Written by Beth Riley and Kathryn Shaw
On May 2, 2019, the Canadian Securities Administrators (CSA) announced that it is seeking comments in respect of a proposed streamlined and integrated national information and filing system for capital market participants (the "Renewed System") along with the adoption of a simplified-fee system.
These proposals are consistent with the CSA's stated policy to identify and consider areas of securities legislation to reduce undue regulatory burdens and costs for reporting issuers, without compromising investor protection or the efficiency of capital markets. See CSA Staff Notice 51-353 Update on CSA Consultation Paper 51-404 and CSA Consultation Paper 51-404 Considerations for Reducing Regulatory Burden for Non-Investment Fund Reporting Issuers.
The CSA proposal is set forth in CSA Notice 13-102 and Request for Comment – Proposed Repeal and Replacement of Multilateral Instrument 13-102 System Fees for SEDAR and NRD and CSA Notice 13-103 and Request for Comment – Proposed National Systems Renewal Program Rule and Related Amendments, which generally provide for the following amendments:
Proposed Repeal and Replacement of Multilateral Instrument 13-102 System Fees for SEDAR and NRD ("MI 13-102")
The proposed amendments to MI 13-102 will, generally:
- establish a flat-fee design for filings with securities regulatory authorities, which fees will better align with the CSA's anticipated costs to operate the Renewed System, rather than the current system based on the number of jurisdictions in which the market participant files its documents;
- eliminate certain system fees associated with certain filing types, to reduce costs and simplify the system fees levied in some areas, such as prospectus offerings outside of Québec and related party transaction filings, among others;
- introduce system fees for new filing types, such as a new system fee for filing a notice of reliance on the international dealer or adviser registration exemption in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations; and
- harmonize system fees for similar filings, including, for example, reports of exempt distribution (Form 45-106F1 Report of Exempt Distribution) will be required to be filed through the Renewed System in all jurisdictions and filers to pay a system fee, rather than the current requirements where most jurisdictions require the form be filed on the System for Electronic Document Analysis and Retrieval ("SEDAR") and to pay a system fee, with British Columbia and Ontario requiring the form be filed using local filing systems.
The CSA advises that these flat fees are intended to better align system fees that market participants must pay with the CSA's anticipated costs to operate the Renewed System, based on market participants' expected system usage. The CSA expects the new fee design to be simpler, total system fees to fall by approximately $1.7 million (7 percent), costs of compliance to be streamlined and fees to decrease or remain the same for 45 percent of market participants.
Proposed National Instrument 13-103 [System Replacement Rule] ("NI 13-103")
Proposed NI 13-103 will replace existing CSA national systems including SEDAR, the System for Electronic Disclosure by Insiders ("SEDI"), and the National Registration Database ("NRD"), along with various local records filing systems, with a more centralized Renewed System.
Under NI 13-103, market participants will be required to transmit electronically through the Renewed System all documents to be filed with securities regulatory authorities, subject to limited exceptions (such as documents filed in connection with an investigation or hearing), and regulatory and system fees will be paid through the Renewed System only to the reporting issuer's principal regulator.
The CSA expects the Renewed System to be more uniform among jurisdictions, to provide a modern, more secure and central system to file documents and pay fees, to expand public search functionality, and to enforce modern access controls.
The Renewed System will be implemented in four phases, with the first phase expected to launch in early 2021 through the replacement of SEDAR, the National Cease Trade Order Database, the Disciplined List, and certain other filings.
The CSA's 90-day comment period closes on July 31, 2019. Bennett Jones is able to assist clients in understanding details of the proposed Renewed System and new fee design as well as the potential impact on client's procedures, and is able to assist with the submission of comments on the CSA's proposal.
We will continue to monitor the progress of the CSA's proposed Renewed System and simplified fee system. Please contact any member of our Corporate Finance practice group for further information.