On April 16, 2015, the Canadian Securities Administrators (CSA),
except for the Ontario Securities Commission (OSC), published a
notice and request for comments on proposed amendments to
Multilateral Instrument 11-102 - Passport System.
The CSA's proposed amendments expand MI 11-102 to include
two new areas: (1) applications to cease to be a reporting issuer;
and (2) the issuance, revocation or variation of failure-to-file
cease trade orders. If adopted, the proposed amendments would:
facilitate multi-jurisdictional applications to cease to be a
reporting issuer by allowing most reporting issuers who meet the
criteria to file an application in only one jurisdiction; and
streamline the issuance, revocation and variation of
failure-to-file cease trade orders by giving effect to the cease
trade order issued by one securities regulator in all jurisdictions
where the issuer is a reporting issuer.
In particular, the CSA proposes making the following amendments
to MI 11-102:
Application to cease to be a reporting issuer:
A reporting issuer would only need to apply to its principal
regulator (or Ontario) to cease to be a reporting issuer in all
jurisdictions where it has this status. Once the principal
regulator grants the order to cease to be a reporting issuer, the
principal regulator's order would automatically have the same
effect in notified passport jurisdictions.
Failure-to-file cease trade orders: Where a
passport securities regulator (including Ontario) may impose a
cease trade order, the order would automatically restrict any trade
in the affected securities in other passport jurisdictions.
Failure-to-file cease trade orders are made when a reporting issuer
is in default of certain continuous disclosure requirements.
Under the current rules, reporting issuers seeking to withdraw
their reporting issuer status or to revoke failure-to-file cease
trade orders must do so in each applicable jurisdiction. The CSA,
with the OSC's collaboration, also proposes a passport
application process, similar to those for prospectus filings and
exemptive relief, for issuers seeking to cease to be reporting
issuers and for failure-to-file cease trade orders which would work
in tandem with MI 11-102.
Background to the Passport System
The Passport System, adopted by all Canadian securities
regulators except Ontario, enables persons or companies to deal
with only one principal regulator for the purposes of filing a
prospectus or obtaining automatic exemptions. The purpose of the
Passport System is to give market participants a single window of
access to the capital markets, creating a streamlined and
pan-Canadian decision-making process.
Although not adopted in Ontario, Ontario market participants
have access to this system since the OSC is recognized as a
principal regulator for the above-mentioned approvals and
exemptions under the current MI 11-102. However, market
participants seeking reporting issuer status or other exemptive
relief in Ontario must follow a dual prospectus or dual application
process even if their principal regulator is in a jurisdiction that
has adopted MI 11-102.
Further Comments Sought on Expanding Cease Trade Orders
Beyond seeking comments on the proposed amendments and the new
policies, the CSA is also considering applying failure-to-file
cease trade orders to jurisdictions where the issuer is
not a reporting issuer. In light of this,
it has invited comments about whether—and to what
extent—trading in cease-traded securities occurs in
jurisdictions where issuers are not reporting issuers. It has also
invited comments about any concerns that may arise from imposing
trading prohibitions in jurisdictions where the issuer is not a
Time for Comment
The CSA has requested comments with respect to the amendments to
the Passport System by June 15, 2015.
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.
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