The Canadian Securities Administrators recently released Multilateral CSA Staff Notice 51-338 – Continuous Disclosure and Prospectus Requirements Relating to Documents Prepared under the U.S. Securities and Exchange Act of 1934 (the Notice). The Notice was published by staff of the securities regulatory authorities in each province and territory of Canada, other than Alberta and British Columbia (Staff).

In the Notice, Staff expresses its expectations concerning the continuous disclosure and prospectus requirements applicable to documents that are schedules or exhibits to, or incorporated by reference in, disclosure documents prepared in accordance with the U.S. Securities and Exchange Act of 1934 (the 1934 Act) and filed by issuers in Canada.

BACKGROUND

Canadian continuous disclosure rules permit certain reporting issuers to satisfy specific Canadian requirements by filing on SEDAR copies of various disclosure documents filed with the Securities and Exchange Commission of the U.S. (SEC). In particular, under:

  • National Instrument 51-102 – Continuous Disclosure Obligations (NI 51-102): (1) an "SEC issuer" is permitted to file a Form 10-K or Form 20-F (each a 1934 Act annual report) as its annual information form; (2) an applicable "exchangeable security issuer" satisfies the requirements of NI 51-102 by, among other things, filing certain U.S. disclosure documents (including a 1934 Act annual report) filed with the SEC by its "parent issuer"; and (3) an applicable "credit support issuer" satisfies the requirements of NI 51-102 by, among other things, filing certain U.S. disclosure documents (including a 1934 Act annual report) filed with the SEC by its "parent credit supporter".
  • National Instrument 71-102 – Continuous Disclosure and Other Exemptions Relating to Foreign Issuers (NI 71-102): an "SEC foreign issuer" satisfies the requirements of Canadian securities legislation (including certain provisions of NI 51-102) by, among other things, filing certain U.S. disclosure documents (including a 1934 Act annual report) filed with, or furnished to, the SEC.

FILING REQUIREMENTS

The Notice expressly provides that an SEC issuer filing an SEC annual report pursuant to NI 51-102 or an SEC foreign issuer filing a U.S. disclosure document pursuant to NI 71-102 must also file on SEDAR all exhibits and schedules to, and documents incorporated by reference in, the filed document (collectively, U.S. Ancillary Materials). By extension, any issuer (including exchangeable security issuers and credit support issuers) filing U.S. disclosure documents on SEDAR under Canadian securities laws should also file the corresponding U.S. Ancillary Materials.

Filing Procedure

The Notice takes an accommodative approach, specifying that an issuer may meet its disclosure obligations by: (1) attaching the U.S. Ancillary Materials to the version of the 1934 Act annual report or other U.S. disclosure document filed on SEDAR (i.e., a single combined document filed under the appropriate document type); (2) filing the combined U.S. Ancillary Materials under the document type "Other" in the same SEDAR project; or (3) filing the U.S. Ancillary Materials separately under the document type "Other" in the same SEDAR project.

  • Notwithstanding the foregoing, the Notice provides an exception for U.S. Ancillary Materials that have already been filed on SEDAR under the appropriate document type. These documents do not need to be re-filed in connection with the filing of a subsequent U.S. disclosure document on SEDAR. 
  • Regardless of the method selected, Staff has recommended that the issuer file a "notice to public" under the document type "Cover Letter" in the same SEDAR submission indicating where the schedules, exhibits and documents incorporated by reference can be found (e.g., by referring to the date of filing on SEDAR). We note that the inclusion of the cover note is not required, and that there is no requirement under NI 51-102 for indexing material contracts filed on SEDAR.

Recommendations

  • Prior to filing a 1934 Act annual report, other U.S. disclosure document or a prospectus, issuers covered by the Notice should assess their SEDAR disclosure record and identify any filing deficiencies regarding U.S. Ancillary Materials. As a practical matter, it is especially important for such issuers to consider any U.S. Ancillary Materials which may pre-date or otherwise be unavailable in electronic form on EDGAR, as obtaining such materials may require additional time (and be particularly inconvenient if the issuer is in the midst of a bought deal prospectus financing – see below).

SHORT FORM PROSPECTUS AND FRENCH TRANSLATION REQUIREMENTS

The Notice cautions that if an issuer is required to incorporate by reference a 1934 Act annual report (or, by extension, any other U.S. disclosure document) in a short form prospectus filed under National Instrument 44-101 – Short Form Prospectus Distributions, the requirement to incorporate such document by reference also applies to all U.S. Ancillary Materials associated with such document. Further, if an issuer files a short form prospectus in Quebec, any such U.S. Ancillary Materials incorporated by reference must be translated and filed in the French language.

EXEMPTIVE RELIEF

The Notice provides that Staff will consider, on a case-by-case basis, applications for exemptive relief from the requirements to file and/or incorporate by reference U.S. Ancillary Materials. Factors Staff consider when determining whether or not to grant such relief include whether the U.S. Ancillary Materials: (1) have only been filed under U.S. securities law requirements that have no Canadian equivalent; or (2) contain material information that the issuer is required to disclose under Canadian securities legislation.

Further, the Autorité des marchés financier will consider granting exemptive relief in respect of the requirement to translate U.S. Ancillary Materials incorporated by reference into a prospectus.