Access-equals-delivery is an idea whose time has come, the CBA’s Business Law Section says in response to the Canadian Securities Administrators’ proposed model for prospectuses and other documents.
“Regulator and administrative practices have evolved to allow electronic delivery and to give investors the option of not receiving certain documents (e.g. financial statements),” the Section says in its submission. “An AED model is a reasonable extension of these practices.”
Benefits of an AED model include easier access to relevant documents; a reduced administrative burden – particularly important for junior issuers; easier tracking of delivery and receipt than with paper documents sent through the mail; reduced costs; and environmental benefits from reduced paper use.
There are also drawbacks, the Section says, including the fact that AED would only work for shareholder reporting requirements not already subject to other laws; in order to be accessible some documents would still have to be made available in paper versions; and an electronic system could be vulnerable to cyber-attacks or prolonged power outages.
There is already a model in the notice and access system for proxy materials. It would be relatively easy to develop a similar process for prospectuses, financial statements and MD&A,” the Section says.
AED should be extended to all disclosure documents requiring delivery to investors, it says. A news release should be sufficient notice, and withdrawal rights could be calculated as commencing on the date the final prospectus news release is published – the news release being analogous to deeming receipt of a prospectus.
The Section also notes that an AED regime would raise concerns regarding investor engagement, since investors might not be able to exercise their rights if access is delayed.
“However, these concerns also exist with the current system as there is no guarantee that paper documents are received or reviewed prior to making investment decisions. An AED model could facilitate the delivery of documents and track receipt and, potentially, review of the documents.”
The Section does recommend more consultations before implementing rule changes affecting documents other than financial statements, MD&A and prospectuses.