The Canadian Securities Administrators (CSA) proposal to permit electronic delivery, published on April 7, 2022, is intended to modernize the way documents are made available to investors while also reducing the costs borne by issuers and benefiting the environment.
- The proposal would permit electronic delivery of prospectuses generally, financial statements and MD&A.
- The CSA are accepting stakeholder comments until July 6, 2022
Prospectuses
Under the CSA’s recently-released proposal (the Proposal), the CSA has proposed amendments to a number of National Instruments to allow for an “access equals delivery” model that would be available for prospectuses generally, but would exclude: (i) rights offerings by way of prospectus; (ii) prospectus offerings of investment fund securities; and (iii) Medium Term Note (MTN) programs and other continuous distributions made under a shelf prospectus.
Pursuant to the Proposal, delivery obligations in respect of a final prospectus, shelf prospectus supplement or supplemented PREP prospectus would in effect be satisfied in all jurisdictions where:
- the document is filed on the System for Electronic Document Analysis and Retrieval (SEDAR) and a receipt has been issued; and
- on the same day the document is filed, a news release is issued and filed on SEDAR that states that the document is available on SEDAR or by contacting the issuer.
Notably, the Proposal does not require issuers to post the relevant documents to their own website. This is a welcome difference from the CSA’s original “access equals delivery” proposal published in a January 2020 consultation paper (further discussed below).
In respect of a preliminary prospectus, delivery obligations would generally be satisfied as soon as the document is filed on SEDAR and a receipt has been issued. No press release would be required.
The right under applicable securities legislation to withdraw from an agreement to purchase securities would become exercisable within two business days after the later of (a) the date that access to the final prospectus (or any amendment) has been provided; and (b) the date that the purchaser has agreed to purchase the securities. The British Columbia exemption would be conditioned on providing an equivalent right to the purchaser. Issuers relying on the “access equals delivery” provisions would be required to include a cross-reference on the prospectus cover page to the section of the prospectus that explains how the withdrawal period is being calculated.
The Proposal also provides for a number of conforming changes to rules governing marketing materials and road shows which would apply for offerings in which the “access equals delivery” provisions are relied upon.
Financial Statements and MD&A
The Proposal would also apply to annual financial statements, interim financial reports and related MD&A. However, the Proposal would not extend the “access equals delivery” model to proxy-related materials and take-over bid and issuer bid circulars on the basis that such documents may require immediate shareholder action.
Like in the case of a prospectus, in addition to filing financial statements and related MD&A on SEDAR, in order to take advantage of the “access equals delivery” model, an issuer would, on the same date the filing of such documents take place, have to issue and file a news release on SEDAR stating that the financial statements and MD&A are accessible on SEDAR. The press release would also have to indicate that such documents are available by contacting the issuer, including in order to receive physical copies without charge.
Under the Proposal, issuers would remain allowed to annually send request forms or copies of the annual financial statements and MD&A to securityholders (other than holders of debt securities) in accordance with current delivery obligations instead of using the “access equals delivery” model.
Issuers would be required to continue to comply with their governing corporate law requirements with respect to delivery of financial statements, such as the requirement to send financial statements to shareholders under the Canada Business Corporations Act unless an exemption is obtained.
Background
As we discussed in a previous post and noted above, the CSA published a consultation paper in January 2020 seeking feedback on permitting reporting issuers to satisfy the legal requirements to “deliver”, “send” or “provide” certain documents to their shareholders by filing the documents on SEDAR, posting the documents to the issuer’s website, and issuing a corresponding news release.
While the CSA’s consultation paper was focused on prospectuses and continuous disclosure documents, the CSA also sought feedback at the time on whether to extend such an “access equals delivery” model to documents that require more immediate shareholder attention, such as proxy-related materials, rights offering materials and take-over bid and issuer bid circulars.
The consultation period for CSA Consultation Paper 51-405 Consideration of an Access Equals Delivery Model for Non-Investment Fund Reporting Issuers ended on March 9, 2020.
Comment Period
The CSA are accepting comments on the Proposal until July 6, 2022, and specifically request feedback on whether, with regards to financial statements and MD&A, the requirement to issue and file a news release is unduly costly and whether alternative ways to alert investors of the availability of a document should be considered. This may be of particular concern to reporting issuers that ordinarily announce financial results before the date they file their financial statements and related MD&A.
With respect to prospectuses, the CSA note that the requirement to issue and file a news release on the prospectus availability date is important given it triggers the withdrawal rights period. Nevertheless, in the context of many offerings, and in particular offerings off of a base shelf prospectus, relying on the “access equals delivery” provisions may result in the issuance and filing of an additional press release. This is because the filing date of a final prospectus, shelf prospectus supplement or supplemented PREP prospectus will often not fall on the pricing date or the closing date of the offering, being dates on which press releases are typically issued and filed.
For further information, please see CSA Notice and Request for Comment – Proposed Amendments and Proposed Changes to Implement an Access Equals Delivery Model for Non-Investment Fund Reporting Issuers (April 7, 2022).
