On January 9, 2020, the Canadian Securities Administrators (“CSA”) published Consultation Paper 51-405 Consideration of an Access Equals Delivery Model for Non-Investment Fund Reporting Issuers (the “Consultation Paper”) for comment by market participants. Specifically, the intention of the Consultation Paper is to solicit comments from market participants on the appropriateness of introducing an “access equals delivery” regulatory model for the delivery of documents to investors pursuant to securities legislation. Under the “access equals delivery” model being contemplated by the CSA, delivery of a document would be effected by an issuer alerting its investors that the applicable document is publicly available on the System for Electronic Document Analysis and Retrieval (“SEDAR”) and the issuer’s website as opposed to mailing the document to the investors.
The Consultation Paper is a direct outgrowth of a consultation paper published by the CSA on April 6, 2017, which aimed to identify and consider areas of securities legislation in which the CSA could reduce undue regulatory burden applicable to non-investment fund reporting issuers, and in which enhancing electronic delivery of documents was identified as a potential area of review.
As noted by the CSA, an “access equals delivery” model is consistent with the general evolution of the Canadian capital markets, including evolutions in technology and the ubiquity of internet access, and provides a cost-efficient, timely and environmentally friendly alternative to physical delivery as it relates to communicating information to investors. In addition, the CSA acknowledges that delivery models similar to “access equals delivery” have already been adopted in the United States, Australia and the European Union for the delivery of certain documents.
This bulletin provides an overview of the “access equals delivery” model currently being contemplated by the CSA and some of the benefits and drawbacks identified by the CSA applicable to this type of model for the delivery of documents to investors.
Importantly, while the Consultation Paper focuses on an “access equals delivery” model to reduce the regulatory burden on non-investment fund reporting issuers, the CSA notes that it is continuing to evaluate other options for enhancing the electronic delivery of documents.
Access equals delivery
Under the existing securities law framework, various documents required to be delivered to investors including prospectuses, proxy-related materials, rights offering circulars, financial statements and related management’s discussion and analysis (“MD&A”), can be delivered in either paper or electronic format. National Policy 11-201 Electronic Delivery of Documents provides guidance to market participants that want to use electronic delivery to fulfill delivery requirements. Moreover, the notice-and-access model introduced in 2013 for the delivery of proxy-related materials also streamlines the delivery requirements by allowing issuers to post proxy-related materials on SEDAR and a non-SEDAR website. However, as discussed in more detail below, the proposed “access equals delivery” model expands the notion of delivery even further by permitting issuers to effect delivery to investors solely through providing public electronic access to the applicable documents.
Specifically, an issuer would be considered to have effected delivery once:
(i) the document has been filed on SEDAR;
(ii) the document has been posted on the issuer’s website; and
(iii) the issuer has issued a news release (and filed it on SEDAR and posted it on its website) indicating that the document is available electronically on SEDAR and the issuer’s website and that a paper copy can be obtained from the issuer upon request.
The “access equals delivery” model has the advantage of reducing costs associated with the printing and mailing of documents, while also enabling issuers to reach more investors in a faster and more environmentally friendly manner. Having such documents available electronically will also enable investors to search for information concerning the issuer more efficiently than they might otherwise be able to with paper copies of the documents.
As an initial step, the CSA is considering prioritizing a policy initiative in which the “access equals delivery” model would be implemented for prospectuses as well as financial statements and related MD&A. As a result, one of the areas in which the CSA is seeking comment in the Consultation Paper is how the “access equals delivery” model would interact with certain aspects of the prospectus regime, including investors’ withdrawal rights and whether the news release would be required for both the preliminary and final prospectus.
While the CSA is open to extending the “access equals delivery” model to other types of documents, such as proxy-related materials and take-over bid and issuer bid circulars, the CSA notes that extending this model to documents that require immediate shareholder attention and participation may raise investor protection concerns. It is also noted that the introduction of this model may require significant changes to the proxy-voting infrastructure, such as the existing processes surrounding solicitation and the submission of voting instructions.
Importantly, the introduction of this model would not eliminate the option for investors to continue to receive documents in paper format. Moreover, these changes are not intended to affect any existing requirements applicable to electronic delivery prescribed under corporate legislation and, as such, issuers would remain subject to such requirements.
The Consultation Paper has been published for a sixty (60) day comment period which ends on March 9, 2020. In addition to soliciting market participants’ views on whether an “access equals delivery” model should be introduced, the types of documents such a model should apply to and the mechanics for its operation, the CSA has also requested feedback on a number of specific questions.
If you have any questions about this article or would like further information about electronic delivery or the proposed “access equals delivery” model, please contact the authors.
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