The Alberta Securities Commission (ASC) is proposing to repeal and replace existing ASC Rule 71-801 Implementing the Multijurisdictional Disclosure System in an effort to update outdated references and better align the requirements of Alberta securities law with the southbound multijurisdictional disclosure system (MJDS). Issued on September 28, 2017, the proposal for a new ASC Rule 71-801 follows comparable initiatives by the British Columbia and Ontario commissions.
Note that the proposed changes would not affect the core principles of the MJDS, which are set out in a separate instrument (National Instrument 71-101 The Multijurisdictional Disclosure System). Instead, its impact is limited to the provincial framework that surrounds and implements NI 71-101 in Alberta.
Southbound MJDS Changes
The substantive proposed changes affect “southbound” MJDS only. In other words, they would impact offerings by Alberta-based issuers to non-Canadian investors pursuant to a registration statement under the MJDS. If the proposed new rule is adopted, there will be three changes:
- The underwriter certificate exemption that the current Rule provides when securities are offered and sold only in the U.S. would, going forward, encompass offerings that include other non-Canadians. This change would simply codify discretionary exemptive relief that the ASC already routinely grants.
- An exemption from the prospectus delivery requirement would be incorporated into the new Rule where U.S. federal law has been satisfied and there are no Canadian investors. This would allow issuers to take advantage of the U.S. principle of “access equals delivery” (if notice is given). This exemption would not apply to equity lines of credit or at-the-market (ATM) distributions, which will continue to require discretionary exemptive relief.
- Statements normally required under Alberta securities law that are allowed to be excluded by SEC Form F-10 (i.e., because they are not material to U.S. investors) could be excluded by Alberta issuers under the proposed changes. In particular, these statements include the discussion of Canadian statutory rights of action to the extent that those rights are not available to U.S. investors. (On this issue, note the “ASC Call for Feedback” below.)
The Notice also includes some housekeeping changes. For example, when the current Rule 71-801 was adopted in 1998, it referenced various Securities Act provisions that have since been superseded by National Instrument 41-101 General Prospectus Requirements and National Instrument 62-104 Take-Over Bids and Issuer Bids. The new Rule 71-801 will replace the outdated references.
ASC Call for Feedback
With respect to the substantive changes, the ASC is requesting feedback on a few questions: (1) whether the Canadian “red herring” legend (i.e., a statement on the cover of a preliminary prospectus that the prospectus is not yet final) would ever be material to a U.S. investor; (2) whether Canadian statutory rights of action are ever unavailable to U.S. investors; and (3) whether the Canadian red herring or statutory rights of action would be material to investors who are neither Canadian nor American.
Any comments that you may have on these issues, or on the proposal generally, may be submitted to the ASC at the email address indicated in the Notice. The comment period ends 30 days from September 28, 2017.