New “access equals delivery” regime for prospectuses

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Canada | Publication | January 19, 2024

Reporting issuers will soon have a new option for delivery of prospectuses to potential investors and purchasers. The Canadian Securities Administrators (the CSA) published final amendments to several national prospectus instruments and their companion policies on January 11, 2024. The amendments introduce an “access equals delivery model” (the AED Model) for the delivery of certain prospectuses.

Under the AED Model, reporting issuers will be permitted to post certain prospectuses on SEDAR+ and issue a news release regarding access to satisfy delivery requirements under securities legislation instead of mailing or electronically delivering such documents. The AED Model will therefore reduce costs for issuers when raising capital. It is anticipated the amendments will come into force on April 16, 2024, if all necessary governmental approvals are obtained.

Which issuers does it apply to?

The AED Model is not mandatory. It can be used by both venture and non-venture issuers, but is not available to investment funds.

What type of prospectuses are able to be delivered using the AED Model?

The AED Model can be used for delivery of all types of prospectuses other than prospectuses for rights offerings and medium-term note programs (MTNs) and other securities in continuous distribution under a shelf prospectus. The CSA has not extended the AED Model to allow delivery of a rights offering prospectus, as such offerings require security holders to make time-sensitive decisions regarding participation in the offering. MTN programs and continuous distributions are also subject to customized regimes under securities legislation and will also not be able to use the AED Model.

How does delivery under the AED Model work?

Under the AED Model, generally delivery of a preliminary and final prospectus, and any amendments to those documents, will occur when:

the document, once receipted by the relevant securities regulators, is filed on SEDAR+, and
other than in the case of a preliminary prospectus or an amendment to a preliminary prospectus, a news release is issued and filed on SEDAR+ indicating that the final prospectus is available on SEDAR+ and a paper or electronic copy can be obtained upon request at no charge.

There is no requirement to issue a press release when filing a preliminary prospectus.

While the AED Model is available for many types of prospectuses (including long-form, short-form, base-shelf and PREP prospectuses), the rules regarding delivery set out above are individually adjusted for the particular type of offering. For example, in the case of delivery of a shelf prospectus supplement or a supplemental PREP prospectus, the revised AED Model allows an issuer to comply with the model by filing a forward-looking news release prior to the filing of the supplement or PREP prospectus that indicates the prospectus will be available within two days of the news release’s date. This allows a news release to be issued on pricing, which complies with the AED Model.

All marketing communications (including road shows) must refer to the final prospectus or amendment being available on SEDAR+ where the AED Model is used for delivery.

Do shareholders have a right to receive a paper or an electronic copy of a prospectus?

Yes, the AED Model gives potential investors the right to request a paper or an electronic copy of any document delivered by such model and to execute standard instructions to receive paper or electronic copies. Where a copy is requested, it must be delivered within two business days other than in the case of a preliminary prospectus.

Are the rights of investors to withdraw within two days of purchase affected under the AED Model?

The current rights of purchasers to withdraw from a purchase of securities within two business days of the date of delivery of the final prospectus (which includes a supplement) or an amendment thereto will not be affected by using the AED Model.

Such rights must be exercised within two business days after the later of: (i) satisfaction of the conditions of delivery under the AED Model; and (ii) the date of the agreement to purchase the securities. Therefore, a news release regarding the filing of the final prospectus or amendment to the final prospectus by the issuer on SEDAR+ is critical so purchasers are aware of the deadline for exercising their two-day right of withdrawal. If relying upon the AED Model, the final prospectus must provide a cross-reference on the cover page to disclosure in the prospectus explaining the calculation of the two-day period. The delivery to the purchaser to satisfy the request for a paper or an electronic copy of the prospectus will not affect the calculation of the time period for withdrawal.

How will the amendments be introduced?

The AED Model will be introduced as an exemption to the requirement to send a prospectus in British Columbia, New Brunswick and Quebec and as a permitted method of access in Alberta and of delivery in all other jurisdictions. Notwithstanding this difference, the AED Model will, in practice, be fully available to issuers in all Canadian jurisdictions.

Can annual financial statements, interim financial reports and related management’s discussion and analysis (MD&A) be delivered under the AED?

Delivery or sending of annual financial statements, interim financial reports and related MD&A may not be made using the AED Model. When the AED Model was originally proposed by the CSA in 2022 (the Initial Proposals), it contemplated allowing financial statements and MD&A to be delivered using the AED Model. Public comments on the Initial Proposals raised investor protection concerns, especially for retail investors. The CSA therefore did not provide the ability to deliver such continuous disclosure documents using the AED Model in the final amendments. The CSA has indicated it is considering ways to enhance the AED Model to address such concerns and will republish proposed amendments for public comment in the future.

Does the AED Model apply to delivery of proxy voting and meeting materials and takeover and issuer bid circulars?

As in the Initial Proposals, it has not been proposed that the AED Model be made available for delivery of documents that may require a response from shareholders within a specified time period (for e.g., proxy voting and other security holder meeting-related materials and takeover and issuer bid circulars).