Streamlining Venture Issuer Disclosure Requirements – Overview Of New CSA Proposal 


June 2014

Securities Bulletin

Tyson Gratton, Student-at-Law

On May 22, 2014, the Canadian Securities Administrators (the "CSA") published for comment proposed amendments to National Instruments 51-102 Continuous Disclosure Obligations ("NI 51-102"), 41-101 General Prospectus Requirements ("NI 41-101") and 52-110 Audit Committees ("NI 52-110") with a view to streamlining venture issuer disclosure. A venture issuer is defined under NI 51-102 as a reporting issuer that does not have any of its securities listed or quoted on any of the Toronto Stock Exchange, a U.S. marketplace or a marketplace outside of Canada and the U.S.

These proposed amendments intend to tailor the existing disclosure regulations to eliminate venture issuers' disclosure obligations that may be less valuable to venture issuer investors. The CSA submits that the proposed changes will enhance informed investor decision-making for the venture issuers market by improving the quality of information available to investors while reducing the burden of preparation for venture issuers.

With respect to venture issuers, some of the key proposed amendments include:

Amendments to NI 51-102

  • Quarterly highlights: For venture issuers without significant revenue, the management's discussion and analysis for interim periods could be satisfied by a streamlined and highly focused report on quarterly highlights, primarily consisting of a short discussion about the venture issuer's operations and liquidity.
  • Executive compensation disclosure: Implementing a new tailored form of executive compensation disclosure that would: (i) reduce the number of individuals for whom disclosure is required from five to three (CEO, CFO, and one additional highest-paid executive officer); (ii) reduce the number of years of disclosure from three to two; and (iii) eliminate the requirement for venture issuers to calculate and disclose the grant date fair value of stock options and other share-based awards in the summary compensation table. Instead, venture issuers would disclose detailed information about stock options and other equity-based awards issued, held and exercised.
  • Business Acquisition Reports ("BARs"): Reducing the instances in which a business acquisition report must be filed by increasing the "significant acquisition" threshold from 40% to 100% and eliminating the requirement that BARs filed by venture issuers must include pro forma financial statements.

Amendments to NI 52-110

  • Audit Committees: Creating a new requirement for venture issuers to have an audit committee consisting of at least three members, the majority of whom must be independent (there is already a comparable requirement under the policies of the TSX Venture Exchange).

Amendments to NI 41-101

  • Audited financial statements: Reducing the number of years of audited financial statements required in an initial public offering (IPO) prospectus for an issuer that will become a venture issuer on completion of its IPO from three to two.
  • Description of the business and history: Reducing the requirement to describe a venture issuer's business and history from three to two years.
  • Conforming to proposed continuous disclosure changes: Conforming the prospectus disclosure requirements for a venture issuer to the corresponding continuous disclosure changes detailed above.

With respect to all issuers (including non-venture issuers), key amendments include:

Amendments to NI 51-102

  • Mining Issuer Disclosure: Revising the annual information form disclosure for mining issuers to conform to the amendments made to National Instrument 43-101 Standards of Disclosure for Mineral Projects in 2011.
  • Filing Requirements for Form 51-102F6 and Proposed Form 51-102F6V: Clarifying the executive compensation disclosure filing deadlines.

The comment period on the proposal is open until August 20, 2014. The CSA Notice and Request for Comment is available here.

a cautionary note

The foregoing provides only an overview and does not constitute legal advice. Readers are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained.

© McMillan LLP 2014