On January 11, 2024, the Canadian Securities Administrators (CSA) published in final form amendments and changes to National Instrument 41-101 – General Prospectus Requirements, National Instrument 44-101 – Short Form Prospectus Distributions, National Instrument 44-102 – Shelf Distributions, National Instrument 44-103 – Post-Receipt Pricing and other related changes to securities laws and guidance (collectively, the Amendments). Certain local jurisdictions published additional rules relating to the Amendments, providing additional information relevant to those jurisdictions only.
The Amendments relate to the implementation of an access model (Access Model) for prospectuses, including long-form, short-form, shelf (including prospectus supplements), and post-receipt pricing for non-investment fund reporting issuers, including venture issuers. The Access Model provides a more cost-efficient and timely manner of communicating information to investors compared to physical delivery. Under the Access Model, providing public electronic access to a prospectus and alerting investors via a news release that the document is accessible through SEDAR+ will either satisfy the conditions of an exemption from the requirements under securities legislation to send a prospectus (in British Columbia, Quebec and New Brunswick), or constitute delivery of the prospectus, generally, under securities legislation (in Alberta, Ontario and the other CSA members jurisdictions). Provided all necessary approvals are obtained, the Amendments will come into force on April 16, 2024.
The Access Model is not mandatory for non-investment fund reporting issuers, and investors will still be able to request prospectuses in both electronic and paper form.
Background to Amendments
On January 9, 2020, the CSA published Consultation Paper 51-405 – Consideration of an Access Equals Delivery Model for Non-Investment Fund Reporting Issuers to provide a forum for discussion on the appropriateness of implementing an access equals delivery model in the Canadian market.
On April 7, 2022, based on the positive feedback from various market participants, the CSA published for comment proposed amendments and changes for prospectuses generally, as well as annual financial statements, interim financial reports and related management's discussion and analysis (collectively, CD documents) for non-investment fund reporting issuers. Based on feedback received, the CSA is further considering a revised access model for CD documents, which they expect to publish for comment by stakeholders. A separate CSA proposal for continuous disclosure reforms intended to streamline annual and interim disclosure requirements for reporting issuers is currently on hold pending this revised access model for CD documents. See our October 2023 Blakes Bulletin: CSA Provides Update on Proposed Continuous Disclosure Reforms for more information.
Summary of the Access Model
The Access Model applies to all types of prospectuses, except rights offerings by way of prospectus, and medium-term note (MTN) programs and other continuous distributions under a shelf prospectus, which already have a separate regime under applicable Canadian securities laws. The Access Model will also not apply to a prospectus offering of investment fund securities.
Filing and News Release Requirements
The Access Model provides that a dealer is exempt from the final prospectus delivery requirements under applicable securities legislation (in British Columbia, Quebec and New Brunswick), and in the other CSA jurisdictions (including Alberta and Ontario) access to the final prospectus or any amendment has been provided, in either case if:
- The issuer has filed the document on SEDAR+ and a receipt has been issued for the document, and;
- After the receipt is posted for the document, the issuer issues and files a news release on SEDAR+ that states:
- In the title of the news release, that the document is accessible through SEDAR+,
- That access to the document is provided in accordance with securities legislation relating to procedures for providing access to a prospectus and any amendment,
- That the document is accessible at www.sedarplus.com,
- The securities that are offered under the document,
- The following: “An electronic or paper copy of the final prospectus and any amendment may be obtained, without charge, from [insert contact information for the issuer or dealer, as applicable] by providing the contact with an email address or address, as applicable.”
With respect to a preliminary prospectus, access will have been provided, or a dealer will be exempt from the prospectus delivery requirements, if the document has been filed on SEDAR+ and a receipt has been issued and posted on SEDAR+ for the document. An issuer need not issue and file a news release on SEDAR+ in connection with the filing of a preliminary prospectus or its amendment to alert investors.
Shelf and PREP Offerings
The Amendments provide different requirements for shelf and post-receipt pricing (PREP) prospectuses. Generally, the news release under the Access Model noted above would be issued and filed on the same day the receipt is issued for a final prospectus. Shelf prospectus supplements and supplemented PREP prospectuses need only be filed within a specified period after the pricing of the offering. To facilitate these offerings and the common practice of issuing a news release after pricing, the Amendments alter the news release requirements to allow a news release to be issued following pricing on a forward-looking basis, disclosing that the shelf prospectus supplement or supplemented PREP prospectus will be filed on SEDAR+ within two business days. This will allow issuers to file a single news release in respect of pricing and filing of the prospectus supplement or final prospectus, to satisfy the requirements of the Access Model.
Requests by Purchasers
If a purchaser requests an electronic or paper copy of the preliminary prospectus, final prospectus or any amendment from the issuer or dealer, a copy of the applicable document, in the format requested by the purchaser, must be sent by the issuer or dealer without charge to the purchaser at the email address or mailing address specified in the request. A final prospectus or any amendment, and a shelf prospectus supplement, corresponding base shelf prospectus or any amendment, must be sent within two business days from when the request was received.
Notably, the Amendments removed the proposed two business day delivery requirement in respect of a preliminary prospectus, as the CSA acknowledges there is no time-sensitive action required from, or investment decision by, prospective purchases in connection with a preliminary prospectus.
Rights of Withdrawal
In connection with the Access Model, the Amendments adjust the right to withdraw from an agreement to purchase securities under applicable Canadian securities laws. If the Access Model is exercised, withdrawal rights may be exercised within two business days after the later of: (a) the date that access to the final prospectus or any amendment has been provided (by filing on SEDAR+ and issuing the prescribed news release), and (b) the date that the purchaser has entered into the agreement to purchase the securities. The withdrawal rights model established by the Access Model and related local rules differs from the way withdrawal rights currently operate in Alberta and Ontario, where such withdrawal rights expire at midnight on the second business day after the purchaser receives the applicable document.
A request for an electronic or paper copy of the final prospectus or any amendment will not affect the calculation of the period of time during which a purchaser or subscriber’s rights must be exercised.
The Access Model is voluntary and issuers may still print and mail or deliver electronic copies (subject to compliance with electronic delivery requirements) to purchasers rather than utilize the Access Model, in which case the “normal” delivery requirements will apply.
As noted above, provided all necessary approvals are obtained, the Amendments will come into force on April 16, 2024. The CSA continues to refine a proposed access model for CD documents. The CSA has declined, at this time, to extend a proposed access model (other than the existing notice-and-access regime) to proxy-related materials, as well as takeover bid and issuer bid circulars.
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