Written by Will Osler and Kathryn Shaw
The Canadian Securities Administrators (CSA) announced on March 27, 2018, the initiation of six policy projects aimed at reducing regulatory burdens for non-investment fund reporting issuers. The announcement comes after stakeholders had the opportunity to respond and comment on a CSA Consultation Paper released in April 2017.
The new policy projects include:
- exploring potential alternative prospectus models;
- facilitating at-the-market offerings;
- revisiting the primary business requirements;
- removing or modifying the criteria to file a business acquisition report;
- revisiting certain continuous disclosure requirements; and
- enhancing electronic delivery of documents.
The projects are briefly summarized as follows:
Alternative Prospectus Models
The CSA noted in the Consultation Paper that it was considering an alternative prospectus offering model for reporting issuers with disclosure more concise and focused than under the current short form prospectus regime. Stakeholders provided positive feedback and potential alternative offering models will be researched.
Facilitating At-the-Market Offerings
Reporting issuers wishing to conduct an at-the-market offering must obtain exemptive relief from certain securities legislation requirements. This regulatory burden may account for why there are a limited number of these offerings. Stakeholders suggested that codifying the exemptive relief on at-the-market offerings would not compromise investor protection nor the integrity of capital markets.
Revisiting the Primary Business Requirements
The CSA did not identify revisiting the primary business requirements in its Consultation Paper. These requirements relate to the historical financial statement to be included in an IPO prospectus. However, based on feedback from stakeholders, CSA staff will consider ways in which to provide greater clarity for issuers preparing an IPO prospectus.
Removing or Modifying the Criteria to File a Business Acquisition Report
Preparing a business acquisition report requires significant time and cost, and at times the required information may be difficult to obtain. The CSA will explore ways to reduce this regulatory burden, given reporting issuers frequently apply for and are granted certain relief.
Revisiting Certain Continuous Disclosure Requirements
Recurring themes among commenters regarding existing continuous disclosure requirements included eliminating duplicative disclosure, consolidating financial statements, management's discussion and analysis and the annual information form, and examining if the volume of information in annual and interim filings can be reduced.
Addressing these concerns would enhance the usefulness and comprehensibility of information for investors, while also reducing the burden of disclosure on issuers.
Enhancing Electronic Delivery of Documents
The Consultation Paper noted market participants incur significant costs associated with printing and delivering various documents required under securities legislation. Stakeholders were generally supportive of facilitating electronic delivery and switching the default to electronic delivery.
The six projects will be initiated by the CSA in the near term. Projects have different timelines for completion, but at this time, the CSA has not elaborated on such timelines.
The policy projects are in no way a guarantee that the current regulatory regime will undergo any changes. However, the positive response from stakeholders to the Consultation Paper and the initiation of projects signal the CSA's willingness to adapt to changing market conditions, investor demographics, technological innovation and globalization in an effort to reduce regulatory burden for reporting issuers.