Introduction
In a significant development, the Canadian Securities Administrators (the “CSA”) unveiled final amendments on January 11, 2024, ushering in a transformative era with respect to the procedure used in Canada for delivering (preliminary and final) prospectuses to investors. Called the Access-Model (the “Access Model”), these amendments are poised to offer issuers and dealers a new avenue for prospectus delivery, promising to streamline processes and cut the costs associated with the procedure. These amendments are expected to come into force on April 16, 2024, contingent upon securing governmental approvals.
What is the rational for the Access Model?
According to the CSA, “a prospective purchaser that has been solicited to purchase under a prospectus distribution or that has indicated an interest in purchasing under a prospectus distribution without having been solicited, will usually already have a relationship with a dealer, or will otherwise have taken steps to become aware of the distribution before purchasing the securities.” On this basis, the CSA believes that the Access Model is well suited for prospectus delivery given that it will reduce regulatory burden on eligible issuers without affecting investor protection and market integrity and efficiency.
What is the Access Model?
Delivery through the Access Model is not mandatory but optional for eligible issuers (i.e. non-investment fund reporting issuers). Under the Access Model, delivery of a prospectus will occur or, in certain jurisdictions (i.e. British Columbia, Québec and New Brunswick), the obligations for an exemption from such delivery obligation will be met, when: (i) a prospectus is filed on SEDAR+ and a receipt is posted on SEDAR+ for the prospectus; and (ii) a news release is issued and filed on SEDAR+ indicating that the prospectus is accessible through SEDAR+ and that an electronic or paper copy can be obtained upon request. Various legislative changes are being made to the prospectus rules and its variants (short-form prospectus distribution, shelf distribution and post-receipt pricing) to provide the wording to be used in the title and body of the press release and the specific delivery rules based on the type of the prospectus offering used. Further amendments and consequential changes are made to the applicable national instruments (in Québec, various regulations) to provide additional operational details.
What type of offerings can opt to use the Access Model?
The Access Model will apply only to certain types of prospectuses and issuers, and will specifically exclude, among other things, prospectus rights offerings, medium-term note offerings and investment fund reporting issuer prospectuses.
Empowering Shareholders: The Right to Copies and the Preservation of Withdrawal Rights
Under the Access Model, potential investors will generally retain the right to request and obtain paper or electronic copies of final prospectuses. In all jurisdictions, if a purchaser or, in Québec, a subscriber, requests a paper or electronic copy of a final prospectus, such copy must be sent, without charge, by the issuer or the dealer within two business days from the date such request is received.
With respect to delivery upon request of a paper or electronic copy of a preliminary prospectus, the rules vary depending on the jurisdiction. In jurisdictions other than British Columbia and New Brunswick, upon receiving a request for a paper or electronic copy of a preliminary prospectus, the issuer or the dealer must send the copy to the prospective purchaser, without charge (usually this is done as soon as practicable after a purchaser has indicated an interest to purchase). In British Columbia and New Brunswick, an issuer or a dealer will be exempt for the requirements contained in the provincial securities act to send a copy of the preliminary prospectus if the document has been filed on SEDAR+ and a receipt has been issued and posted on SEDAR+.
In all jurisdictions, the Access Model does not encroach upon withdrawal rights within two days of securities purchase. Purchasers can exercise these rights within two business days after the later of: (i) the Access Model’s delivery conditions satisfaction; and (ii) the date of the securities purchase agreement or in Québec, the date of the subscription.
Limitations on Other Documents: A Balanced Approach
For the time being, certain continuous disclosure documents, such as annual financial statements, interim financial statements, and related management’s discussion and analysis, are excluded from the Access Model’s delivery procedure. Recognizing concerns, the CSA contemplates future amendments to address these limitations, reflecting their commitment to a balanced approach.
Exclusions from Immediate Responses: A Strategic Approach
Notably, the Access Model strategically excludes documents necessitating an immediate response from shareholders, including proxy voting materials and takeover circulars. The proposed amendments also introduce changes to policies related to trading securities using the internet and communication with beneficial owners of securities.
The Access Model aims to usher in an access equal delivery model for various prospectuses. Positioned to modernize document availability, reduce costs and align with the electronic evolution of capital markets, the Access Model underscores the CSA’s commitment to a more efficient and environmentally friendly communication landscape. Although, one may question whether the use of mega data centers to store documentation is really environmentally friendly. In essence, it preserves investor protection while embracing the digital future, ensuring a seamless transition for issuers and investors alike.
For further information or assistance with regards to the Access Model, please contact the Capital Markets and Securities Group at Miller Thomson LLP.
