

The paper can be downloaded at

SOURCE The School of Public Policy - University of Calgary

For further information: Media contact: Morten Paulsen,, 403.399.3377


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