CHAPTER 01 10 Regulatory and Judicial Developments That GCs and Boards Need to Know 5 | A Mixed Bag: Capital Markets Modernization Taskforce Report and Draft Capital Markets Act
In February 2020, the Ontario government formed the Taskforce, whose mandate was to review and modernize Ontario’s capital markets regulations. Following the publication of its initial consultation report in July 2020 and the receipt of more than 130 comment letters, in January 2021, the Taskforce published its final report containing 74 recommendations. As discussed in our comment letter on the Taskforce’s initial consultation, several recommendations represented much-needed updates (a number of which were initiatives the CSA had been pursuing for some time) to a securities regulatory framework that had not been formally reviewed since 2003. These included facilitating electronic delivery of documents and providing issuers with the flexibility to gauge interest from institutional accredited investors before formally commencing securities offerings. Other recommendations, such as expanding the OSC’s mandate to include fostering capital formation and competition in the markets, were quite controversial. In October 2021, the Ministry published the CMA for stakeholder consultation on the Taskforce’s recommendation. If enacted, the CMA would replace Ontario’s Securities Act . For the reasons discussed in our comment letter (including that the CMA would unduly increase regulatory burden for various stakeholders and generate significant market uncertainty), we have suggested that the Ministry instead amend Ontario’s existing securities legislation – as it has done many times before – to incorporate certain positive changes the CMA contemplates.
KEY TAKEAWAYS
– Further burden-reducing measures are en route. Several of the Taskforce’s
recommendations are geared toward making life easier for issuers. These include allowing issuers to consolidate their financial statements, management’s discussion and analysis (MD&A) and annual information form into a single document, to report semi-annually rather than quarterly and to raise smaller amounts of capital without a prospectus, all of which the CSA is actively considering. Given the regulatory focus on burden-reducing initiatives in recent years, other similar changes are likely coming soon. – Issuers may get to know who their beneficial shareholders are. The Taskforce has proposed eliminating non-objecting beneficial owner and objecting beneficial owner statuses, which would allow issuers to access a complete list of their securityholders and do away with the anonymity that objecting beneficial owner status currently provides. If adopted, this could have profound implications for issuers’ shareholder engagement strategies in the future. – New, but not necessarily improved. Market participants continue to await the Ministry’s next steps with respect to the CMA. If it is ultimately enacted, stakeholders should brace for a fairly lengthy, uncertain and costly transition period during which they will be forced to navigate a host of new and modified regulatory requirements.
10
Davies | dwpv.com
Powered by FlippingBook