The Canadian Securities Administrators (CSA) recently published Staff Notice 51-353 – Update on CSA Consultations Paper 51-404 Considerations for Reducing Regulatory Burden for Non-Investment Fund Reporting Issuers (Notice), which sets out a number of upcoming CSA policy projects intended to reduce the regulatory burden associated with capital raising in public markets (i.e., prospectus-related requirements) and the ongoing costs (i.e., continuous disclosure requirements) applicable to non-investment fund reporting issuers.
The six new policy projects announced by the CSA are:
- Removing or modifying the criteria for reporting issuers to file a business acquisition report
- Facilitating at-the-market (ATM) offerings
- Revisiting the primary business requirements to provide greater clarity to issuers preparing an initial public offering (IPO) prospectus
- Considering a potential alternative prospectus model
- Reducing or streamlining certain continuous disclosure requirements
- Enhancing electronic document distribution for investors.
These new policy projects follow a consultation process commenced in 2017 with the publishing of Consultation Paper 51-404 – Considerations for Reducing Regulatory Burden for Non-Investment Fund Reporting Issuers (Consultation Paper). Please see our May 2017 Blakes Bulletin: Canadian Securities Administrators Seek to Reduce Regulatory Burdens for Reporting Issuers for more information on the Consultation Paper.
ADOPTED POLICY PROJECTS
Following the consultation process, the CSA selected which projects to undertake based on, among other things, the level of stakeholder support expressed in comment letters responding to the Consultation Paper, the project’s potential to substantively reduce regulatory burden, existing coverage by ongoing policy projects, and the Consultation Paper’s scope of review. The six new policy projects selected by the CSA are highlighted below.
1. Removing or Modifying Business Acquisition Report Criteria
The CSA intend to undertake a policy review of the criteria under which reporting issuers are required to file business acquisition reports and whether such reports should be required at all. Commenters noted that business acquisition reports are the frequent subject of exemptive relief, otherwise entail significant time and expense to complete, and that the necessary information for such reports may be difficult or impossible to obtain, while some stakeholders have questioned the value of such reports.
2. Facilitating ATM Offerings
National Instrument 44-102 – Shelf Distributions sets out rules applicable to ATM offerings under Canadian shelf prospectuses, but does not provide a comprehensive offering framework. As a result, reporting issuers must currently obtain exemptive relief in order to complete an ATM offering. The CSA intends to implement a review of the existing ATM offering restrictions in an effort to better facilitate these types of offerings going forward.
3. Revisiting the IPO Primary Business Requirements
Although not explicitly mentioned in the Consultation Paper, the CSA intend to consider how to clarify the rules for the historical financial statements required as part of an IPO prospectus (e.g., in respect of the primary business of the issuer), which have been perceived by some commenters to be interpreted inconsistently by CSA staff.
4. Considering a Potential Alternative Prospectus Model
Certain jurisdictions of the CSA intend to conduct initial research as part of a policy project to explore alternative offering models aimed at providing more concise and focused disclosure than currently required under the short-form prospectus regime. Some commenters provided support for alternative prospectus concepts previously proposed in CSA jurisdictions, but not implemented, such as Continuous Market Access and the Integrated Disclosure System.
5. Reducing or Streamlining Certain Continuous Disclosure Requirements
The CSA intend to conduct a multi-stage review of certain continuous disclosure requirements in order to reduce the disclosure burden on reporting issuers, and to enhance the usefulness, accessibility, and understandability of disclosure documents. In particular, the CSA noted that commenters supported:
- Eliminating duplicative disclosure in financial statements, management’s discussion and analysis (MD&A), and other NI 51-102 forms
- Consolidating into one document two or more of an issuer’s applicable financial statements, MD&A, and annual information form
- Reducing the amount of information in annual and interim filings to prevent excess information from obscuring key information or otherwise improving quality and accessibility.
6. Enhancing Electronic Document Distribution
Commenters reported that reporting issuers incur significance costs associated with the printing and delivery of paper documents. The CSA will explore options or approaches to further facilitate the electronic delivery of documents to investors, including setting the default method of delivery to electronic delivery provided that paper documents remain available at request. However, the CSA has noted that its ability to expand electronic delivery is somewhat limited, as some legal aspects fall outside the scope of securities legislation.
POTENTIAL REFORMS NOT INCLUDED
A number of potential areas of reform outlined in the Consultation Paper were not discussed in the Notice, including:
- Extending the application of streamlined venture issuer rules to smaller non-venture issuers
- Facilitating cross-border offerings
- Further liberalizing the pre-marketing and marketing regime.
It may be that the CSA have determined not to pursue such matters at this time, however some matters (e.g., permitting semi-annual reporting) may just have been subsumed into listed projects (e.g., the review of continuous disclosure requirements).
The CSA anticipate that the new policy projects will be initiated in the near term, however the exact scope, timeline, and mandate of each project is to be determined. We will provide further updates on the policy projects as they develop, including when the CSA publish any amendments for comment.
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