By Cora Pettipas
There is one notable theme that keeps coming up with individuals new to the exempt market and private investing; comparisons between the exempt market and the public markets. It is natural for inquiring minds to compare something that is known to them to something that is unknown. To assist with this intellectual exploration for industry and those new to the exempt market, this issue of the Exempt Edge is dedicated to the similarities and differences of public versus private investments.
In our context, the exempt market refers to ‘prospectus exempt’ meaning that private issuers do not go through the process of building a prospectus, but use an offering memorandum or term sheet instead. The practical reason why Issuers would write a prospectus offering is that they want to be publically listed. If they do not want to be publically listed, they generally do not go through the extra costs and steps of creating a prospectus. A private issuer could theoretically offer a prospectus, and not be publically traded, but it is not done in practice.
Based on that core difference stems all the other differences between the private and public markets. Some industry experts argue that new regulations in recent years have facilitated a blending of attributes of private and public markets. This is true, but it is important to note that private and public markets serve very different purposes, for Issuers of different structures, goals, and sizes. In general, the public markets are not better than private markets, or vice versa. However, from an Issuer perspective, one route could mean success and the other failure depending on that Issuer’s needs.
Both markets are needed. Both are essential to efficient capital raising. The cover story of Greg Romundt and Centurion, a large Canadian private REIT will help to illustrate this point practically. We have included other articles from industry experts such as Craig Skauge, Paul Ghezzi, and Alan Lo, that further discusses the differences and similarities in the public versus private spaces.
This is an exciting time in the private markets as investor interest continues to flourish. As the trend in regulation increases in our space, we need to embrace information technology as an industry to make these increased requirements scalable. As well as cutting costs, financial technology (FinTech) innovations can increase the transparency, accountability and general communications to investors in a way that could never have been done before.
There is much talk in financial markets about lack of financial literacy in investors; but it could be argued that there is also a lack of technological literacy in the financial industry, and that handicap will not be forgiven in the years ahead, as the exempt market embraces is growing importance in the capital markets alongside public markets, a culture of technological literacy, along with compliance, will be essential to maintain a competitive advantage.
The next issue of Exempt Edge will be an Advisor focused issue, which will celebrate the top advisors in our space as well as business building practices. If you are interested in contributing, please contact me, as NEMA is the voice of the Exempt Market.
Cora Pettipas CFP, FCSI, M.Sc., FMA, CIM, DBA (ABD) is currently the Vice President and a Board of Director of the National Exempt Market Association (NEMA) in Canada. Cora is also the editor of Exempt Edge Magazine, the Canadian industry trade publication on the exempt market/private equity. She is also currently representing Canada on the Education Working Group for international education initiatives for the Financial Planners Standards. She holds a Bachelor’s degree from McGill University, a Master’s Degree (Finance & Controlling) from Swiss Management Center University and is currently doing her Doctoral dissertation in Finance, focusing on the influences of FinTech applications to financial planning. Cora has had tenures with several financial institutions in the capacity of financial advisor, wealth management, investor services, retail banking, and financial planning. Her most recent previous position was as a Professor at Mount Royal University, where she taught Finance and Financial Planning. She has published and presented her work internationally. Cora is also the founder and Co-Owner of Melodic Twilight, a successful business venture which is internet based and sells in over 20 countries.