The Canadian Securities Administrators (CSA) is moving ahead with a new exempt-market reporting system that will harmonize reporting across the country and increase the amount of information regulators collect although it has backed off from certain aspects of previous proposals.
The CSA published rule amendments on Thursday that will introduce a new harmonized report for exempt distributions, which will apply to all issuers that distribute securities under certain prospectus exemptions. In a notice outlining the new requirements, the CSA indicates that the new reporting process will reduce the compliance burden on issuers by harmonizing reporting; it will also bolster oversight by providing regulators with more information on exempt distributions.
The new exempt-market reports will require additional disclosure about the issuer, its insiders (directors, officers and promoters), the securities that are being distributed, the exemptions being relied on and the compensation being paid for the distribution.
"The prospectus-exempt market has seen tremendous growth in recent years and regulators must adapt to this growth. With the introduction of a single and harmonized report, issuers will be able to more adequately provide the information needed by regulators to ensure effective oversight of this market," says Louis Morisset, the CSA's chairman and president and CEO of the Autorité des marchés financiers (AMF).
However, the CSA has removed the requirement for insiders to disclose their holdings of the issuers' securities; and, it also provides carve-outs from certain disclosure requirements for investment fund issuers, reporting issuers, foreign issuers, and issuers distributing foreign securities only to permitted clients. In addition, issuers will not be required to provide information that's already available in its continuous disclosure filings.
The CSA also removed the requirement for issuers distributing securities in more than one jurisdiction to file a report in each jurisdiction, identifying the purchasers. The regulators also scrapped the requirement to provide information about the individuals behind trusts that acquire the securities; and the disclosure about issuers' "control persons" will not be available publicly.
The CSA notice indicates that a longer-term project is underway to "create a single integrated filing system for reports of exempt distribution that would further reduce the regulatory burden on market participants." For now, the new harmonized reporting system is set to take effect on June 30.
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