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The Canadian Securities Administrators ("CSA") has published notice which outlines the CSA's plan to pursue policy projects to examine specific prospectus requirements, revisit certain continuous disclosure requirements, and enhance electronic delivery of documents.
The CSA has published CSA Staff Notice 51-353 - Update on CSA Consultation Paper 51-404 Considerations for Reducing Regulatory Burden for Non-Investment Fund Reporting Issuers (see here), which outlines the CSA's plan to pursue policy projects to examine specific prospectus requirements, revisit certain continuous disclosure requirements, and enhance electronic delivery of documents.
The CSA indicated that it is moving forward with several projects that could meaningfully reduce regulatory burden for public companies in Canada's capital markets. The projects noted follow the consultation initiated by the CSA in 2017 on reducing regulatory burden in the public markets.
Specific projects the CSA intends to pursue include:
Potential alternative prospectus model. CSA staff received strong support for the previous proposal to revisit the merits of an alternative prospectus offering models for reporting issuers, such as Continuous Market Access and the Integrated Disclosure System, with disclosure more concise and focused than under the current short form prospectus regime. In light of the feedback received, certain CSA jurisdictions will begin research as an initial phase of a project to explore potential alternative offering models.
Facilitating at-the-market (ATM) offerings. While National Instrument 44-102 - Shelf Distributions ("NI 44-102") establishes certain rules for ATM offerings under Canadian shelf prospectuses, NI 44- 102 does not establish a comprehensive framework for ATM offerings as it does not exempt ATM offerings from certain provisions of securities legislation applicable to all prospectus offerings. CSA staff noted the observation by many that the limited number of ATM offerings in Canada may be partly attributable to regulatory burden associated with the requirement to obtain prior exemptive relief and the conditions typically imposed in connection with such relief and that some of the current restrictions on ATM offerings could be relaxed or eliminated without compromising necessary investor protection and the integrity of the capital markets. In light of feedback that facilitating ATM offerings would be beneficial for Canadian reporting issuers, the CSA intends to initiate a CSA policy project in this area.
Revisiting the primary business requirements. Commenters suggested that CSA staff revisit the interpretation of Item 32 of Form 41-101F1 - Information Required in a Prospectus. These rules outline the historical financial statements required to be included in an IPO prospectus and commenters noted certain inconsistencies between staff’s interpretation of these requirements across the CSA. In light of this feedback received from stakeholders, CSA staff is considering ways in which we can provide greater clarity to issuers preparing an IPO prospectus regarding these issues.
Removing or modifying the criteria to file a business acquisition report (BAR). Reporting issuers frequently apply for and are granted certain relief from the BAR requirements. Commenters suggested that the preparation of a BAR entails significant time and cost, and that the information necessary to comply with the BAR requirements may, in some instances, be difficult to obtain. Some Commentors also questioned the value of the BAR disclosure and a wide range of suggestions on how the CSA can reduce regulatory burden in this area was received. In light of this feedback, a CSA policy project will be pursued in this area
Revisiting certain continuous disclosure requirements. The CSA received a number of comments pertaining to existing continuous disclosure requirements as set out in National Instrument 51-102 - Continuous Disclosure Obligations ("NI 51-102") supporting:
eliminating duplicative disclosure among the financial statements, management’s discussion and analysis (MD&A), and other NI 51-102 forms;
consolidating two or more of the financial statements, MD&A and annual information form into one reporting document; and
examining whether the volume of information in annual and interim filings can be reduced in order to prevent excessive disclosure from obscuring key information or otherwise improving the quality and accessibility of disclosure.
In light of this feedback received, a CSA policy project will be initiated to review certain continuous disclosure requirements, with a view to reducing the burden of disclosure on issuers, while enhancing its usefulness and understandability for investors. However, the CSE noted that they would expect that this will be a staged project with a majority of the work requiring a longer time frame.
Enhancing electronic delivery of documents. Market participants has previously expressed a view that reporting issuers continue to incur significant costs associated with printing and delivering various documents required under securities legislation. Commenters were generally supportive of developments which would further facilitate electronic delivery of documents and, in particular, switching the current default to electronic delivery, provided that investors retained an option to receive paper documents. In light of this feedback, a CSA policy project will be initiated in this area. However it was again noted that some legal aspects of electronic delivery fall outside of the scope of securities legislation and, as a result, the CSA is limited on the potential changes that can be made in this area.
The CSA stated that it will initiate each of the above options in the near term by establishing CSA working groups consisting of staff from participating CSA jurisdictions and identifying the project mandate, scope, timelines and resources required. The CSA cautioned that certain projects may involve longer time frames for completion than others; that any potential changes to the current regulatory regime will need to follow standard policy-making process, including publishing any proposed amendments for comment; and finally there is no assurance that any changes to the current regulatory regime will ultimately be adopted in any of the CSA jurisdictions.
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