Canada: Securities Authorities Propose Streamlining Venture Issuer Regulation

Copyright 2010, Blake, Cassels & Graydon LLP

Originally published in Blakes Bulletin on Securities Regulation, June 2010

The securities regulatory authorities (the Securities Authorities) in Alberta, British Columbia, Manitoba, New Brunswick, Nova Scotia and Saskatchewan have recently published Multilateral Consultation Paper 51-403: Tailoring Venture Issuer Regulation (the Paper) to determine if there is market interest in streamlining venture issuer regulation. The securities regulatory authorities in Ontario and Quebec are also encouraging their market participants to participate in this consultation.

All proposals described in the Paper are expected to apply to reporting issuers that trade on the TSX Venture Exchange (TSXV) and the Canadian National Stock Exchange (CNSX), as well as other reporting issuers whose equity shares trade over the counter in Canada or on certain international junior markets.

Rationale for Proposals

The Paper notes that the current approach to securities regulation in Canada is largely "one size fits all" and, while the existing rules contain certain exemptions for venture issuers, the venture market has unique characteristics that warrant a tailored approach to regulation. First, venture issuers are less likely to have access to specialized professional support and would benefit from consolidated disclosure documents. Second, disclosure requirements should reflect the unique relevance of certain information to the venture market investor. And third, the venture market is an important part of the economy that should not be stifled by unduly burdensome compliance requirements.

According to the Securities Authorities, the proposals have been designed to enhance investor protection and reduce regulatory costs for venture issuers.

Summary of Proposals

Introduction of Regulatory Instrument Specific to Venture Issuers. The Securities Authorities have published a sample instrument, applicable only to venture issuers, that would replace the governance and continuous disclosure requirements in several existing National Instruments, namely: NI 51-102 – Continuous Disclosure Obligations, NI 52-109 – Certification of Disclosure in Issuers' Annual and Interim Filings, NI 52-110 – Audit Committees, and NI 58-101 – Disclosure of Corporate Governance Practices.

The Securities Authorities anticipate that the consolidated instrument will reduce costs associated with using specialized compliance advisers due to duplicative provisions and disclosure requirements being eliminated and complex companion policies being replaced with plainly written guidance notes in the body of the instrument. However, the Securities Authorities acknowledge that a shift to a single securities instrument could create an initial learning curve and may complicate the transition for venture issuers to senior markets.

Introduction of Required Annual Report.

The proposed rules would require venture issuers to file an annual report. Existing rules allow a venture issuer to file an annual information form (AIF) if such issuer wishes to access the short form prospectus offering system or certain prospectus-exempt offerings. However, there is no requirement to do so. Unlike the existing disclosure framework, the proposed annual report would emphasize forward-looking rather than retrospective disclosure and would only require a two-year business history as compared to the three-year snapshot that is currently required in an AIF.

The annual report would be designed to assist investors by consolidating information into one document containing the material information of the venture issuer. It would combine certain disclosure elements found in the existing AIF, management's discussion and analysis (MD&A), annual audited financial statements, and annual meeting information circular.

The Securities Authorities indicate that items required to be disclosed in the annual report would include:

  • Description of the business. Venture issuers would be required to briefly describe the material aspects of the venture issuer's business.
  • Comparison of business development expenses vs. executive compensation. Venture issuers would no longer be required to include this information in an information circular. The method of reporting executive and director compensation would be greatly simplified.
  • Biographical disclosure of executives. Venture issuers would no longer be required to include this data within an information circular.
  • Material contract summaries. Venture issuers would be required to describe the purpose for entering the contract and its expected impact on the business.
  • Trading by reporting insiders.
  • Trading price and volume.
  • Outstanding securities.


Replacement of Three- and Nine-Month Interim Financial Statements with Mid-Year Report. Three- and nine-month interim financial statements and associated MD&A would no longer be required. Instead, venture issuers would be required to file a mid-year report that includes financial statements and corresponding MD&A. The mid-year report would also require the disclosure of recent insider transactions and material updates about the issuer.

Enhanced Certifications. Robust certificates would need to accompany the annual and mid-year reports. The Securities Authorities believe that this enhanced certificate requirement would increase management's attention to the quality of disclosure.

Enhanced Disclosure Standards. Directors and officers of a venture issuer would be held liable for authorizing, permitting, or acquiescing to statements made by or on behalf of the issuer that are inconsistent with its most recently filed disclosures, subject to a due diligence defence. This measure is targeted at reducing confusing statements made in forums, such as websites, and where disclosure is not filed with the securities regulatory authorities.

Enhanced Governance Standards. The Securities Authorities believe that substantive governance requirements would help ensure proper corporate behaviour in venture markets where pressure from investors, such as institutional investors, is lacking. The following measures are proposed:

  • Enhanced duties of directors and officers. Directors and officers of venture issuers would be required to act honestly and in good faith with a view to the best interests of the venture issuer (this would be in addition to any similar duties imposed by corporate law). This requirement would be mandated within the instrument, and thus enforceable by securities regulators.
  • Policies to address conflicts of interest and related entity transactions. Directors of venture issuers would be required to implement policies designed to ensure that they are made aware of and have an opportunity to consider perceived conflicts of interest and each proposed material related entity transaction.
  • Trading policies. Issuers would be required to implement policies designed to deter persons in possession of undisclosed material information from illegally transacting, or encouraging others to transact in the issuer's securities.

Replacement of Business Acquisition Reports with Enhanced Material Change Reporting. The proposed rules would replace the business acquisition report with material change report style disclosure for venture issuers. Also proposed would be a new requirement to disclose "Disclosable Events". A "Disclosable Event" would include material related entity transactions and "significant transactions", a term defined to include significant acquisitions, significant dispositions, restructuring transactions as well as there filing of documents. Financial statements would not generally be required unless an acquisition was of 100% significance (based on market capitalization) to the venture issuer.

Simplified Disclosure in Connection with Offerings. Venture issuers would be able to rely on the proposed mid-year and annual reports to satisfy many of the disclosure requirements found in NI 44-101 – Short Form Prospectus and the qualifying issuer offering memorandum exemption under NI 45-106 – Registration and Prospectus Offerings.

Also, disclosure requirements would be consolidated for an issuer conducting an initial public offering under NI 41-101 – General Prospectus Requirements where such issuer intends to be a venture issuer following the offering. Only the type of reporting required by the annual report would be required in the IPO prospectus instead of the heavier burden imposed by NI 41-101.

Consultation Process

The Securities Authorities are encouraging market participants to provide input on the proposals outlined in the Paper. Written comments may be submitted in hard copy or electronic form by September 17, 2010. After the consultation, we expect the Securities Authorities to publish a draft multilateral instrument, with another comment period following such publication

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Events from this Firm
27 Oct 2016, Seminar, Toronto, Canada

Please join members of the Blakes Commercial Real Estate group as they discuss five key provisions of a commercial real estate purchase agreement that are often the subject of much negotiation but are sometimes misunderstood.

1 Nov 2016, Seminar, Toronto, Canada

What is the emotional culture of your organization?

Every organization and workplace has an emotional culture that can have an impact on everything from employee performance to customer or client satisfaction.

3 Nov 2016, Seminar, Toronto, Canada

Join leading lawyers from the Blakes Pensions, Benefits & Executive Compensation group as they discuss recent updates and legal developments in pension and employee benefits law as well as strategies to identify and minimize common risks.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.