CSA publishes for comment proposed access equals delivery model for prospectuses, financial statements and MD&A

On April 7, 2022, the Canadian Securities Administrators (CSA) published for comment proposed amendments to several national instruments and policies to adopt an “access equals delivery” model (the AED Model), which would allow reporting issuers (other than investment funds) to satisfy the requirement to deliver certain prospectuses, annual and interim financial statements and related MD&A by (i) publicly filing the document on SEDAR, and (ii) issuing and filing a news release announcing that the document is publicly available on SEDAR and that a paper or electronic copy can be obtained upon request.

What you need to know

• The proposed amendments apply to all non-investment fund reporting issuers, including venture issuers.
• The proposed amendments apply to (i) all types of prospectuses (long-form, short-form, shelf, post-receipt pricing) except prospectuses for rights offerings, medium-term note offerings and other continuous distributions under a shelf prospectus, (ii) annual financial statements and related MD&A, and (iii) interim financial reports and related MD&A.
• The proposed amendments do not apply to certain time-sensitive documents, including proxy-related materials, takeover bid and issuer bid circulars and rights offering prospectuses. However, the existing “notice-and-access” regime will continue to be available to issuers for sending proxy-related-materials.
• Issuers may still be required to deliver paper copies of documents under corporate law and other applicable requirements. An issuer’s constating documents also may require the delivery of paper copies (or impose requirements on the delivery of electronic copies) of documents.
• Applicable securityholders will continue to have the right to request and/or provide standing instructions to receive paper copies of documents.
• In British Columbia, the amendments would be adopted as exemptions from the prospectus delivery requirements, which are intended to provide the same effect as in other jurisdictions.
• The proposed AED Model also would be available to SEC foreign issuers and designated foreign issuers.
• The proposed amendments follow a CSA consultation process in 2020. The CSA reports that it received general support for the proposed amendments, meaning it is highly likely the amendments will be adopted in some form.
• The public comment period ends on July 6, 2022.

Discussion

Electronic delivery (including by email, the internet or other electronic means) in accordance with National Policy 11-201 is currently available to satisfy delivery requirements under Canadian securities laws for most documents. The existing “notice-and-access” regime also is available to many issuers to send proxy-related materials under National Instruments 51-102 and 54-101 (which allows an issuer to publicly file proxy-related materials on SEDAR and a non-SEDAR website and deliver to securityholders a notice informing them of how to access the materials together with a voting document relating to the meeting). Notice-and-access also can be used to send annual financial statements and related MD&A.

With the proposed AED Model, the CSA is now proposing to add a third optional delivery method for certain prospectuses, financial statements and related MD&A.

The CSA indicated that it considered alternatives to the proposed amendments, such as changing the current default of paper delivery to default to electronic delivery, and enhancing the current “notice-and-access” regime. However, it ultimately opted for the proposed amendments, citing challenges associated with changing the current default to electronic delivery, including legal uncertainties to satisfying electronic delivery of documents under other legislation such as corporate law and electronic commerce legislation that may require consent to electronic delivery.

Prospectuses

The key requirements under the proposed amendments for the delivery of prospectuses are as follows:

• Unless an issuer uses an alternative delivery method, the requirement to deliver a preliminary prospectus or any amendment is satisfied on the date the issuer provides access to the document by filing the document on SEDAR after a receipt has been issued. The proposed amendments do not require an issuer to issue and file a news release on SEDAR to alert investors of the filing of a preliminary prospectus or any amendment (as the CSA indicated that investors should be aware of when the preliminary prospectus is available by virtue of their interest in the distribution).
• Unless an issuer uses an alternative delivery method, the requirement to deliver a final prospectus (and in the case of a shelf or PREP offering, a supplement) or any amendment is satisfied on the date the issuer provides access to the document by (i) filing the document on SEDAR after a receipt has been issued, and (ii) on the same date, issuing and filing on SEDAR a news release that states the document is available and accessible on SEDAR, indicating the securities that are being offered and specifying that an electronic or paper copy of the final prospectus may be obtained without charge from the issuer by providing an email address or address, as applicable.
• The final prospectus would be deemed to be received on the date that it has been delivered in accordance with the above procedure.
• If a prospective purchaser requests a copy of the preliminary or final prospectus or any amendment, a copy must be sent within two business days without charge to the email address or address specified in the request.
• Purchasers would be able to exercise rights of withdrawal or recission within two business days after the later of (i) the date the final prospectus (or in the case of a shelf or PREP offering, the supplement) or any amendment has been received (i.e., the date access has been provided in accordance with the above procedure), and (ii) the date the purchaser entered into an agreement to purchase the securities.
• A cross-reference on the front page of a prospectus utilizing the AED Model would be required to alert investors to the section of the prospectus that explains how the withdrawal right period is calculated under the AED Model.
• Communications, dealer scripts and other materials would generally need to be updated to refer to the prospectus or amendment being available on SEDAR.

Financial statements and related MD&A

The key requirements under the proposed amendments for the delivery of financial statements and related MD&A are as follows:

• Following the filing on SEDAR of an issuer’s annual financial statements or interim financial report and related MD&A, an issuer must, on the same date, issue and file on SEDAR a news release that states the documents are available and accessible on SEDAR and that electronic or paper copies of the documents may be obtained without charge from the issuer by providing an email address or address, as applicable. However, an issuer would not be required to issue such a press release if it (i) annually sends a request form to securityholders (other than holders of debt instruments) to request paper copies of the issuer’s financial statements and related MD&A, or (ii) sends copies of the annual financial statements and related MD&A to all securityholders (other than holders of debt instruments) within 140 days of the issuer’s financial year-end.
• An issuer that complies with the above procedure would not be required to annually send a request form to securityholders (other than holders of debt instruments) to request copies of the issuer’s financial statements and related MD&A.
• Applicable securityholders would continue to be able to request paper copies of financial statements and related MD&A, either on an individual basis or by giving standing instructions to the issuer or its intermediary. An issuer’s use of the AED Model would not override any standing delivery instructions given by a securityholder.

Other types of documents

The CSA has indicated that the proposed amendments may be a first step to the wider adoption of “access equals delivery” or similar methods of electronic delivery for other documents. The CSA indicated that, at this time, the proposed amendments do not apply to proxy-related materials, takeover bid and issuer bid circulars and rights offering prospectuses, as such documents require immediate securityholder action and participation. The CSA also indicated that it excluded MTN programs and other continuous distributions under a shelf prospectus from the proposed AED Model, as such prospectus distributions are dealt with in a different manner under existing rules and are not suited for the proposed AED Model.

Specific request for comments

With respect to the delivery of financial statements and related MD&A, the CSA has requested comment on whether (i) the requirement for issuers to issue and file a news release is unduly costly or onerous, (ii) the burden differs depending on whether the issuer is a venture issuer or not, and (iii) there are less onerous alternatives to a news release to alert investors of the availability of a document.