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) seeking views on whether an "access equals delivery" model should be adopted in Canada.
The objective of the proposed "access equals delivery" model is to modernize the way documents are made electronically available to investors and to significantly reduce costs associated with the printing and mailing of documents that are currently borne by issuers. The CSA identifies an "access equals delivery" model as a means of communicating with more investors faster and in a more cost-effective and environmentally friendly manner.
Current delivery requirements
Currently, securities legislation requires issuers to deliver various documents to investors but does not prescribe the medium by which issuers must deliver such documents; however, issuers are also required to adhere to applicable privacy legislation and obtain express consent from investors for electronic delivery. Without this, it may be difficult to demonstrate that an investor had notice of, and access to, the applicable document. As such, many issuers currently find the ability to take advantage of the electronic delivery of certain documents under securities legislation difficult or in some cases prohibitive and, as a result, some issuers continue to incur significant costs associated with printing and mailing documents such as prospectuses, rights offering circulars, annual and interim financial statements and related management's discussion and analysis (MD&A), proxy-related materials and take-over bid and issuer bid circulars.
Access equals delivery
Under the proposed "access equals delivery" model, delivery would be considered to be effected once:
- The document has been filed on SEDAR;
- The document has been posted on the issuer's website; and
- The issuer has issued a news release (filed on SEDAR and posted 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.
As a starting point, the CSA is proposing to implement an "access equals delivery" system for prospectuses and financial statements and related MD&A. Replacing the current framework with an "access equals delivery" model for these documents could reduce costs for issuers and provide convenient and timely access to information for investors. The CSA notes that the United States, the European Union and Australia have implemented "access equals delivery" models for prospectuses.
The Consultation Paper also sought comment on extending an "access equals delivery" model to other types of documents such as rights offering materials, proxy-related materials and take-over and issuer bid circulars. Because such documents typically require immediate shareholder attention and participation, the "access equals delivery" model could raise investor protection and shareholder participation concerns. The CSA sought comment on these concerns, as well as whether an "access equals delivery" model would require significant changes to the operational processes surrounding solicitation and submission of voting instructions.
Implications
While the proposed "access equals delivery" model could reduce the regulatory burden and costs associated with the current delivery framework, the CSA acknowledges that issuers are in the best position to determine whether "access equals delivery" is the best model for their investors. As such, the CSA proposes to implement "access equals delivery" as an option rather than a requirement, allowing issuers to continue to deliver documents in paper or electronic form.
The CSA is cognizant of other corporate laws and regulations containing specific delivery requirements, including those set forth in the Business Corporations Act (Alberta) and the Canada Business Corporations Act. Should the proposed "access equals delivery" amendments be adopted, they would not supersede existing rules in other laws and regulations.
The CSA provided specific questions for comment with respect to the proposed "access equals delivery" model in the Consultation Paper which can be accessed here.
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