Canadian securities are proposing rule amendments that would relax certain disclosure requirements for venture issuers in a bid to ease the regulatory obligations on early-stage companies.
The Canadian Securities Administrators (CSA) Thursday published for comment proposed amendments to both the continuous disclosure and governance obligations, and prospectus disclosure requirements, for venture firms.
The CSA says the proposed amendments “are intended to make the disclosure requirements for venture issuers more suitable and manageable for issuers at their stage of development”; which will allow management to focus on the growth of their businesses.
And, at the same time, the amendments aim to result in more focused disclosure “that reflects the needs and expectations of venture issuer investors”, and eliminates disclosure obligations “that may be less valuable to those investors.”
Among other things, the proposed amendments would implement a new tailored form of executive compensation disclosure; reduce the need for business acquisition reports to be filed; reduce the number of years of audited financial statements required for venture issuers becoming reporting issuers; and, allow companies without much revenue to fulfill interim MD&A disclosure obligations with a streamlined, focused report on quarterly highlights. The amendments would also create a new requirement for audit committees to have a majority of independent members.
In the past, regulators have proposed new rules and rule amendments that would have also reduced disclosure requirements for venture issuers by creating an entirely new regime for these firms. These latest proposals are more modest, but the CSA notes they contain many of the same elements as these earlier initiatives, including streamlined quarterly financial reporting, executive compensation disclosure, and business acquisition reporting. However, they would achieve these objectives by amending existing rules rather than introducing a wholly new regime for venture issuers.
The CSA notes that the feedback it received from the venture issuer community on the previous proposals indicated that “the benefits from streamlining and tailoring were outweighed by the burden of the transition to a new regime, particularly at a time when many venture issuers were facing significant challenges.”