A Consultation Paper identifying areas of securities legislation where the regulatory burden on non-investment fund reporting issuers could be reduced was published for comment by the Canadian Securities Administrators (CSA) on April 6, 2017. The Consultation Paper describes options applicable to both capital raising in the public markets and the ongoing costs of remaining a reporting issuer. The potential initiatives outlined in the Consultation Paper fall into five categories and are proffered with an eye to maintaining the appropriate level of investor protection and efficiency in the capital markets:
- Extending the application of streamlined rules to smaller reporting issuers. Currently, reporting issuers that do not have securities listed or quoted on a senior exchange, including the Toronto Stock Exchange, (generally referred to as “venture issuers”) benefit from less onerous continuous disclosure requirements, including longer filing deadlines and reduced filing obligations. The CSA is considering the use of a size-based metric to reduce the reporting requirements for smaller reporting issuers listed on senior exchanges. Similar size-based thresholds are already available in the United States, where reduced reporting requirements are available for smaller reporting companies under the U.S. Securities and Exchange Commission’s rules and regulations and for “emerging growth companies” under the U.S. Jumpstart Our Business Startups Act of 2012 (the JOBS Act).
- Reducing the regulatory burden associated with the prospectus rules and offering process. Among other things, the Consultation Paper proposes reducing the audited financial statement requirements in IPO prospectuses for either all issuers or only issuers who have pre-IPO revenue under a certain threshold. Also proposed are the removal or modification of certain prospectus requirements, including (i) an increase of the business acquisition report (BAR) thresholds for non-venture issuers and removal of the pro forma financial statements requirement for significant acquisitions, (ii) re-examining the short form prospectus eligibility requirements, and (iii) considering whether to eliminate or modify existing short form prospectus disclosure requirements where such requirements are duplicative. Consideration is also being given to alternative prospectus models intended to provide concise and focused disclosure and the facilitation of at-the-market (ATM) offerings. Finally, the CSA is considering reducing regulatory burden by facilitating cross-border offerings and further liberalizing the pre-marketing and marketing regime.
- Reducing the ongoing disclosure requirements. Following on the heels of amendments to the significance thresholds for acquisitions made by venture issuers, the CSA is assessing whether it should undertake a broader review of the BAR requirements, looking specifically at removing one or more of the significance tests, removing the BAR requirement in circumstances, increasing the significance thresholds for non-venture issuers and providing industry specific alternative tests. Semi-annual reporting and reduced disclosure requirements in annual and interim filing with a focus on key information are also being considered.
- Eliminating overlap in regulatory requirements. Acknowledging a potential overlap in disclosure requirements in the continuous disclosure forms under National Instrument 51-102 Continuous Disclosure Obligations (NI 51-102), the CSA is considering consolidating requirements of the MD&A, AIF and financial statements into one document or the removal of some or all of the overlap.
- Enhancing electronic delivery of documents. Although amendments have been made to various regulatory instruments and policies to facilitate electronic delivery of documents (including, for example, through the adoption of “notice-and-access” and guidance provided in National Policy 11-201 Electronic Delivery of Documents),the CSA is considering whether new methods of electronic delivery should be permitted to ultimately reduce costs for reporting issuers.
In addition to outlining potential regulatory options to reduce reporting issuers’ disclosure obligations, the Consultation Paper provides a snapshot of the Canadian public market broken out by industry and market capitalization, as well as a summary of recent CSA policy initiatives. The Consultation Paper also poses targeted questions to gauge the nature and scope of the issues to be addressed. Responses to the CSA’s questions and other general comments must be submitted by July 7, 2017.
For further information, please see CSA Consultation Paper 51-404 Considerations for Reducing Regulatory Burden for Non-Investment Fund Reporting Issuers (April 6, 2017).