CSA 94/01 - An Electronic System for Securities Filings [CSA Notice - Rescinded]
| Published Date: | 1994-06-17 |
|---|---|
| Effective Date: | 1994-06-15 |
In the Spring of 1990, the Canadian Securities Administrators ("CSA") began developing an electronic filing system for all required securities filings. The system, called SEDAR (System for Electronic Document Analysis and Retrieval/Système électronique de document d'analyse et de recherche), is scheduled for implementation during 1995. It will ultimately permit electronic filing of required public securities filings and create a remotely accessible electronic database of all publicly available information regarding those issuers using the system. It will also provide the means to electronically link all participants in the securities markets in the country.
CSA decided to pursue electronic filing for a number of reasons. Currently, most securities filings are prepared on computers and printed on paper. Copies are made and sent, usually by courier, to multiple jurisdictions and stock exchanges, each of which must maintain bulky paper records. The paper records are difficult for both regulators and market participants to search. Electronic filing will permit a single electronically filed package to satisfy the filing requirements of all 12 CSA jurisdictions and, it is expected, some or all of the Canadian stock exchanges. The maintenance of securities filings in electronic form will permit much faster and better access by more market participants to more information.
The use of technology will also facilitate regulatory harmonization at an international level. The Securities and Exchange Commission of the United States (the "SEC") is implementing the Electronic Data Gathering and Retrieval system ("EDGAR"). This system mandates electronic filing for the vast majority of U.S. issuers. The North American Securities Administrators Association is developing the Securities Registration Depository to link to EDGAR and facilitate state filings. The Multijurisdictional Disclosure System has been in place for over two years. Securities markets in North America have become increasingly interdependent. CSA has concluded that an electronic system for regulatory filings is needed to improve the efficiency and ensure the continued competitiveness of the Canadian markets.
This notice is being published to provide the securities community with the opportunity to comment on SEDAR. The notice includes preliminary information with respect to systems requirements, certain legal and procedural issues and implementation. The introduction of SEDAR will change the manner in which filings are made with securities commissions in Canada. CSA appreciates the time that commenters have given and will give to this project.
Systems Requirements
SEDAR has been developed with significant input from the securities filing community. Care has been taken to ensure that the final system will be easy to use and accommodate systems in use by the majority of filers.
SEDAR is a network with electronic mail capability and a database. IBM Canada Ltd. ("IBM") will develop and initially manage both. Filings will be sent by the filer electronically to the SEDAR main computer via the IBM Information Network. Required filing fees will also be remitted electronically. Those securities commissions or exchanges designated by the filer to receive the submission will receive an electronic message that the submission has been made. If a securities commission or exchange wishes to review the submission, it will download the submission to its local computer facility. Through use of the system, the filer will be able to monitor the status of the filing. Interaction between the regulator and the filer (e.g., the issuance of prospectus comment letters and responses to them, and the issuance of receipts) will be accommodated through the system.
The network will be "distance insensitive". Whether a filing is made with a securities commission 100 or 1000 miles away will be irrelevant; the system access charges will remain the same. System access charges (those charges paid to IBM to file the material electronically) are being developed in consultation with the filing community and CSA, with a view to ensuring that on a system wide basis the cost of using SEDAR will be less than the costs that are being displaced by SEDAR. In other words, in most cases, use of the system should cost less than the copying, courier, mailing and other costs that will be eliminated in an electronic environment.
For example, on a national prospectus filing, filers must prepare at least one and sometimes multiple copies of all material for filing in 12 jurisdictions. The packages must be physically assembled and placed into courier packages. It then takes 24 to 48 hours to have those packages couriered to each of the jurisdictions. With SEDAR, one electronic package will be prepared and electronically delivered immediately to all 12 jurisdictions.
CSA has chosen to develop SEDAR with certain systems requirements. These requirements were set following informal surveys of the filing community. CSA recognizes that some filers may not have systems able to meet all of the system requirements. However, the cost of making the required acquisitions is minimal compared to the ongoing costs that would have been incurred with a more generic model.
CSA wanted to avoid the complexity and cost of a generic model and chose to simplify the structure through the use of readily available software packages. In order to access SEDAR using a standard application developed by IBM, filers will need an IBM compatible computer with the following software:
1. Windows 3.1
Of utmost importance to CSA was "ease of use". CSA made it clear to the developers that, while third parties might want to involve themselves in the filing process, generally speaking, the system should be capable of being used by anyone with general computer skills. This necessitated the use of an "intuitive" operating system and the surveys indicated that Microsoft Windows was the most commonly used program of this type within the filing community.
2. WordPerfect 5.1 or 5.2
Only documents submitted in IBM compatible WordPerfect 5.1 or 5.2 will be accepted by SEDAR. Informal surveys have indicated that WordPerfect is in wide use in the legal and accounting community. Acceptance of more than one wordprocessing format would have caused considerable concern with respect to the integrity of the SEDAR database. The ready availability of translation software will allow filers or third parties to convert documents prepared using word processing software other than IBM compatible WordPerfect 5.1 or 5.2.
Legal and Procedural Issues
Signatures
The signing of documents filed electronically is a key issue that must be resolved to permit SEDAR to operate efficiently.
Courts in England and Canada have held that the primary purpose of requiring a signature manually or otherwise is to authenticate the document by ensuring that the person signing has given personal attention to the document and assumed responsibility for its contents. The rules adopted by the SEC in connection with EDGAR provide that the electronic entry of a typed name satisfies the signature requirement for all documents filed through EDGAR. According to SEC publications, commenters who addressed the issue of signatures in the United States strongly supported the view that filers should be able to satisfy signature requirements by reproducing the signatory's name in typed form. The following are the rules contained in Regulation S-T, the general regulation for filing under EDGAR.
Reg. 232.302.
(a) Signatures to or within any electronic submission shall be in typed form rather than manual format. When used in connection with an electronic filing, the term "signature" means an electronic entry in the form of a magnetic impulse or other form of computer data compilation of any letter or series of letters comprising a name, executed, adopted or authorized as a signature.
(b) A manually signed signature page or other document authenticating, acknowledging or otherwise adopting the signatures that appear in typed form within an electronic filing shall be executed before or at the time the electronic filing is made and shall be retained by the filer for a period of five years. Upon request, an electronic filer shall furnish to the Commission or its staff a copy of any or all documents retained pursuant to this section.
CSA is considering a similar approach with respect to electronic signatures. However, in place of the EDGAR requirements for retention of signature pages found in Reg. 232.302(b), CSA will require that one manually signed document entitled "Certificate of Authority to File" be submitted within a prescribed period of time following the electronic submission. This Certificate will be signed by all persons who would otherwise have been required to sign the paper filing.
Acceptance of Graphic and Other Material
Certain material required to be filed with a securities commission does not lend itself, at present, to easy and inexpensive electronic transmission and storage.
This material falls generally into three categories:
1. graphic material incorporated directly into filings (e.g., photographs, maps, graphs, etc.);
2. material prepared in a non-electronic environment that is required to be filed in support of a filing (e.g., old trust deeds, contracts prepared by third parties, etc.); and
3. material prepared in an electronic environment by third parties (e.g., consent letters, financial statements).
Here again, CSA is proposing to borrow from the procedures put in place by the SEC for EDGAR. With respect to material falling into the first category, there will be a requirement that the electronic submission contain an accurate and complete textual description of the graphic material that would otherwise be included. The hard copy of the material that is included in the commercial copies of the submission will be incorporated by reference into the electronic copy. The filer will be required to forward, on request, any of this graphic material to any securities commission that requests it.
Material falling into the second category will be reproduced electronically in a WordPerfect file by the filer and filed together with certification in electronic form that the electronically filed material accurately reflects the content of the original material maintained by the filer.
Material included in the third category will generally be required to be filed electronically by the filer following conversion by the filer or the third party into IBM compatible WordPerfect format.
Mandating
The SEC is mandating electronic filings through EDGAR. A number of representatives of the Canadian filing community have submitted that CSA consider mandating SEDAR.
There are some practical reasons to consider mandating of electronic filings once CSA is satisfied with the viability of the system. Requiring use of SEDAR should permit each of the jurisdictions and all filers to reduce costs in a number of areas. Mandating would also create a complete electronic record with respect to all issuers. CSA invites particular comment on this issue.
Conclusion
SEDAR is scheduled for implementation during 1995. Testing of the system by all types of issuers is expected to be conducted during 1994 and early 1995.
The introduction of SEDAR is a major step by CSA toward making compliance with Canadian securities regulatory requirements easier and more efficient. Implementation will require the cooperation and assistance of all participants in the securities markets. While the filing community has already played a significant role in the development of SEDAR, CSA encourages market participants to provide further comment.
Comment letters submitted in response to this notice will be placed in the public file in certain jurisdictions and form part of the public record unless confidentiality is requested. Comment letters will be circulated among the securities regulatory authorities for purposes of preparing draft procedures for SEDAR whether or not confidentiality is requested. Accordingly, although comment letters for which confidentiality is requested will not be placed in the public file, freedom of information legislation may require the securities regulatory authorities in certain jurisdictions to make the comment letters available. Persons submitting comment letters should be aware that the press and members of the public may be able to obtain access to any comment letter.
Comments should be in writing only and should be delivered to the attention of CSA. Comments should be submitted on or before August 15, 1994. All comment letters should be delivered to the following address:
Canadian Securities Administrators
SEDAR Working Committee
c/o Secretary
British Columbia Securities Commission
1100 - 865 Hornby Street
Vancouver, B.C.
V6Z 2H4
Questions may be referred to :
Wade D. Nesmith
Lang Michener Lawrence & Shaw
Barristers and Solicitors
(604) 691-7415
Mark DesLauriers
Osler, Hoskin & Harcourt
Barristers and Solicitors
(416) 862-5914
Karen Eby
Ontario Securities Commission
(416) 593-8242
Pascale Mercier
Lavery, de Billy
Barristers and Solicitors
(514) 871-1522
Richard Proulx
Commission des valeurs mobilières du Québec
(514) 873-5326
June 15, 1994