On February 11, 2016, the Toronto Stock Exchange (the “TSX”) issued a notice (the “Notice”) of Housekeeping Amendments (the “Amendments“) to Appendix D – Toronto Stock Exchange Evidence of Security Ownership (“Appendix D“) of the TSX Company Manual. Previously, Appendix D contained two sets of customized security certificate requirements that apply to TSX issuers listed under the following categories: (i) Exempt Industrial Companies (“Exempt Certificate Requirements“) and (ii) Mining, Oil & Gas and Non-Exempt Companies (“Non-Exempt Certificate Requirements“). The Amendments remove the Exempt Certificate Requirements from Appendix D, which will likely result in a reduction of costs of producing the customized security certificates for Exempt Industrial Companies. The TSX understands that the additional intaglio printing required by the Exempt Certificate Requirements, as set out below, resulted in higher printing costs for issuers.
As set out in the Notice, the Exempt Certificate Requirements had additional security features compared with Non-Exempt Certificate Requirements, most notably:
- a vignette, which shall: i) be at least 3.1 square inches (20 square centimeters) in area, and shall display a wide range of tonal quality from very light to very heavy lines, with ample content of middle tones and graduating shades; ii) consist of lines of differing vertical dimensions, some of which shall measure 25 microns perpendicular to the normal plane of paper; and iii) not consist of a monogram, trade mark or other company symbol only, but shall include some plainly discernible features of at least a part of the human form;
- a printed underlay in colour other than black in the area of the general or promissory text;
- an intaglio printing in black made of the vignette, the general or promissory text and the corporate name;
- an intaglio printing made of wording or an abridgement of words in micro lettering of a size below normal readable limits, and in repetition; and
- the general or promissory text produced from line engravings in “script” style lettering.
The reasons for the Amendments include the fact that generic certificates, which are supported by the Securities Transfer Association of Canada and are accepted by TSX, are not required to have the security features specific to the Exempt Certificate Requirements. The TSX also noted that CDS has committed to eliminating physical security certificates for both existing issues and the issuance of new securities as an effort to improve the efficiency and cost effectiveness of the Canadian capital markets.
Additionally, the TSX understands that the rules of the New York Stock Exchange do not require security certificates to have security features comparable to the Exempt Certificate Requirements and that NASDAQ does not have requirements regarding the form of security certificates. Similarly, the TSX understands that other Canadian stock exchanges do not have requirements for security certificates equivalent to the Exempt Certificate Requirements.
For these reasons, the Amendments remove the Exempt Certificate Requirements.
The TSX will monitor Canadian and international industry initiatives, including the possible introduction of a shortened settlement cycle (T+2), and if necessary, review the TSX’s security certificate requirements in light of any such developments.