On April 6, 2017, the Canadian Securities Administrators (CSA) published Consultation Paper 51-404 (51-404) Considerations for Reducing Regulatory Burden for Non-Investment Fund Reporting Issuers (CP 51-404). The CSA was looking for comments on the following broad topics:
- Extending the application of streamlined roles to smaller reporting issuers
- Reducing the regulatory burdens associated with the prospectus rules and offering process
- Reducing ongoing disclosure requirements
- Eliminating overlap in regulatory requirements
- Enhancing electronic delivery of documents
The CSA received a total of 57 comment letters from issuers, individual investors, law firms, audit firms, institutional investors and advocacy groups, among others.
The comments received are generally accepting of the concept of reducing the regulatory burden that issuers currently face, including eliminating duplication, streamlining requirements, and modernizing processes to ensure they are keeping up with technological changes.
However, several commenters caution that care must be taken to ensure that there are no unintended consequences as a result of any new regulations. Some areas of concern include:
- The implementation of size-based distinctions for reporting issuers
- Permitting semi-annual reporting
- Combining the annual financial statements, management's discussion and analysis, and Annual Information Forms
One area that was widely commented on is the need for modernization. Comments made include the following:
- Eliminating or reducing the need for paper-based disclosure. This includes utilizing electronic delivery and providing paper documents only upon request
- Modernizing SEDAR
- Allowing electronic delivery of prospectus, offering memoranda and private placement subscription documents
Computershare supports the enhancement of electronic delivery of documents, as we believe there are still impediments to implementation of Notice and Access. The questions posed include the processes involved when an issuer decides to distribute material using the current Canadian Notice and Access regime. Although there are still many issues with Notice and Access, and the disconnect between certain provincial statutes and the processes set out in National Instruments 54-101 and 51-102, one of the topics for comment was whether or not issuers should be able to post meeting material without prior notice to shareholders.
Computershare has concerns with the "access equals delivery" proposal as it will have a negative impact on the integrity of the voting process. The majority of our clients offer internet and telephone voting to their shareholders, and the validation process for these forms of voting includes a unique access code that is included either on the paper proxy or the e-mail notification that is forwarded to the shareholder. If material is posted with no notice, the shareholder will not receive this code, and the validation process breaks down. The shareholder would be forced to vote via a paper proxy that would require manual validation by the tabulator. It is expected that this process would result in an increase in rejected votes, and a delay in tabulation results reported to the issuer. The technology required for an issuer to hold their meeting in a virtual environment would also be negatively impacted by the lack of a unique access number.
We strongly support improvements in electronic communication, including simplifying the consent requirements, allowing additional documents to be delivered electronically, and automatic gathering of email addresses when new shares are issued.
However, in situations where the shareholder must submit information back to the Transfer Agent, such as voting, making elections on offers, or rights offerings, issuers must take care to ensure that modernization of delivery does not adversely affect the other stages of the process.
