Dear Investor, A. SVX AS AN EXEMPT MARKET DEALER

Transcription

1 MaRS SVX 101 Cllege Street, Suite 406 Trnt, ON M5G 1L7 Dear Investr, As a part f ur cntinued effrts t keep yu infrmed abut ur business peratins, the regulatins, plicies and prcedures guiding ur peratins, and the act f investing, we wanted t prvide yu with the fllwing infrmatin: A. SVX s registratin as an exempt market dealer ( EMD ) B. Prspectus exemptins C. Risks f investing in exempt markets D. Risks f using brrwed mney t invest E. Hw client assets are held F. Descriptin f cmpensatin paid by issuers t SVX G. Cnflicts f interest H. Independent dispute reslutin services I. Suitability J. Client reprting A. SVX AS AN EXEMPT MARKET DEALER SVX is a nt-fr-prfit entity and is a whlly-wned subsidiary f MaRS Discvery District ("MaRS") with its head ffice at 101 Cllege Street, Suite 406, Trnt, ON, M5G 1L7. SVX is registered as an exempt market dealer in Ontari, Quebec, Alberta, British Clumbia and Saskatchewan with the Ontari Securities Cmmissin as its principal regulatr. The "exempt market" describes a sectin f Canada s capital markets where securities can be sld withut the prtectins assciated with a prspectus. Examples f activity in the exempt market include: Canadian and freign cmpanies, bth public and private, selling securities t institutinal investrs and qualified investrs Canadian and freign hedge funds and pled funds selling securities t institutinal investrs and qualified investrs Generally, securities ffered t the public in Canada must be ffered under a prspectus, which is a dcument that prvides detailed infrmatin abut the security and the cmpany ffering it. Hwever, there are sme exceptins t this rule that allw securities t be ffered withut a prspectus, called prspectus exemptins. These prspectus exemptins can help a cmpany raise mney withut the time and expense f preparing a prspectus. Investrs wh buy securities thrugh prspectus exemptins generally d nt have the benefit f nging infrmatin abut the security that they are buying r the cmpany selling it. As well, they ften d nt have the ability t easily resell the security. MaRS SVX 101 Cllege Street, Suite 406 Trnt, ON M5G 1L7 Relatinship Disclsure Agreement January, 2018

2 B. PROSPECTUS EXEMPTIONS SVX supprts investments by British Clumbia, Alberta, Ontari, Quebec and Saskatchewan residents under varius prspectus exemptins available t cmpanies raising capital, including: the Crwdfunding Exemptin (British Clumbia and Saskatchewan), the Offering Memrandum Exemptin and the Accredited Investr Exemptin. 1. Accredited Investr Exemptin under this exemptin, any resident f British Clumbia, Alberta, Ontari, Quebec, Saskatchewan r Manitba may purchase securities frm any issuer in such prvinces, prvided the issuer btains a signed risk acknwledgement frm (Frm F9) frm the investr and the investr satisfies any f the fllwing criteria: Investr Limits earned a net incme befre taxes which exceeds $200,000 (r $300,000 cmbined incme with spuse) in each f the tw mst recent years and wh reasnably expects t exceed that net incme in the current year; has alne r with spuse at least $1 millin in liquid financial assets (cash and securities) befre taxes. (In calculating an individual's financial assets, any utstanding lans incurred t acquire thse assets must be deducted.); hlds alne r with spuse at least $5 millin in net assets; is a crpratin, limited partnership, trust r permitted client having net assets f at least $5 millin. Reprting Requirements: a. the issuer must prvide the subscriptin agreement t each investr; b. the issuer must prvide the investr with share certificate(s); c. the issuer must file Frm F1 Reprt f Exempt Distributin: thrugh the OSC's Electrnic Filing Prtal, the BCSC s eservices, r in Quebec, Alberta, Saskatchewan and Manitba n SEDAR, as applicable, n later than 10 days after the distributin and pay the applicable filing fee. Investment funds relying n certain prspectus exemptins have the ptin f filing Frm F1 n an annual basis, within 30 days f the end f the calendar year. Each investr will be required t recertify his, her r its eligibility as an accredited investr r ther eligibility status prir t the clsing f any transactin in which such investr participates. If, after this agreement is entered int, SVX becmes aware that yu are nt, r there is a reasnable basis fr believing that yu d nt meet the eligibility requirements as an accredited investr r an eligible investr, as per the requirements abve, SVX will immediately take apprpriate actin, including remving yur access t the Private Prtal. MaRS SVX 101 Cllege Street, Suite 406 Trnt, ON M5G 1L7 Relatinship Disclsure Agreement Nvember 7, 2017

3 2. Offering Memrandum Exemptin under this exemptin, any resident f British Clumbia, Alberta, Ontari, Quebec, Saskatchewan r Manitba may purchase securities frm any issuer in such prvinces prvided the fllwing cnditins are satisfied: Issuer Checklist: a. the investr must buy the security n his r her wn behalf; b. restrictins n securities that can be distributed under the Offering Memrandum Exemptin are: specified derivatives, structured finance prducts, investment funds (except in British Clumbia and Manitba). (Investment funds are restricted in Alberta and Saskatchewan unless they are nn-redeemable investment funds r mutual funds that are reprting issuers. All types f investment funds are restricted in Ontari and Quebec). c. all marketing materials fr the ffering must be referenced in a statement within the Offering Memrandum and filed with applicable Canadian Regulatrs tgether with the Offering Memrandum (except in British Clumbia and Manitba); d. the issuer must sign a certificate that indicates that the ffering memrandum des nt cntain a misrepresentatin; e. befre the investr signs the agreement t purchase the securities, the issuer: i. btains a signed risk acknwledgement frm (Frm F4) frm the investr. Except in British Clumbia, this includes: schedule 1: Classificatin f Investrs under the Offering Memrandum Exemptin schedule 2: Investment Limits fr Investrs under the Offering Memrandum Exemptin; and ii. delivers an ffering memrandum, prepared in the required frm, t the investr (OM fr Nn-Qualifying Issuers- Frm F2; OM fr Qualifying Issuers- Frm F3) Investr Limits (except investrs in British Clumbia): a. if the individual is a retail investr, invests n mre than $10,000 in a 12-mnth perid; b. if the individual is an eligible investr, has nt received advice frm a prtfli manager, investment dealer r exempt market dealer that the investment is suitable and invests n mre than $30,000 in a 12-mnth perid; MaRS SVX 101 Cllege Street, Suite 406 Trnt, ON M5G 1L7 Relatinship Disclsure Agreement Nvember 7, 2017

4 c. if the individual is an eligible investr, has received advice frm prtfli manager, investment dealer r exempt market dealer that the particular investment is suitable and invests n mre than $100,000 in a 12-mnth perid. Reprting Requirements: a. the issuer files the Offering Dcument (Frm F2 r F3) with the Regulatrs at the pint f sale; b. issuers must file audited annual financial statements within 4 mnths f year end with the Securities regulatrs, except in British Clumbia and Manitba, and prvide them t security hlders in the manner required by each applicable jurisdictin, r in cnnectin with the issuer s first use f the Offering Memrandum exemptin, in certain cases within sixty days f the first distributin (fr a financial year ending prir t the distributin date), if earlier; c. except in British Clumbia and Manitba, issuers must file Ntice f Use f Prceeds within 4 mnths f year end with the Securities regulatrs (Frm F16); d. issuers must ntify investrs in Ontari in the event f a discntinuatin f the issuer s business, a change in the issuer s industry r a change f cntrl f the issuer and file Ntice f Specified Key Events (Frm F17); e. the issuer must prvide the subscriptin agreement t each investr (fr items t include in the subscriptin agreement, refer t Appendix B); f. the issuer must prvide the investr with share certificate(s); g. the issuer must file Frm F1 Reprt f Exempt Distributin thrugh the OSC's Electrnic Filing Prtal, the BCSC s eservices, r in Quebec, Alberta. Saskatchewan and Manitba n SEDAR, as applicable, n later than 10 days after the distributin and pay the applicable filing fee. 3. Crwdfunding Exemptin any resident f Ontari, Quebec r Alberta may purchase securities frm any private cmpany with its head ffice in Ontari, Quebec r Alberta prvided that fllwing cnditins are satisfied: Issuer Checklist: the cmpany raising capital (the issuer) distributes its securities thrugh an nline Funding Prtal; the issuer cannt raise mre than $1,500,000 per ffering in a 12 mnth perid; the types f eligible securities that can be distributed, under are: cmmn shares, nn-cnvertible preference shares, security cnvertible int abve, nn-cnvertible debt security linked t a fixed r flating interest rate, unit f an LP, r a flw-thrugh share as defined under the ITA; the issuer must cmplete a Persnal Infrmatin Frm (PIF) (Frm F5) fr every directr, executive fficer, and prmter f an eligible crwdfunding issuer; MaRS SVX 101 Cllege Street, Suite 406 Trnt, ON M5G 1L7 Relatinship Disclsure Agreement Nvember 7, 2017

5 the issuer distributes securities using the Crwdfunding Offering Dcument (Frm F1) made available thrugh the nline Funding Prtal; the issuer must sign a certificate that indicates that the Crwdfunding Offering Dcument des nt cntain a misrepresentatin; the issuer must btain a Risk Acknwledgement Frm (Frm F2) frm the investr at r prir t the time f the transactin, which SVX facilitates via the platfrm; the issuer must btain a cnfirmatin f investment limits (Frm F3) frm each investr at r prir t the time f the transactin, which SVX facilitates via the platfrm; the issuer disclses financial statements at the pint f sale. Investr Limits: a. the individual invests n mre than $2,500 per ffering and $10,000 (Ontari and Alberta) in ttal in a calendar year; b. if the individual is an Accredited Investr as per NI , n mre than $25,000 per ffering and $50,000 (Ontari and Alberta) in ttal in a calendar year; c. if the individual is a Permitted Client as per NI , n limits apply; Reprting Requirements: the issuer files the Crwdfunding Offering Dcument (Frm F1) with the Regulatrs at the pint f sale; the issuer prvides a Ntice f Specified Key Events, (Frm F4) t investrs within 10 days f the event (Ontari nly), which SVX facilitates via the platfrm; the issuer prvides annual financial statements t investrs, which SVX facilitates via the platfrm; the issuer prvides an annual ntice regarding the use f the prceeds t investrs, which SVX facilitates via the platfrm; the issuer must prvide the subscriptin agreement t each investr (fr items t include in the subscriptin agreement, refer t Appendix B), which SVX facilitates via the platfrm; the issuer must prvide the investr with share certificate(s), which SVX facilitates via the platfrm; the issuer must file Frm F1 Reprt f Exempt Distributin thrugh the OSC's Electrnic Filing Prtal, r in Quebec and Alberta n SEDAR, as applicable, n later than 10 days after the distributin and pay the applicable filing fee. MaRS SVX 101 Cllege Street, Suite 406 Trnt, ON M5G 1L7 Relatinship Disclsure Agreement Nvember 7, 2017

6 C. RISKS The investment pprtunities psted n this prtal have nt been reviewed r apprved in any way by a securities regulatry authrity r regulatr. They are risky and may result in the lss f all r mst f yur investment. Yu may receive limited nging infrmatin abut an issuer r an investment made thrugh this prtal. The main bjective f these issuers is nt t maximize returns t investrs and yu shuld invest in issuers whse fferings are psted n the SVX platfrm nly if yu are prepared nt t receive any return n yur investment and t lse yur investment in its entirety. There are significant risks assciated with the fferings psted n the SVX platfrm, including the severe illiquidity (including that there is n market fr resale f securities issued thrugh the fferings) and ptential vlatility f the investment. The investr understands the significant risks assciated with fferings psted n the private prtal including the fllwing: Transparency exempt securities are nt subject t the reprting issuer regime, they prvide less infrmatin t their investrs, and the infrmatin prvided is nt subject t the versight f the regulatrs nt every exempt security will reveal their prtfli it may be difficult fr the client t ascertain whether the issuer is actually ding what it says it will d (i.e. whether it is adhering t its investment mandate, risk cntrl prcess, trading discipline, and cmpliance prcesses) Related Issuer where the EMD and the dealer are related parties, there is a cnflict f interest an EMD cannt recmmend a trade in a security issued by it r an affiliate unless they disclse the nature and extent f the relatinship r cnnectin between the EMD and the issuer Independent Review Cmmittee there is n Independent Review Cmmittee (IRC) fr nn-public investment funds Liquidity Risks mst exempt securities are subject t resale restrictins there is n secndary market fr exempt securities the nly means fr liquidatin may be thrugh the issuer and if there is n redemptin feature, the client will nt be able t liquidate the securities at all even exempt securities which ffer redemptin features ften d s n a limited basis and, in mst cases, the issuer als has the ptin t suspend redemptins MaRS SVX 101 Cllege Street, Suite 406 Trnt, ON M5G 1L7 Relatinship Disclsure Agreement Nvember 7, 2017

7 Valuatin Risk the accuracy and integrity f valuatins can give rise t cncerns which include: cnflicts f interest accuracy f valuatins Investr Rights investrs in exempt securities are nt affrded the same legal rights that are available t investrs wh purchase prspectus-based investments there are n statutry rights fr damages including: right f rescissin right f withdrawal secndary market civil liability Investment Risk there is increased investment risk with exempt securities fr the fllwing reasns: the risk f smaller businesses including thse in the start-up phase pse higher risks there is a higher risk f fraud due t the lack f transparency the pssibility that the client may lse sme r all f the principal invested D. RISKS OF USING BORROWED MONEY TO INVEST Using brrwed mney t finance the purchase f a security invlves greater risk than a purchase using cash resurces nly. The purchase f securities using brrwed mney magnifies the gain r lss n the cash invested. This effect is called leveraging. If yu brrw mney t purchase a security, yur respnsibility t repay the lan and any interest as required by the terms f the lan remain cnstant even if the value f the securities declines. E. HOLDING CLIENT ASSETS SVX des nt hld any client assets. Transactins are prcessed using a third party firm: Versapay. Versapay has a trust accunt with TD Canada Trust wh will hld the funds in the client s name until apprval fr the release f funds has been granted frm the SVX upn successful cmpletin f a campaign. Once the transactin has been apprved by SVX, the funds, less SVX fees, will be released t the issuer. The assets will be held in the client s name with the issuer. If the client prvides a physical cheque t the SVX, the cheque shuld be made payable t the issuer and the cheque will be sent t the issuer alng with an invice fr SVX fees. MaRS SVX 101 Cllege Street, Suite 406 Trnt, ON M5G 1L7 Relatinship Disclsure Agreement Nvember 7, 2017

8 F. COMPENSATION PAID BY ISSUERS TO THE SVX Campaigns targeting accredited investrs r retail investrs will have the fllwing fees: 1. Review and Supprt Fee: Issuers will be charged $2,500, $5,000 r $7,500+ t cver review and supprt csts fr their campaign. Fees will be determined based n issuer and ffering readiness and the level f develpment and custmizatin required. 2. Transactin Fee: Tw (2) per cent f all funds raised thrugh the platfrm. This cvers supprt that SVX prvides ver the curse f raising the funds as well as pst-investment supprt. G. CONFLICTS OF INTEREST SVX will prvide prir written disclsure f a cnflict f interest t issuers that are prmted n the SVX Platfrm and t investrs in such issuers when there is a reasnable likelihd that the investr wuld cnsider the cnflict imprtant when entering int a prpsed transactin, r where therwise required by law. Examples f situatins in which a cnflict f interest may arise include the fllwing: SVX has relatinships with related issuers r cnnected issuers ; SVX has relatinships with ther issuers; there are cmpeting interests f issuers that are prmted n the SVX platfrm; the issuer has participated in a MaRS Discvery District r SVX prgram; SVX individuals (e.g., Registered Individuals) serve n a bard f directrs f anther entity; SVX individuals have Outside Business Activities; and SVX emplys certain cmpensatin practices that create incentives t prmte certain issuers r securities ver ther issuers r securities. In rder t reduce the chance f an investr being expsed t cnflicts f interest, the SVX and its dealing representatives d nt/are nt: 1. Buy r sell securities as principal r agent 2. Act as a prtfli manager r investment fund manager MaRS SVX 101 Cllege Street, Suite 406 Trnt, ON M5G 1L7 Relatinship Disclsure Agreement Nvember 7, 2017

9 3. Related t r cnnected t any issuer 4. Cmment n the merits r expected returns f an investment 5. Hld client assets 6. Clear r settle any trades 7. Invest itself in any issuer 8. Underwrite any issuer If, hwever, a member f either the SVX team r the advisry r review team is invlved with an issuer as utlined belw, then that persn is required t infrm either the Directr r the CCO f the SVX. A review f the invlvement will be cnducted and if needed, the persn will be recused frm the nbarding and apprval prcess f the issuer. Being invlved with an issuer may include, but is nt limited t: 1. Being a family member, clse friend r business assciate f the issuer r a member f the issuer 2. Prvided financial assistance t the issuer 3. Invested in the issuer 4. Cntemplating investing in the issuer H. INDEPENDENT DISPUTE RESOLUTION SERVICE The OmbudsNetwrk gives Canadian cnsumers access t independent cmplaint reslutin services invlving the banking, insurance, securities and mutual fund industries. The OBSI is the branch f the OmbudsNetwrk that prcesses securities-related cmplaints. A client must attempt t reslve the cmplaint with the firm befre the OBSI will review it. In the rare event there is a financial dispute between yu and the SVX, that we cannt mutually reslve, within 90 days, r if the Cmplainant is nt satisfied with the reslutin within 180 days f receiving SVX s decisin, yu may use the services f the Ombudsman fr Banking Services and Investments ( OBSI ) t act as mediatr fr the cmplaint, prvided the amunt claimed is $350,000 r less, and is related t a trading r advising activity cnducted by SVX within 6 years f the Cmplainant discvering the actin. There is n charge t the client fr dispute reslutin with OBSI. Fr SVX s cmplaint plicy and prcedures, please g t Cmplaints Plicy. Fr further infrmatin n OBSI and the services they ffer please g t: I. SUITABILITY SVX, as an EMD, is required under securities legislatin, as part f the Knw Yur Client (KYC ) rules, t review and advise clients n the suitability f any prducts being ffered fr sale. The KYC bligatins require SVX t make all recmmendatins based n a careful analysis f bth MaRS SVX 101 Cllege Street, Suite 406 Trnt, ON M5G 1L7 Relatinship Disclsure Agreement Nvember 7, 2017

10 infrmatin abut the client and infrmatin relating t a particular transactin. SVX and its registered individuals must take reasnable steps t ensure that, befre they make a recmmendatin t r accept an instructin frm a client t buy r sell a security, the purchase r sale is suitable fr the client. The bligatin t cnduct a suitability assessment generally applies t all clients, regardless f their size r the level f sphisticatin, unless an exemptin is available. Having SVX s apprval t sell the issuers that are prmted n the SVX platfrm r ther securities des nt mean that the issuers r ther securities will be suitable fr all clients; therefre, SVX s Registered Individuals must determine the suitability f each transactin fr every client. SVX will review the suitability f the securities by reviewing the fllwing f the client: investment needs and bjectives; financial circumstances (including net wrth, incme, current investment hldings, and emplyment status); time hrizn fr their investments; and risk tlerance fr varius types f securities and investment prtflis (taking int accunt the client s investment knwledge). The extent f KYC infrmatin a registrant needs t determine suitability f a trade will depend n the: client s circumstances type f security client s relatinship t the registrant registrant s business mdel Even if a SVX dealing representative has determined that an investr qualifies as an accredited investr, the dealing representative must still assess whether the investment is suitable fr the investr. J. CLIENT REPORTING The fllwing will be prvided t all clients: trade cnfirmatins f each investment mnthly statements in the mnth that there has been a transactin quarterly statements, even where there have been n transactins annual statement summarizing, all investment transactins made during the year, detailing the quantity, descriptin f the investment, initial cst, any gain r lss, value at year end and fees paid. The abve reprts will be available t all investrs via the platfrm. Once psted n the platfrm, each client will receive an ntificatin f the availability f the reprt n the platfrm and its nature. MaRS SVX 101 Cllege Street, Suite 406 Trnt, ON M5G 1L7 Relatinship Disclsure Agreement Nvember 7, 2017

11 Setting Expectatins The SVX encurages yu, as ur client, t actively participate in ur relatinship. Yu are encuraged t: Keep SVX up t date abut yur Knw-Yur-Client (KYC) infrmatin Prmptly ntify the SVX abut any change in yur infrmatin that culd result in a change t the types f investments apprpriate fr yu, such as a change t yur incme, net wrth, investment bjectives, risk tlerance, r time hrizn. Be infrmed abut yur investments Yu shuld fully understand yur investments by asking questins, cnsulting prfessinals, and carefully reviewing the literature prvided t yu. Stay infrmed abut yur investments Review all accunt dcumentatin prvided t yu and t regularly review prtfli hldings and perfrmance. Yu shuld als request infrmatin frm the SVX if yu have cncerns abut yur accunts, transactins, yur relatinship with the SVX, r yur relatinship with the Dealing Representatives. MaRS SVX 101 Cllege Street, Suite 406 Trnt, ON M5G 1L7 Relatinship Disclsure Agreement Nvember 7, 2017