Reporting issuers may soon have a new option for delivery of materials to security holders and potential investors. On April 7, the CSA published for public comment proposed amendments to multiple national instruments and policies. These amendments, if enacted, will introduce an “access equals delivery model” (the Proposed AED Model) for delivering certain prospectuses, annual financials, quarterly reports and accompanying MD&A.
Reporting issuers will be permitted to post these documents on the System for Electronic Document Analysis and Retrieval (SEDAR) and issue a press release that the documents have been posted to satisfy delivery requirements instead of mailing or delivering by other electronic means. The Proposed AED Model will reduce costs for issuers and can be used by venture and non-venture issuers (including foreign private issuers and designated foreign issuers) but is not available to investment funds. The proposed amendments follow the CSA’s January 2020 consultation paper on access equals delivery and was endorsed by the Capital Markets Modernization Taskforce in January of 2021. This update outlines the key attributes of the Proposed AED Model.
The Proposed AED Model can be used for delivery of all types of prospectuses other than prospectuses for rights offerings and medium-term note programs (MTNs) and other securities in continuous distribution under a shelf prospectus. The CSA is of the view that delivery of a rights offering prospectus by the Proposed AED Model may not be appropriate as rights offerings require shareholders to make time-sensitive decisions regarding participation in the offering. MTN programs and continuous distributions are also subject to particular regimes under securities legislation.
Under the Proposed AED Model, delivery of a preliminary and final prospectus, and any amendments to those documents, will occur when:
- the document, once receipted by the relevant securities regulators, is filed on SEDAR, and
- other than in the case of a preliminary prospectus or an amendment to a preliminary prospectus, a news release is issued and filed on SEDAR indicating that the final prospectus is available on SEDAR and that a paper or electronic copy can be obtained upon request.
There is no requirement to issue a press release when filing a preliminary prospectus as interest in the offering, in the view of the CSA, is not generated by a press release.
As the Proposed AED Model is available for many types of prospectuses including long form, short form, base shelf and PREP prospectuses, the rules regarding delivery set out above have been individually adjusted for the particular type of offering in the instruments and policies applicable to such offering types.
The current rights of purchasers to withdraw from a purchase of securities within two business days of the delivery of the final prospectus (which includes a supplement) or an amendment thereto will not be affected by the adoption of the Proposed AED Model. Such rights must be exercised within two business days after the later of: (i) satisfaction of the conditions of delivery under the Proposed AED Model; and (ii) the date of the agreement to purchase the securities. Therefore a news release confirming the final prospectus or amendment to the final prospectus by the issuer on SEDAR is critical so purchasers are aware of the deadline for exercising their two-day right of withdrawal. If relying upon the Proposed AED Model, the final prospectus must provide a cross-reference on the cover page to disclosure that explains the calculation of the two-day period.
All marketing communications (including road shows) must refer to the final prospectus or amendment being available on SEDAR where the Proposed AED Model is used for delivery.
Due to British Columbia’s drafting and legislative approach, the Proposed AED Model will be introduced as an exemption to the requirement to send a prospectus. Notwithstanding this, the Proposed AED Model will, in practice, be fully available in British Columbia as in all other jurisdictions in Canada.
Annual financial statements, interim financial reports and related management’s discussion and analysis (MD&A)
Delivery of annual financial statements, interim financial reports and related MD&A, may be made under the Proposed AED Model by filing such documents on SEDAR and alerting security holders by news release that the documents are available on SEDAR and specifying that a paper or electronic copy may be received upon request.
Proxy voting and meeting materials and takeover and issuer bid circulars
The Proposed AED Model is not available for delivery of documents that may require a response from shareholders within a specified time period such as proxy voting and other security holder meeting-related materials and takeover and issuer bid circulars. Such documentation will require delivery by other means. In the case of meeting materials, costs of mailing may be reduced by using the existing notice-and-access system. The CSA has indicated it may consider expanding the Proposed AED Model to other documents in the future.
Rights of security holders
If the Proposed AED Model is adopted, security holders will continue to have the right to request a paper or electronic copy of any document delivered by the Proposed AED Model and to execute standard instructions to receive paper or electronic copies. Where a copy is requested, it must be delivered within two business days.
Corporate legislation and constating documents
Issuers should be aware that applicable corporate legislation and their constating documents (for e.g. by-laws) may impose requirements on delivery that may not be compatible with the Proposed AED Model.
A copy of the request for comments is available here. Comments on the proposed amendments must be received by July 6, 2022.