Beginning in 2022, Well-Known Senior Issuers (WKSIs) will be exempt from certain base shelf prospectus filing requirements, including the requirement to file a preliminary base shelf prospectus, in accordance with virtually harmonized local general ordinances adopted by the Canadian Securities Administrators (CSA).
- WKSIs that meet the conditions of the exemption will no longer be required to file a preliminary base shelf prospectus. A final short form base shelf prospectus will be the first public step in an offering.
- An exemption is provided from certain disclosure requirements relating to a final base shelf prospectus, including the requirement to limit distributions under the base shelf prospectus to the dollar value that it is reasonably expected to be made in the future. every 25 months.
- The accelerated procedures will allow the receipt to be issued on the same working day, if it is filed before noon, and if it is filed after noon, before noon of the following working day.
- The exemptions come into effect on January 4, 2022 by local general ordinances passed in every province and territory of Canada.
Well-known seasoned issuers
Issuers that meet the WKSI requirements and certain other conditions will be able to take advantage of new temporary exemptions from certain of the requirements of the base prospectus (the WKSI exemption). The WKSI exemption defines a âwell-known seasoned issuerâ or âWKSIâ as an issuer that has any of the following:
- outstanding listed equity securities that have a public free float of C $ 500,000,000 (generally calculated as the total market value of the securities held by persons who are not affiliated parties of the issuer); Where
- at least C $ 1,000,000,000 of non-convertible securities, other than equity securities, distributed under a prospectus in primary cash offers, and not in exchange, within the past three years.
To take advantage of the WKSI exemption, issuers will need to qualify as a WKSI from a date within 60 days preceding the filing of the base shelf prospectus and must also meet the following criteria:
- be a reporting issuer in at least one jurisdiction in Canada for 12 months;
- to be eligible to file a simplified prospectus under National Instrument 44-101 Distributions by simplified prospectus (Regulation 44-101);
- have met the requirements to be qualified to file a simplified prospectus (i.e. having filed a notice of intention to qualify);
- not being a “ineligible transmitterâ(Which would generally include issuers who fail to meet their continuous disclosure obligations, have ceased their activities, have gone bankrupt or are subject to a cease trade order);
- not being a investment funds and not having outstanding asset-backed securities; and
- pay it fee required of a preliminary simplified prospectus and submits the personal information forms required under section 4.1 of Regulation 44-101.
If the issuer has mining operations, its most recent audited financial statements disclose gross revenues from mining operations of at least:
- CA $ 55,000,000 for the last completed financial year of the issuer; and
- Cdn $ 165,000,000 in total for the last three fiscal years of the issuer.
The issuer must also file all technical reports that should be filed with a preliminary short form prospectus under NI 43-101. Disclosure standard for mining projects.
In accordance with the WKSI exemption, the base shelf prospectus must comply with the requirements of National Instrument 41-101. General prospectus requirements, Regulation 44-101 and Regulation 44-102 Distributions on shelves. It may not qualify the distribution of any asset backed security and should include basic distribution information as well as the required cover page language.
Instead of a preliminary base shelf prospectus, an issuer must file a letter that, among other things:
- is dated the date of the base shelf prospectus and is signed by a member of senior management or a director;
- states, as the case may be, the free float of listed equity securities in circulation or the total amount of non-convertible securities, other than equity securities, that the issuer has distributed under a prospectus during the last three years which meet the definition of WKSI and the date of this determination;
- specifies the eligibility criteria on which the issuer relies to meet the eligibility requirements for filing a simplified prospectus;
- if the issuer is engaged in mining, describe how it meets the criteria listed above; and
- declares that the issuer is based on the blanket order and certifies the satisfaction of the eligibility conditions.
Subject to the issuer meeting the above conditions, WKSI will be exempt from the following base shelf prospectus requirements:
- drop off and get a receipt for a preliminary prospectus in connection with the filing of a base shelf prospectus;
- at limit distributions under the dollar value base shelf prospectus that the issuer reasonably expects to distribute within 25 months from the date of receipt;
- to state the total dollar amount transferable securities that may be exercised under the base shelf prospectus;
- to include a distribution plan in the base shelf prospectus, except to indicate that the investment plan will be described in the supplement for any investment;
- at describe titles being distributed, except as necessary to identify the types of securities eligible for distribution under the base shelf prospectus; and
- at describe any seller of securities in the base shelf prospectus.
The accelerated procedures will allow the receipt to be issued on the same working day, if it is filed before noon, and if it is filed after noon, before noon of the following working day.
Benefits of the WKSI exemption
Approximately 550 issuers currently listed on the Toronto Stock Exchange or TSX Venture Exchange have a market capitalization greater than or equal to $ 500 million. While the definition of âfree floatâ (see above) and market capitalization are not fully aligned, it would appear that a significant number of Canadian reporting issuers will be able to take advantage of the WKSI exemption with significantly reduced regulatory burden.
In light of the strength of the public markets in recent years, we have seen a number of large cap issuers amend or re-file base shelf prospectuses in order to increase the overall value of qualifying securities. The WKSI exemptions will not only reduce the initial regulatory burden on WKSIs, but by relieving WKSIs of the requirement to disclose an aggregate dollar amount in the base shelf prospectus, the WKSI exemptions will eliminate the need for such issuers to modify or modify resubmit a prospectus within the initial 25 month base storage period to provide additional supply capacity.
The WKSI exemption will also streamline public offerings for dual-listed issuers (and issuers considering becoming dual-listed). The WKSI exemption better aligns the Canadian shelf prospectus system with the US pre-registration system offered to US WKSIs. This is particularly useful for dual-listed issuers who typically require a Canadian base shelf prospectus to take full advantage of the Multi-Jurisdictional Information System (MJDS). It is important to note, however, that unlike the US WKSI pre-registration statement on Form F-3 which is automatically effective upon filing, a Canadian base shelf prospectus will always require a receipt from regulatory authorities. Thus, in order to better coordinate the timing of filings in Canada and the United States, issuers may wish to make arrangements with regulators to have the Canadian base shelf prospectus visa withheld until market close.
Finally, an accelerated filing time for a base shelf prospectus without the need to file a preliminary base shelf prospectus can help mitigate any potential overrun risk for WKSIs considering filing a base shelf prospectus.
The WKSI exemption is the result of comments received by the CSA regarding its consultation paper 51-404 Considerations for reducing the regulatory burden on reporting issuers other than investment funds, previously discussed here. The CSA had received complaints that certain prospectus requirements in the basic display context create unnecessary regulatory burden for large, established reporting issuers that have strong market monitoring and up-to-date disclosure records. In Ontario, similar comments were made by the Task Force on Modernizing Capital Markets (Task Force), whose January 2021 final report included a recommendation that the Ontario Securities Commission develop a template. WKSI in Ontario to streamline the prospectus process for certain qualifying issuers. For more information on the working group consultation process, please click here. In drafting the exemptions, the CSA also studied the US WKSI regime (which has been in use for several years) and conducted targeted consultations with market participants.
The implementation of the WKSI exemption through interim orders in effect until July 4, 2023 will allow the CSA to make the WKSI exemption available on a trial basis to determine how best to adopt these procedures. through future rule changes. Blanket orders will provide an opportunity to assess the adequacy of the eligibility criteria and identify any potential public interest concerns or operational considerations that should be addressed in future rule changes.
The CSA question whether future rule changes to implement a Canadian WKSI regime would be appropriate. Any changes to implement permanent arrangements for WKSIs will be adopted by the CSA through the normal rulemaking procedures on a coordinated basis.
For more information, please see the following local blanket orders: