by Erica Freeman
What a difference a year makes. This statement certainly holds true for the Quebec retail exempt market. Although we still have a way to go, this market is expanding rapidly. With the addition of three more Quebec based EMDs, and many seasoned Mutual Fund Representatives obtaining their EMDR License, we are unquestionably leaps and bounds from where we were this time last year. In this article I will outline the many differences from my article published last year, Tapping into La Belle Province, and where I feel this market is going in the foreseeable future.
The Quebec exempt market industry has been fortunate to work with many Western-based Issuers during the past year. This is undoubtedly due to all the progress and awareness we have made in this market. However, it still amazes me how many Issuers do not realise that Quebec works under fundamentally the same regulations as Alberta. Yes, Quebec does have the Offering memorandum Exemption in place.
The one difference is the requirement to translate all documents, including Offering Memorandums (OMs) and subscription agreements, to French. The Issuers who are taking the time to adapt to Quebec requirements and compliance, and embrace Quebec’s unique culture, are the Issuers who will indisputably flourish in this market. Let me expand on this point: Quebec is very distinctive in many ways especially when it comes to our culture, language, and background. If an Issuer wishes to succeed in this province, the appropriate steps must be followed.
For instance, as mentioned above, having your mandatory documents translated is the requirement for doing business in Quebec. But why stop there? As I have previously emphasised, in order to embrace the Quebec ‘Joie de vivre,’ you must jump in with both feet! A half-hearted scenario may work, but I can say with certainty that it will not be as effective as going ‘all in.’ I strongly encourage issuers that all business communications are bilingual, including all websites and marketing materials.
Just as exciting, we are seeing a big increase in Issuer participation in Quebec-based companies. As little as a year ago, this trend was unheard of. It is a true testament to our space that Quebec Issuers are starting to learn more about the retail exempt market, and wanting to learn more about how this industry works. Many Quebec investors would like the opportunity to invest in their own backyard; and now they can. With translation costs being more affordable, more Issuers will see a huge benefit to exploring the possibilities of the Quebec exempt market.
More education = More product = More representatives
The amount of representatives obtaining their Dealer Representative (DR) license in Quebec is quite significant from last year. The numbers are growing monthly. Last year, the province of Quebec had approximately twelve DRs in the retail exempt market space. Today that number has tripled. We have also seen some representatives who only had their mutual fund license obtain their DR license, and therefore are moving their book of business to dealerships that sell many forms of securities, including exempt market products.
These trends are definitely an indication of the increased awareness that is occurring all over the province of Quebec regarding the benefits of the exempt market, and the importance of diversification in a client’s portfolio. We must keep the momentum going. Education through word of mouth, seminars within individual firms, and Issuer conferences, will certainly help the development, and ultimately the growth, of the Quebec retail exempt market.
I had an opportunity to discuss the Quebec exempt market with Monika Niedbalski, a DR situated in Montreal. Monika’s story is quite interesting, as she was an investor in the exempt market long before the existence of NI 31-103. “My introduction to the exempt market went back to 2006 after our financial advisor decided to sell his business and our portfolio went downhill from there. I knew there had to be something else to keep some of our money out of the public market. I was introduced to the exempt market and happily was not affected by the crash of 2008-2009.’’
After numerous years of being an investor in the exempt market, Monika decided to obtain her DR license and the rest is history. Although Monika had faced a slow start, she is determined and very excited, for the road ahead. “There are challenges educating people on the exempt market especially in the East when several unethical advisors in the news tainted the industry. Unfortunately we have all been put in the same box.’’ Monika is determined to change investor’s attitudes and educate consumers on the exempt space. “I believe the upcoming year will have positive growth in the exempt market. We need a plan of action to really gain momentum and show the public that provisions have been put into place since 2010. I have some great ideas and by creating a ‘mastermind group’ in Quebec with several individuals and issuers we can begin to plan a strategy to get the word out in a concise and positive manner.’’ Monika is cautiously optimistic her plan will succeed, and she looks forward to this next year.
In conclusion, industry participants must all come together and demonstrate the positive role the retail exempt market space plays, and how investors in Quebec have another exciting alternative in which to invest their hard-earned money. We must continue to focus on all the great strengths this industry brings, and share successful stories from the past and present. As an Industry, we must collaboratively continue to educate the Quebec public that the retail exempt market space is a solid means to raise capital and invest. A David Rockefeller famous quote is very timely when applied to succeeding in the Quebec exempt market: “Success in business requires training and discipline and hard work. But if you're not frightened by these things, the opportunities are just as great today as they ever were.’’