Supporting Ontario’s issuers and intermediary market

5. Mandate that securities issued by a reporting issuer using the accredited investor prospectus exemption should be subject to only a seasoning period

Currently, securities issued by an exempt market issuer under certain prospectus exemptions, such as the accredited investor exemption, are subject to a four-month restricted period before becoming freely tradable.

Multiple stakeholders have indicated that given the sophistication and knowledge of clients who qualify as accredited investors, this four-month hold is an unnecessary regulatory burden that reduces liquidity for investors.


The Taskforce proposes that securities issued by a reporting issuer using the accredited investor prospectus exemption should be subject to only a seasoning period. Under the seasoning period, secondary trades are permitted so long as the issuer has been a reporting issuer for four months preceding the trade.

Subjecting an issuer to a seasoning period allows them to develop an adequate disclosure record for secondary investors to rely upon. Allowing stock to become freely tradable so long as the issuer has completed the seasoning period would invigorate the secondary market and provide such issuers with additional capital raising opportunities. Trades over an exchange would be permitted.

In order to prevent indirect underwritings to investors who are not accredited, the issuer and any dealer involved in the distribution would be required to take reasonable steps to ensure that the accredited investor (AI) is purchasing as principal and not with a view to further distribution. Such reasonable steps could include representations and warranties in the purchasers’ subscription agreements that they are purchasing the securities with investment intent and not with a view to distribution, provided that such representations and warranties are reasonable in the circumstances. In addition, the underwriter registration requirement and registrant obligations would apply to any accredited investor that purchased securities with a view to further distribution.

Are there any challenges or concerns that may arise from this proposal? If the holding period is not eliminated, what is the minimum period that would balance the objectives of the holding period and not unduly impede resales? Should this measure be expanded to other prospectus exemptions that currently require a four-month hold? What impact would the elimination or shortening of the holding period have on the willingness of issuers to do prospectus offerings and exempt offerings?

6. Streamlining the timing of disclosure (e.g., semi-annual reporting)

Publicly listed companies in Ontario are currently required to provide quarterly financial reporting of interim financial results and provide accompanying Management Discussion and Analysis (MD&A). However, many stakeholders, especially smaller issuers, have noted the significant costs and resources allocated to producing quarterly financial statements and MD&A. While quarterly financial statements provide timely information to investors and intermediaries, there can be instances in which the regulatory and internal cost of preparing such frequent reporting exceeds the benefit. This is particularly true for smaller issuers that may not experience significant changes to their operations that would be reflected in the financial statements.


To minimize regulatory burden, the Taskforce is considering changing the requirement for quarterly financial statements to allow for an option for issuers to file semi-annual reporting.

What may be the concerns of such proposal? Should the option of semi-annual reporting be made available to only smaller issuers with less significant quarterly operational changes and what should the eligibility criteria for those publishing semi-annual reporting be? If semi-annual reporting is adopted, should issuers using a short form prospectus be required to supplement their financial disclosure if more than a quarter has passed since their most recent financial statements?

7. Introduce an alternative offering model for reporting issuers

The existing prospectus system functions well for larger issuers that can absorb the costs of conducting a public offering. However, the high costs associated with preparing and filing a prospectus can prove to be a barrier to capital raising for smaller issuers. Placing greater reliance on a reporting issuer’s continuous disclosure record to support investment decisions rather than the filing of a prospectus for ordinary course financings would provide capital at a lower cost to these companies.


The Taskforce proposes introducing an alternative offering model prospectus exemption for all reporting issuers, with securities listed on an exchange that are in full compliance with their continuous disclosure requirements, to offer freely tradeable securities to the public.

The exemption would include conditions such as the issuer must have been a reporting issuer for 12 months; and be up to date with its continuous disclosure and not be in default; securities offered under this prospectus exemption must be of a class that is listed on an exchange; the offering must be subject to an annual maximum; and issuers must file a short disclosure document with the OSC to update the continuous disclosure record for recent events (including information regarding the use of proceeds) and certify its accuracy. Both the disclosure document and certificate would be required to be filed on System for Electronic Document Analysis and Retrieval (SEDAR).

This exemption allows issuers to raise capital based on their continuous disclosure record and a short offering document, rather than a prospectus filing. Investors would assume the same level of risk as purchases of the same securities in the secondary market. The civil and statutory protections associated with prospectuses would not be available to investors under this model.

However, because of the maximum limit, significant transactions will continue to require a prospectus.

What are some of the conditions that should be imposed on issuers relying on the alternative offering model prospectus exemption? Should issuers opting into semi-annual reporting (Proposal #6) be covered under this exemption?

8. Introduce greater flexibility to permit reporting issuers, and their registered advisors, to gauge interest from institutional investors for participation in a potential prospectus offering prior to filing a preliminary prospectus

Stakeholders have noted that publicly listed companies are increasingly relying on financing through private placements rather than prospectus offerings. One reason for this trend is the limited ability to “test the waters” prior to a prospectus offering. Although the bought deal exemption provides for the ability to solicit expressions of interest prior to the filing of a preliminary prospectus, it requires the underwriters to take on the risks of the offering. Other than for the most senior issuers, the risk of a failed transaction is leading to less use of the short form prospectus structure.


To facilitate the greater use of the prospectus system, the Taskforce is proposing liberalizing the ability for reporting issuers to pre-market transactions to institutional accredited investors prior to the filing of a preliminary prospectus. The Taskforce believes that a greater ability to communicate with potential investors to gauge the demand for a public offering would minimize the risk of failed transactions. The greater flexibility should be accompanied by increased monitoring and compliance examinations by regulators of the trading by those who have advance information concerning an offering in order to deter insider trading and tipping. The Taskforce does not propose to make any changes to the bought deal exemption.

Do you think that the current prohibition on pre-marketing prospectus offerings continues to serve a useful purpose? If pre-marketing is expanded, should this be accomplished through a change to the prohibition generally or by introducing an exemption? Should conditions be attached to the ability to pre-market transactions more freely, such as: limits on the period that pre-marketing can be done, a requirement to enter into confidentiality and standstill agreements, limits on the number of potential investors that can be involved, or a requirement to reserve a portion of the offering for other investors? What other conditions should be applicable when companies choose to pre-market? Will this proposal result in less investment opportunities to retail investors? Do you have any concerns about increased insider trading or tipping as a result of increased pre-marketing? If so, what steps should be taken to deter such conduct?

9. Transitioning towards an access equals delivery model of dissemination of information in the capital markets, and digitization of capital markets

As technology continues to advance and access to the internet increases, the methods companies use to communicate with their investors and stakeholders will also evolve. Allowing companies to provide documents in electronic format, including by posting them on websites, helps to minimize the resources (both time and costs) and environmental impact of providing information when compared to physical delivery. Many stakeholders have commented on the timeliness of electronic delivery and expressed a general preference for less paper-based communication.


The Taskforce supports adopting full use of electronic or digital delivery in relation to documents mandated under securities law requirements (i.e. access equals delivery model) and reducing duplicative and unnecessary regulatory burden.

The Taskforce suggests that an access equals delivery model could be used for the delivery of documents, including: a prospectus under prospectus offerings by reporting issuers, annual and interim financial statements and related Management Discussion and Analysis (MD&A) of reporting issuers, and the management report of fund performance (MRFP).

Please provide feedback regarding which of the above communication and regulatory documents (and suggestions for others) should be made available electronically rather than delivered. How should shareholders be kept informed of these documents (i.e. one-time verification that shareholders will continuously monitor a company’s website notifying electronic delivery of communication documents)? How long should a transition period be if the access equals delivery model is adopted? Are there instances whereby physical delivery of such documents is more well-suited? Would the implementation of an access equals delivery model raise any investor protection or investor engagement concerns and what are potential solutions? Should this be extended to issuers in exempt markets? In what time frame should this transition to the access equals delivery model occur, e.g. six months after the publishing of the Taskforce’s final report? Lastly, what other measures could be pursued to promote the digitization of capital markets? What other reporting requirements could be streamlined in order to benefit capital market participants? Which documents should be required to be electronically delivered and which ones should be posted on the company’s website?

10. Consolidating reporting and regulatory requirements

As our capital markets regulatory framework modernizes, to reduce the burden of initially listing on a market exchange and continue to maintain a public listing, outdated and duplicative public reporting requirements must also be addressed. Unnecessary costs and resources are borne by companies and shareholders when reporting requirements are not streamlined. Further, duplicative information repeated in multiple disclosure documents adds to the volume of disclosure that investors must absorb. This leads to concerns about information overload.


The Taskforce supports reducing regulatory burden for companies’ reporting requirements to reduce compliance costs where possible, while maintaining investor protection and an appropriate level of disclosure. The Taskforce is considering streamlined reporting and regulatory requirements, including but not limited to:

  1. Combining the form requirements for the Annual Information Form (AIF), Management’s Discussion & Analysis (MD&A) and financial statements
  2. Simplifying the content of the Business Acquisition Report or revising the significance tests so that BAR requirements apply to fewer significant acquisitions

What are some specific reporting requirements arising from regulatory disclosures as noted above, such as the MD&A and Annual Information Form, that can be removed, consolidated and/or streamlined to reduce duplication and regulatory burden while upholding investor protection?

11. Allow exempt market dealers to participate as selling group members in prospectus offerings and be sponsors of reverse-takeover transactions

Exempt market dealers (EMDs) have traditionally played an important role in assisting smaller issuers and start-ups to raise capital at the pre-initial public offering (IPO) stage. However, as smaller issuers grow and seek financing via a prospectus offering, EMDs are often unable to continue supporting these issuers. EMDs are currently prohibited from participating as selling group members in prospectus offerings even though they were previously allowed to do so. Allowing EMDs to again participate would enable them to maintain their relationships with issuers following an IPO and would open up additional channels of financing to issuers, particularly venture issuers.

In addition, the current restriction on EMDs participating in prospectus offerings is a barrier to EMDs acting as agents in Capital Pool Company (CPC) offerings (used by smaller issuers under the TSX Venture Exchange’s (TSXV) capital raising framework because the TSXV’s CPC Policy require at least one agent in the CPC offering to be an IIROC member).


The Taskforce proposes that the OSC and TMX allow EMDs to act as “selling group members” in the distribution of securities made under a prospectus offering. The proposal would include CPC offerings, both in relation to initial public offerings and prospectus offerings in connection with a qualified transaction.

The Taskforce also proposes that the OSC work with stock exchanges to allow EMDs to act as sponsors in reverse-takeover transactions (RTOs).

How would these proposals invigorate the intermediary market? What are the potential benefits and concerns of these proposals?

12. Develop a Well-Known Seasoned Issuer Model

In the U.S., a well-known seasoned issuer (WKSI), defined as an issuer that is above a certain public float or has issued debt securities above a set amount in a specified time period, and has established an appropriate disclosure record, is subject to a less burdensome shelf registration process. WKSIs can register their securities offerings on shelf registration statements that become effective automatically upon filing. Stakeholders have suggested that such a process reduces regulatory burden on large issuers and makes it more cost-efficient to raise capital.


The Taskforce proposes that the Securities Act be amended to allow the OSC to develop a WKSI model in Canada to issue shelf prospectus receipts automatically for issuers that are above a certain public float or have issued debt securities above a set amount in a specified time period and have established an appropriate disclosure record.

The OSC should also consider implementing additional changes to the shelf prospectus system to provide similar accommodations to those available to WKSIs in the United States.

This would streamline the shelf prospectus process for such large issuers who meet the prescribed thresholds and make it more cost-efficient for such issuers to raise capital in Ontario’s capital markets.

Do commenters view such an WKSI model to be appropriate for Ontario’s capital markets? If yes, what should be the appropriate threshold for an issuer’s public float and/or debt security offering to qualify for WKSI status?

13. Prohibit short selling in connection with prospectus offerings and private placements

The existing prospectus system is generally working effectively for Canadian issuers. However, multiple stakeholders have advised us that short selling in connection with prospectus offerings is making pricing and execution of prospectus offerings more difficult. Since prospectus offerings are generally priced at a discount to the market price, market participants and investors who expect to purchase under the offering may seek to profit through aggressive short selling prior to the offering to depress the price of the offering. Short selling is particularly problematic where the underwriters are engaged in market stabilization in connection with the prospectus offering. In the United States, the Securities and Exchange Commission has addressed some of these concerns through the prohibition in Rule 105 of Regulation M: Short selling in connection with a public offering. Stakeholders have noted to the Taskforce that bought deals pre-arranged with hedge funds that are shorting the stock before the bought deal is announced are rife in the Canadian markets and particularly targeting capital intensive industries. This harms the corporation, its shareholders and the uninformed investors trading against the short sellers.


The Taskforce proposes that the OSC consider adopting a rule that would prohibit market participants and investors that have previously sold short securities of the same type as offered under a prospectus or private placement from acquiring securities under the prospectus or private placements.

There are current requirements that could potentially apply to short selling in advance of a prospectus offering or private placements, such as: (i) market participants and investors who have access to material undisclosed information concerning the offering would be precluded from short selling by the insider trading prohibition; (ii) the underwriter registration requirement may apply to market participants and investors who sell short in advance of an offering and fill their short position through the offering, since this is a form of indirect distribution; (iii) insiders of the issuer who enter into securities lending arrangements in connection with short sales prior to an offering would be subject to reporting requirements and such transactions may also be limited by the insider trading prohibition and applicable blackout periods; and (iv) the prohibition on market manipulation may apply to conduct that artificially depresses the price of the securities. However, these requirements will require detailed and contextual analysis.

A simple requirement that would prohibit market participants and investors that have previously sold short securities of the same type as offered under a prospectus or through a private placement from acquiring securities would result in greater clarity for all market participants and would be less complicated from both a conduct and compliance perspective.

Would such a rule be beneficial in facilitating greater and more effective use of the prospectus or private placement system? When should the period with restricted short selling begin and how long should it extend? Are there any concerns with the operation or oversight of this potential rule? Should there be exceptions to the prohibition, such as for market makers?

14. Introduce additional Accredited Investor (AI) categories

In 2019, 90.5 per cent of capital raised under prospectus exemptions was raised through the use of the AI exemption. The current definition of AI includes individuals who meet specific income and net financial asset thresholds. Although these criteria may be indicative of one’s ability to withstand potential market losses, they are not necessarily correlated with one’s sophistication or ability to understand investments.


The Taskforce proposes to expand the AI definition to those individuals who have completed relevant proficiency requirements, such as the Canadian Securities Course Exam; the Exempt Market Products Exam; the CFA Charter or; who have passed the Series 7 Exam and the New Entrants Course Exam (as defined in NI 31-103). If an individual meets the requisite proficiency standard in order to be able to recommend an investment product to other investors, the individual should be able to make a similar investment decision for himself or herself. Adding criteria based on existing educational proficiency would provide greater investment opportunities for individuals who already have the sophistication required for investment decisions and can adequately quantify the risk of potential investments.

Would commenters recommend additional expansions to the existing AI definition? If so, which ones?

15. Expediting the SEDAR+ project

Currently, market participants may use up to six separate database platforms to file or search various electronic regulatory documentation. Many stakeholders have voiced concerns over the antiquated systems and the need to expedite the SEDAR+ project.

SEDAR+, formerly known as the National Systems Renewal Program, is an initiative of the CSA that aims to replace CSA national systems (the System for Electronic Document Analysis and Retrieval (SEDAR), the System for Electronic Disclosure by Insiders (SEDI), the National Registration Database (NRD), the National Registration System, the National Cease Trade Order Database (CTO) and the Disciplined List (DL)) with a more centralized CSA IT system. CSA members have been working together on the SEDAR+ project since 2016. The SEDAR+ project aims to:

  • allow for a single portal access to all filings;
  • address cyber security and privacy management;
  • allow for a larger scope of filings and system users;
  • provide better functionality through a modernized user interface, with search function improvements and harmonized processes for all filings; and
  • facilitate better data quality through database consolidation and input standardization.

The target date for Phase I (replacement of SEDAR, CTO and DL) is currently set for 2021.


The Taskforce supports the goal of the SEDAR+ project, which would enable greater burden reduction and efficiency, and proposes that it be accelerated. SEDAR+ would modernize the way in which market participants use the centralized system, making it easier to file and access documentation. Given the importance and impact SEDAR+ would have on market participants and their operations, the Taskforce recognizes the need to expedite this project.

What priority should be given to the development and launch of SEDAR+? The Taskforce also invites suggestions for further expansions or improvements in relation to SEDAR+ objectives.