As securities regulators on both sides of the border look for ways to eliminate needless compliance costs and encourage capital formation, the Canadian Securities Administrators (CSA) are consulting on an array of possible reforms — including potentially redefining what it means to be a venture issuer, introducing a new prospectus exemption, and matching possible U.S. reforms.
On Thursday, the CSA published a consultation paper for an extended 120-day comment period, which seeks feedback on potential reforms to modernize public company regulation — such as shifting its approach to “proportionate” regulation, permitting venture issuers to use alternative financial reporting metrics, revising private placement hold periods, and altering reporting requirements for material changes. The umbrella organization for Canada’s provincial and territorial securities regulators is also consulting on the impact of recent reform efforts from the U.S. Securities and Exchange Commission (SEC).
Specifically, the regulators are canvassing the idea of redefining the distinction between venture and non-venture issuers, which is currently tied to companies’ exchange listings. The CSA is looking at whether that approach still works, given recent trends — including larger companies that are still listed on venture exchanges, issuers losing their venture status when they obtain foreign listings, and large issuers being classified as venture companies due to the lack of a public listing.
Against that backdrop, the CSA is considering a new approach to defining venture issuers such as shifting to issuer-specific criteria, adjusting the current approach, or requiring issuers that reach a certain size to move from venture listings to a senior listing.
At the same time, the regulators are considering whether to allow certain venture issuers to deviate from international accounting standards and prepare financials using alternative reporting methods. They’re also considering revisions to material change reporting requirements that aim to reduce duplication in the existing requirements.
Additionally, they’re consulting on reforms aimed at making it easier for issuers to raise capital by potentially revising the hold periods that apply to securities that are issued under a prospectus exemption; and, possibly introducing a new exemption for qualified institutional investors to acquire securities without a hold period.
Finally, the CSA is seeking the market’s feedback on the implications for Canadian markets from recent U.S. reform proposals, including the proposed introduction of semi-annual reporting for issuers generally (the CSA is currently allowing venture issuers to use semi-annual reporting); SEC proposals to expand access to shelf registration; and proposed revisions to public company reporting requirements.
“The CSA continues to explore ways to support a regulatory framework for reporting issuers that facilitates access to capital, supports the competitiveness of Canadian capital markets and balances investor protection,” said Stan Magidson, chair of the CSA and chair and CEO of the Alberta Securities Commission (ASC) in a release.
“We are committed to ensuring that Canada’s securities regulatory environment adapts to the evolving needs of investors, reporting issuers, and other market participants,” he added.