The Canadian Securities Administrators ("CSA") will implement the "Passport System" for prospectus review on March 17, 2008. The good news is that for users the Passport System will likely feel much like the current Mutual Reliance Review System ("MRRS"), albeit slightly improved. The bad news is that for prospectus offerings, fees will still be paid in all the jurisdictions where securities will be offered.
Documents will be filed in all the offering jurisdictions and with the principal regulator as before. With respect to the review process:
- If the Ontario Securities Commission ("OSC") is the principal regulator, only the OSC will review and comment on the prospectus in the time frame we are currently accustomed to: 10 working days for a long form prospectus and three working days for a short form prospectus (subject to any extensions for novel or complex issues). The OSC will issue the final receipt.
- If an offering includes Ontario but the OSC is not the principal regulator, two regulators will be involved ("dual review"), namely the principal regulator and the OSC. The time frame for the first comment letter will still be 10 and three working days, for a long form prospectus and short form prospectus, respectively. Except where the OSC opts out of dual review, only the principal regulator will issue a final receipt.
- If the offering does not include Ontario and Ontario is not the principal regulator, the principal regulator alone will review and comment on the prospectus in the applicable time frame and issue the final receipt.
The principal regulator will issue one final receipt for all jurisdictions included in the offering. The sole exception, as noted above, will be where the OSC, as a non-principal regulator, has opted out of a dual review, in which case a separate receipt from the OSC will be required.
The Passport System should eliminate or reduce the delays that occasionally occur under MRRS due to the involvement of securities regulators in all the jurisdictions included in the offering. Currently, all jurisdictions must sign off. Under the Passport System, at most two regulators will be involved in reviewing routine prospectus filings and at most two final receipts will be issued. (However, if there is a novel issue, the principal regulator may decide to consult with other jurisdictions. As mentioned above, the usual review timeframes may be extended for complex or novel issues.)
Whether or not costs will decrease will likely depend on whether the various jurisdictions decrease prospectus filing fees.
The CSA also expects to implement the Passport System for exemptive relief applications in March 2008. For these applications, filings will be made only with the principal regulator or, for a dual application, with the principal regulator and the OSC, as described above for a dual review prospectus. Fees will be payable only to the principal regulator and, if applicable, the OSC, so for exemptive relief applications, in contrast to prospectus filings, there should be an immediate reduction in costs for applicants