4 - Distribution Requirements

CSA Notice and Request for Comment Proposed Amendments and Proposed Changes to Implement an Access Equals Delivery Model for Non-Investment Fund Reporting Issuers

April 7, 2022 Introduction The Canadian Securities Administrators (the CSA or we) are publishing for a 90-day comment period, proposed amendments and proposed changes to

• • • • • •

• • • •

National Instrument 41-101 General Prospectus Requirements, National Instrument 44-101 Short Form Prospectus Distributions, National Instrument 44-102 Shelf Distributions, National Instrument 44-103 Post-Receipt Pricing, National Instrument 51-102 Continuous Disclosure Obligations, National Instrument 71-102 Continuous Disclosure and Other Exemptions Relating To Foreign Issuers, Companion Policy 41-101CP to National Instrument 41-101 General Prospectus Requirements, Companion Policy 44-102CP to National Instrument 44-102 Shelf Distributions, Companion Policy 44-103CP to National Instrument 44-103 Post-Receipt Pricing, and Companion Policy 51-102CP Continuous Disclosure Obligations;

as well as related proposed consequential changes to • National Policy 11-201 Electronic Delivery of Documents, • National Policy 47-201 Trading Securities Using the Internet and Other Electronic Means, and • Companion Policy 54-101CP to National Instrument 54-101 Communication with Beneficial Owners of Securities of a Reporting Issuer;

(collectively, the Proposed Amendments). The public comment period will end on July 6, 2022. The text of the Proposed Amendments is contained in Annexes A through M of this notice and will also be available on websites of CSA jurisdictions, including:

www.lautorite.qc.ca www.albertasecurities.com www.bcsc.bc.ca

nssc.novascotia.ca www.fcnb.ca www.osc.ca www.fcaa.gov.sk.ca www.mbsecurities.ca

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Substance and Purpose The Proposed Amendments implement an access equals delivery model for prospectuses generally, annual financial statements, interim financial reports and related management's discussion & analysis (MD&A) for non-investment fund reporting issuers.

The proposed access equals delivery model (the AED Model) contemplates the following: • in all jurisdictions except British Columbia, providing public electronic access to a document and alerting investors that the document is available will constitute delivery for prospectuses under securities legislation; • in British Columbia, an exemption from the requirement under securities legislation to send a prospectus (the BC Exemption) will permit access instead of delivery; • for annual financial statements, interim financial reports and related MD&A, providing public electronic access to the documents and alerting investors that the documents are available will constitute delivery for the documents; and • in all cases, delivery of a document will occur, or the conditions in the BC Exemption will be met, when: o the document is filed on the System for Electronic Document Analysis and Retrieval (SEDAR), and o where applicable, a news release is issued and filed on SEDAR indicating that the document is available electronically and that a paper or an electronic copy can be obtained upon request.

The purpose of the proposed AED Model is to modernize the way documents are made available to investors and reduce costs associated with the printing and mailing of documents, which are currently borne by issuers. The proposed AED Model provides a more cost-efficient, timely and environmentally friendly manner of communicating information to investors than paper delivery. In our view, the proposed AED Model reduces regulatory burden on issuers without compromising investor protection.

We recognize that information technology is an important and useful tool in facilitating communication with investors. The proposed AED Model is consistent with the general evolution of our capital markets, including how investors are increasingly accessing and consuming information electronically.

The proposed AED Model offers benefits for both issuers and investors. The proposed AED Model further facilitates the communication of information by enabling issuers to reach more investors in a faster and more effective manner than by mailing documents. SEDAR is a common, standardized platform that provides ease and convenience of use for investors, allowing them to access and search for specific information in a document more efficiently than they would otherwise be able to with paper copies of documents.

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The proposed AED Model does not remove an investor’s ability to request documents in paper or electronic form or prevent an issuer from delivering financial statements and related MD&A based on an investor’s standing instructions.

The Proposed Amendments would implement the proposed AED Model for prospectuses generally, annual financial statements, interim financial reports and related MD&A. In our view, the proposed AED Model is well suited for these types of documents, which are increasingly being accessed electronically by investors. At this time, we are not proposing an access equals delivery model for the delivery of documents that require immediate shareholder action and participation, such as proxy-related materials and take-over bid and issuer bid circulars.

Background On January 9, 2020, we published CSA Consultation Paper 51-405 Consideration of an Access Equals Delivery Model for Non-Investment Fund Reporting Issuers. The purpose of the consultation was to provide a forum for discussion on the appropriateness of implementing an access equals delivery model in the Canadian market. We solicited views on whether an access equals delivery model should be introduced, the types of documents to which an access equals delivery model should apply and the mechanics of a potential access equals delivery model.

The comment period ended on March 9, 2020. We received 30 comment letters from various market participants, including issuers, investors, industry associations and law firms. We wish to thank all commenters for contributing to the consultation.

We have reviewed the comments received, and we note as follows: • A large majority of commenters expressed general support for implementing an access equals delivery model. • A majority of commenters expressed support for prioritizing implementing an access equals delivery model for prospectuses, annual financial statements, interim financial reports and related MD&A. • Although many commenters expressed general support for extending an access equals delivery model to other types of documents, such as proxy-related materials and takeover bid and issuer bid circulars, some commenters indicated that the CSA should carefully consider the impact of introducing an access equals delivery model to documents that require a time sensitive response from investors. • Several commenters submitted that filing a document on SEDAR (and not also posting the document on the issuer's website) is sufficient as it provides a common, standardized platform that allows investors to access issuers’ documents. • A majority of commenters agreed that a news release is sufficient to alert investors that the document is available electronically. • Commenters identified several benefits of an access equals delivery model, including reducing regulatory burden and costs for issuers, modernizing the way documents are made available to investors and promoting a more environmentally friendly manner of communicating information than paper delivery. • The main limitations to implementing an access equals delivery model identified by commenters are the delivery requirements outside of securities legislation (e.g. corporate law) and electronic transactions legislation. In addition, some commenters noted the potential negative impact on investor engagement.

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In light of the comments received and our analysis, we think it is appropriate to propose the AED Model for prospectuses generally, annual financial statements, interim financial reports and related MD&A into the Canadian market.

Summary of the Proposed Amendments Prospectuses The proposed AED Model applies to all types of prospectuses, except rights offerings by way of prospectus and medium-term note (MTN) programs and other continuous distributions under a shelf prospectus. The proposed AED Model may not be suitable for a rights offering by way of prospectus since this type of distribution requires a time sensitive response. MTN programs and other continuous distributions under a shelf prospectus are dealt with in a different manner in our rules and are not suited for the proposed AED Model. It also does not apply to a prospectus offering of investment fund securities.

Except in British Columbia, the Proposed Amendments contemplate that a prospectus or any amendment must be delivered or sent by providing access to the document in accordance with the procedures set out in the rules, unless the document is delivered or sent pursuant to another procedure prescribed by securities legislation.

British Columbia is instead providing an exemption from the prospectus delivery requirements because it better aligns with British Columbia’s legislative authority and approach to legislative drafting. The BC Exemption is intended to achieve the same outcome as the AED Model proposed in the other jurisdictions.

The Proposed Amendments stipulate that, in all jurisdictions except British Columbia, access to the final prospectus or any amendment has been provided if:

• •

the issuer has filed the document on SEDAR and a receipt has been issued for the document, and the issuer has issued and filed a news release on SEDAR announcing that the document is available and accessible on SEDAR, indicating the securities that are offered and specifying that a paper or an electronic copy of the document can be obtained upon request.

Under the BC Exemption, a dealer is exempt from requirements under securities legislation to send a final prospectus or any amendment to a purchaser if these same conditions are met.

The Proposed Amendments clarify that, under the proposed AED Model, the right to withdraw from an agreement to purchase securities may be exercised within 2 business days after the later of (a) the date that access to the final prospectus or any amendment has been provided, and (b) the date that the purchaser has entered into the agreement to purchase the securities. In British Columbia, it is a condition of the BC Exemption that an equivalent right be provided to a purchaser.

We are also proposing to require a cross-reference on the front page of the prospectus to alert investors to the section that explains how the withdrawal right period is calculated under the AED Model.

For the preliminary prospectus or any amendment, the Proposed Amendments stipulate that access has been provided if the issuer has filed the document on SEDAR and a receipt has been issued

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for the document. In this scenario, the Proposed Amendments do not require that the issuer issue and file a news release on SEDAR to alert investors because investors should be aware of when the preliminary prospectus is available by virtue of their interest in the distribution. In our view the requirement to file a news release is important in connection with the final prospectus because the investor’s withdrawal right period is calculated at this stage.

The Proposed Amendments clarify how the AED Model applies to the advertising and marketing of a prospectus offering, including with respect to the preliminary prospectus, and update the statements contained in the marketing materials to inform investors that the prospectus or any amendment is available on SEDAR and that a copy of the document can be obtained upon request.

The proposed AED Model has been adapted to suit the particularities of different types of prospectuses, i.e. long-form prospectuses, short-form prospectuses, shelf prospectuses and post-receipt pricing prospectuses.

In certain jurisdictions, amendments to local securities acts may be required to fully implement the Proposed Amendments.

Financial Statements and related MD&A The Proposed Amendments contemplate that the proposed AED Model applies to annual financial statements, interim financial reports and related MD&A.

The Proposed Amendments provide that the issuer must issue and file a news release to inform investors that its financial statements and related MD&A are available on SEDAR, unless the issuer complies with the current delivery requirements. The Proposed Amendments stipulate that access to the financial statements and related MD&A has been provided if

• •

the issuer has filed the documents on SEDAR, and on the same day that it has filed the documents, the issuer has issued and filed a news release on SEDAR announcing that the documents are available electronically and specifying that a paper or an electronic copy of the documents can be obtained upon request.

We think the proposed AED Model is especially well suited for these types of documents since investors are generally aware that the documents will be available on SEDAR. Investors can also predict when the documents will be available since they are subject to prescribed filing deadlines.

Issuers may still be required to comply with certain delivery requirements under corporate law and other applicable requirements to which they may be subject.

The proposed AED Model would also be available to SEC foreign issuers and designated foreign issuers.

Consequential Amendments We are proposing changes to National Policy 47-201 Trading Securities Using the Internet and Other Electronic Means to clarify that the investment dealer conducting a road show must make an oral statement at the commencement of the road show that the relevant prospectus or any

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amendment is available on SEDAR, or provide the investor with a copy of the relevant prospectus or any amendment.

We are proposing changes to Companion Policy 54-101CP to National Instrument 54-101 Communication with Beneficial Owners of Securities of a Reporting Issuer to clarify the interaction between the current delivery requirements and the proposed AED Model with respect to financial statements and related MD&A.

Local Matters Where applicable, an additional annex is being published in any local jurisdiction that is making related changes to local securities laws, including local notices or other policy instruments in that jurisdiction. It also includes any additional information that is relevant to that jurisdiction only.

Request for Comments We welcome your comments on the Proposed Amendments and also invite comments on the following specific questions.

1. With regards to financial statements and related MD&A, the Proposed Amendments provide that an issuer must issue and file a news release on SEDAR announcing that the documents are available electronically and specifying that a paper or an electronic copy of the documents can be obtained upon request. a. Would the requirement to issue and file a news release be unduly costly or onerous in these circumstances? If so, why? Would the burden differ depending on whether the issuer is a venture issuer or not? b. Should we consider alternative ways to alert investors of the availability of a document that could be less onerous? Which ones and why?

Please submit your comments in writing on or before July 6, 2022. Please send your comments by email in Microsoft Word format.

Please address your submission to all members of the CSA as follows: British Columbia Securities Commission Alberta Securities Commission Financial and Consumer Affairs Authority of Saskatchewan The Manitoba Securities Commission Ontario Securities Commission Autorité des marchés financiers Financial and Consumer Services Commission of New Brunswick Superintendent of Securities, Prince Edward Island Nova Scotia Securities Commission Superintendent of Securities, Newfoundland and Labrador Superintendent of Securities, Yukon Territory Superintendent of Securities, Northwest Territories Superintendent of Securities, Nunavut

Deliver your comments only to the addresses below. Your comments will be distributed to the other participating CSA members.

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Me Philippe Lebel Corporate Secretary and Executive Director, Legal Affairs Autorité des marchés financiers Place de la Cité, tour Cominar 2640, boulevard Laurier, bureau 400 Québec (Québec) G1V 5C1 Fax: 514 864-8381 E-mail: consultation-en-cours@lautorite.qc.ca

The Secretary Ontario Securities Commission 20 Queen Street West 22nd Floor Toronto, Ontario M5H 3S8 Fax: 416 593-2318 E-mail: comments@osc.gov.on.ca

We cannot keep submissions confidential because securities legislation in certain provinces requires publication of the written comments received during the comment period. All comments received will be posted on the websites of each of the Alberta Securities Commission at www.albertasecurities.com, the Autorité des marchés financiers at www.lautorite.qc.ca and the Ontario Securities Commission at www.osc.ca. Therefore, you should not include personal information directly in comments to be published. It is important that you state on whose behalf you are making the submission.

Contents of Annexes • Annex A: Proposed Amendments to National Instrument 41-101 General Prospectus Requirements • Annex B: Proposed Changes to Companion Policy 41-101CP to National Instrument 41-101 General Prospectus Requirements • Annex C: Proposed Amendments to National Instrument 44-101 Short Form Prospectus Distributions • Annex D: Proposed Amendments to National Instrument 44-102 Shelf Distributions • Annex E: Proposed Changes to Companion Policy 44-102CP to National Instrument 44-102 Shelf Distributions • Annex F: Proposed Amendments to National Instrument 44-103 Post-Receipt Pricing • Annex G: Proposed Changes to Companion Policy 44-103CP to National Instrument 44-103 Post-Receipt Pricing • Annex H: Proposed Amendments to National Instrument 51-102 Continuous Disclosure Obligations • Annex I: Proposed Changes to Companion Policy 51-102CP Continuous Disclosure Obligations • Annex J: Proposed Amendments to National Instrument 71-102 Continuous Disclosure and Other Exemptions Relating To Foreign Issuers

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Annex K: Proposed Changes to National Policy 11-201 Electronic Delivery of Documents Annex L: Proposed Changes to National Policy 47-201 Trading Securities Using the Internet and Other Electronic Means Annex M: Proposed Changes to Companion Policy 54-101CP to National Instrument 54-101 Communication with Beneficial Owners of Securities of a Reporting Issuer

Questions Please refer your questions to any of the following: Autorité des marchés financiers Michel Bourque Senior Regulatory Advisor Direction de l’information continue 514 395-0337, ext. 4466 michel.bourque@lautorite.qc.ca

Diana D’Amata Senior Regulatory Coordinator Direction de l’information continue 514 395-0337, ext. 4386 diana.damata@lautorite.qc.ca

Tania Boulanger Analyst Direction de l’information continue 514 395-0337, ext. 4383 tania.boulanger@lautorite.qc.ca

British Columbia Securities Commission Noreen Bent Chief, Corporate Finance Legal Services 604 899-6741 nbent@bcsc.bc.ca

Alberta Securities Commission Tracy Clark Senior Legal Counsel, Corporate Finance 403 355-4424 tracy.clark@asc.ca

Jennifer Whately Senior Legal Counsel, Corporate Finance Legal Services 604 899-6625 jwhately@bcsc.bc.ca

Danielle Mayhew Senior Legal Counsel, Corporate Finance 403 592-3059 danielle.mayhew@asc.ca

Financial and Consumer Affairs Authority of Saskatchewan Heather Kuchuran Director, Corporate Finance, Securities Division 306 787-1009 heather.kuchuran@gov.sk.ca

Manitoba Securities Commission Patrick Weeks Corporate Finance Analyst 204 945-3326 patrick.weeks@gov.mb.ca

Ontario Securities Commission Erin O’Donovan Manager (Acting), Corporate Finance 416 204-8973 eodonovan@osc.gov.on.ca

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Alexandra Melo Legal Counsel, Corporate Finance 416 263-7695 amelo@osc.gov.on.ca

Financial and Consumer Services Commission, New Brunswick Ella-Jane Loomis Senior Legal Counsel, Securities 506 453-6591 ella-jane.loomis@fcnb.ca

Nova Scotia Securities Commission Peter Lamey Legal Analyst 902 424-7630 Peter.Lamey@novascotia.ca

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ANNEX A PROPOSED AMENDMENTS TO NATIONAL INSTRUMENT 41-101 GENERAL PROSPECTUS REQUIREMENTS

National Instrument 41-101 General Prospectus Requirements is amended by this Instrument.

The following is added after Part 2: PART 2A: Access to a Prospectus Application 2A.1 This Part does not apply in respect of (a) a prospectus to distribute rights, (b) a prospectus filed under NI 44-102 or NI 44-103, and (c) a prospectus to distribute securities of an investment fund. Access equals delivery 2A.2(1) This section does not apply in British Columbia. (2) The requirement under securities legislation to deliver or send a prospectus or any amendment is satisfied when access to the document has been provided in accordance with subsection 2A.3(3) or (6).

(3)

(4)

(5)

The prospectus or any amendment is delivered or sent on the date that access to the document has been provided in accordance with subsection 2A.3(3) or (6).

The prospectus or any amendment is received on the date the document has been delivered or sent in accordance with subsection (3).

Except in Saskatchewan, if the final prospectus or any amendment is delivered or sent in accordance with subsection 2A.3(3), the right to withdraw from, or in Quebec the right to rescind, an agreement to purchase a security provided to a purchaser under securities legislation may be exercised within 2 business days after the later of

(a) (b)

the date the document is received in accordance with subsection (4), and the date that the purchaser has entered into the agreement to purchase the security.

(6)

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In Saskatchewan, if the final prospectus or any amendment has been delivered or sent in accordance with subsection 2A.3(3), a purchaser that is not a registrant may cancel a purchase if the purchaser has not sold or otherwise transferred beneficial ownership of the security and the person or company from whom the purchaser purchased the security receives notice in writing to cancel the agreement of purchase and sale for the security at any time up to 2 business days after the later of

(a)

(b)

the date that the document is received in accordance with subsection (4), and

the date that the purchaser has entered into the agreement to purchase the security.

Procedures 2A.3(1) This section does not apply in British Columbia. (2) A final prospectus or any amendment must be delivered or sent by providing access to the document, unless the document is delivered or sent pursuant to another procedure prescribed by securities legislation.

(3)

(4)

Access to the final prospectus or any amendment has been provided if (a) the document has been filed on SEDAR and a receipt has been issued for the document, and

(b)

on the same day the document was filed, a news release has been issued and filed on SEDAR that states

(i) (ii) (iii) (iv)

in the title of the news release, that the document is available, that the document is accessible at www.sedar.com, the securities that are offered under the document, and the following: “An electronic or paper copy of the final prospectus or any amendment may be obtained, without charge, from [insert contact information for the issuer or dealer, as applicable] by providing the contact with an email address or address, as applicable.”

If a prospective purchaser requests a copy of the preliminary prospectus or any amendment, or a purchaser requests a copy of the final prospectus or any amendment, from the issuer or dealer, a copy of the document must be sent by the issuer or dealer within 2 business days and without charge to the prospective purchaser or purchaser at the email address or address specified in the request.

(5)

(6)

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Except if a prospective purchaser indicates an interest in purchasing a security and requests a copy of the preliminary prospectus or any amendment, such document that is required to be delivered or sent must be delivered or sent by providing access to the document, unless the document is delivered or sent pursuant to another procedure prescribed by securities legislation.

Access to the preliminary prospectus or any amendment has been provided if the issuer has filed on SEDAR, and a receipt has been issued for, the document.

Exemption from requirement to send prospectus - British Columbia 2A.4 (1) In British Columbia, a dealer is exempt from a requirement under securities legislation to send a final prospectus or any amendment if

(a) the document has been filed on SEDAR and a receipt has been issued for the document, and

(b) on the same day the document was filed, a news release has been issued and filed on SEDAR that states

(i) in the title of the news release, that the document is available, (ii) that the document is accessible at www.sedar.com, (iii) the securities that are offered under the document, and (iv) the following: “An electronic or paper copy of the final prospectus or any amendment may be obtained, without charge, from [insert contact information for the issuer or dealer, as applicable] by providing the contact with an email address or address, as applicable.”

(2)

(3)

(4)

In British Columbia, a dealer or issuer that solicits an expression of interest from a prospective purchaser is exempt from the requirement in securities legislation to send a copy of the preliminary prospectus or any amendment to the prospective purchaser if the document has been filed on SEDAR and a receipt has been issued for the document.

If a purchaser requests a copy of the final prospectus or any amendment from the issuer or dealer, a copy of the document must be sent by the issuer or dealer within 2 business days and without charge to the purchaser at the email address or address specified in the request.

If a dealer relies on subsection (1), an agreement of purchase and sale is not binding on a purchaser if the dealer from whom the purchaser purchases the security receives written notice sent by the purchaser, evidencing the intention of the

3.

4.

(5)

(6)

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purchaser not to be bound by the agreement, not later than 2 business days after the later of

(a) the date that conditions referred to in subsection (1) are satisfied, and (b) the date of the agreement. Subsection (4) does not apply if the purchaser (a) is a registrant, or (b) disposes of the beneficial ownership of the security referred to in subsection (4), otherwise than to realize on collateral given for debt, before the end of the time referred to in subsection (4).

For the purposes of this section, receipt of the notice referred to in subsection (4) by a dealer that acted as agent of the seller with respect to the sale of the security referred to in subsection (1) is deemed to be receipt by the seller on the date on which the dealer received the notice..