CSA Update on Policy Projects Aimed at Reducing Regulatory Burden
April 10, 2018
The Canadian Securities Administrators (CSA) recently issued Staff Notice 51-353 – Update on CSA Consultation Paper 51-404 Considerations for Reducing Regulatory Burden for Non-Investment Fund Reporting Issuers (Staff Notice) intended to provide an update on a previously-issued consultation paper (Consultation Paper) which was aimed at identifying areas of Canadian securities legislation where the regulatory burden for non-investment fund reporting issuers could be reduced.
The Staff Notice summarizes comments received by the CSA in response to the Consultation Paper, and identifies some initial policy projects to be undertaken by the CSA in the near term.
Here is a summary of those initial policy projects:
Continuous Disclosure Requirements
Removing or Modifying the Criteria to File a Business Acquisition Report
Reporting issuers are currently required to file a business acquisition report (BAR) following the completion of a significant acquisition. In the Staff Notice, the CSA acknowledged that reporting issuers frequently apply for and are granted relief from the BAR requirements and that the BAR can entail significant time and cost. Comments in response to the Consultation Paper questioned the value of the BAR disclosure, and offered suggestions on how the CSA can reduce the regulatory burden associated with the BAR requirements. The CSA intends to initiate a policy project in this area.
Revisiting Certain Continuous Disclosure Requirements
According to the Staff Notice, comments in response to the Consultation Paper supported the following proposals:
- Elimination of duplicative disclosure among the financial statements, MD&A and other requirements of National Instrument 51-102 – Continuous Disclosure Obligations;
- Consolidation of two or more of the financial statements, MD&A and annual information form into one reporting document; and
- Reduction of the volume of information in annual and interim filings to prevent excessive disclosure from obscuring key information and otherwise improve the quality and accessibility of disclosure.
The CSA intends to review certain continuous disclosure requirements to determine where the regulatory burden on issuers can be reduced, while enhancing usefulness and understandability for investors.
Enhancing Electronic Delivery of Documents
Comments received by the CSA in response to the Consultation Paper were generally supportive of developments that would further facilitate electronic delivery of documents. The CSA intends to initiate a policy project in this area.
Potential Alternative Prospectus Model
The CSA continues to consider whether there should be an alternative prospectus offering model for reporting issuers to the current short form prospectus regime. Going forward, certain CSA jurisdictions will explore potential alternatives to the short form prospectus regime.
Facilitating At-The-Market Offerings
In the Staff Notice, the CSA noted that current rules for at-the-market offerings under shelf prospectuses do not provide a comprehensive framework because they do not exempt at-the-market offerings from some of the securities legislation applicable to all prospectus offerings. The result is that reporting issuers doing an at-the-market offering need to first obtain exemptive relief from the securities commissions. Comments in response to the Consultation Paper noted that the requirement to obtain exemptive relief may discourage issuers from conducting at-the-market offerings in Canada, and suggested that some of the current restrictions should be relaxed or eliminated. The CSA intends to initiate a policy project in this area.
Revising the Primary Business Requirement
Comments in response to the Consultation Paper suggested that the CSA revisit the interpretation of the rules which outline the historical financial statement requirements for initial public offering prospectuses, and eliminate inconsistencies in how these rules are interpreted across the CSA. The CSA is looking at ways to clarify the interpretation of this requirement so that issuers preparing an IPO prospectus have greater clarity.
It should be noted that here is no assurance that the policy projects discussed above will result in any regulatory changes. Any proposed amendments will be subject to public comment.