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6 Reasons to Work With an Exempt Market Dealer (EMD)

July 19, 2012  
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By: Jacoline Loewen, EMDA Director and Director, Loewen & Partners Inc.

Before we talk about reasons to working with an EMD, let’s first discuss why value is critical.

If you found a glass Coke bottle on the desert sand, even if you had never seen such an object before, you would perceive that it had been made by an intelligent entity. So it is with business: its complexity is proof of its design. The Coke bottle surrounds the actual product a carbonated, sweet, dark fluid. Yet, that bottle has become ubiquitous as a global brand. Making money is a result of all the little actions that get the strategy done: the brilliant management of cash flows, the production expansion, the supply chain’s meticulous design, and prompt delivery to the world market of customers.

So how do you determine the value of that Coke bottle and then of the whole enterprise that produced it? How do you capture the worth of all those years of work by the owners and the employees? Coke, like Facebook and other public companies have public stock markets to help determine value. But as we watch the Facebook IPO wobble and drop we can see that value is not set in stone – in public or private markets. But why then does Coke have clearer value which has endured over the decades?

For many Canadian business owners of private companies wishing to sell their company or to attract investors, an exempt market dealer (EMD) can help them unlock their true value. More than any time in recent history, the stability of the Canadian economy is attracting a great deal of investment in search of the right business opportunities. Investors are scouring Canada for that company with Coke bottle on the desert sand value and the real question is whether they will find it – and if they will find you. Investors want to find business owners who put deep management competency and time into their business, who can explain its worth in elegant terms and who understand the relationship with private equity or investors.

To help those investors find and then evaluate your companies coke bottle type value one of the best tools available is to use an EMD. Owner–operated companies, established private and public companies, and companies with requirements beyond bank or credit financing, or ‘friends and family’ funding will find huge value in the capital raising expertise of an EMD.

Here are six reasons to use a registered EMD:

1. Legal Protection securities regulators in each jurisdiction of Canada license EMDs and prescribes compliance and regulatory standards for an EMD to conduct their securities dealer services with clients.

2. Peace of Mind by ensuring your financial advisors are registered as an EMD, you can trust they are appropriately regulated and managed by securities professionals who adhere to high standard of compliance and client service. EMDs are accountable for their compliance practices, acting in good faith and acting in the best interests of their clients.

3. Proficiency EMDs pass a series of exams to ensure proficiency. In addition, compliance rules are in place to ensure that a strict code of conduct and proper client processes are followed to ensure fair and transparent service.

4. Best Practices Ensured the conduct of an EMD is set by regulation including requirements for proficiency, capital and operational compliance requirements. EMDs are required by law to have audited financial statements, a minimum of $50,000 working capital, and periodic statements to clients if there are transactions undertaken on their behalf, as well as insurance in place to cover a wide range of client and dealer issues.

5. Broader Capabilities EMDs offer access to sophisticated business advisers and a pool of exempt market investors minimizes many of the complicated and expensive features of the public equity markets. EMDs are experts in the purchase and sale of exempt market securities and often specialize in raising capital in particular industries: real estate, construction, mining, oil & gas, food technology, biotechnology, manufacturing, etc. EMDs are allowed to offer clients a far wider range of financial opportunities than a financial advisor doing M&A or sale of companies.

6. Dispute Resolution Mechanism If there is an issue with your EMD the firm will have internal mechanisms to address client concerns and if necessary an independent dispute resolution option will be available to you.

For more information contact: Jacoline Loewen

For more articles, please download the Exempt Market Update - the national magazine of the EMDA