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Securities Law

NIN 98/30 - Proposed National Policy 43-201 Mutual Reliance Review System for Prospectuses and Initial AIFs [NIN - Rescinded]

Published Date: 1998-06-19
Effective Date: 1998-06-18
The British Columbia Securities Commission, together with other members of the Canadian Securities Administrators (the "CSA"), is publishing for comment the text of proposed National Policy 43-201. The proposed National Policy will replace National Policy Statement No. 1: Clearance of National Issues ("NP1"). It is anticipated that NP1 will be repealed once the proposed National Policy comes into force. The proposed National Policy also replaces those sections in proposed National Instrument 44-101 and Companion Policy 44-101CP that deal with the procedures for filing and review of short form prospectuses and initial AIFs.

Substance and Purpose of the Proposed National Policy

The proposed National Policy establishes a mutual reliance review system for prospectuses (including mutual fund prospectuses), prospectus amendments, waiver applications, pre-filing discussions and initial AIFs for issuers eligible to participate in the prompt offering qualification system. The proposed National Policy is derived in part from the Expedited Review System for Short Form Prospectuses and Renewal AIFs implemented by each Canadian securities regulatory authority by memorandum of understanding ("Expedited Review MOU").

The Mutual Reliance Review System (the "MRRS") is an understanding between the Canadian securities regulatory authorities on the principles of mutual reliance and is being implemented by way of a memorandum of understanding (the "MOU"). The draft MOU is also being published for comment (See NIN#98/29).

Since the procedures in the proposed National Policy apply to the filing and review of short form prospectuses, the Expedited Review MOU will be replaced by the proposed National Policy. The Expedited Review MOU also includes procedures for the review of renewal AIFs. The Canadian securities regulatory authorities have concluded that renewal AIFs are considered to be continuous disclosure documents and should therefore be included in a future MRRS instrument dealing with continuous disclosure documents. Consequently, Expedited Review will no longer be available for renewal AIFs.

The CSA has authorized the use of the system on a test basis and will, in the near future, solicit volunteers to participate in the testing phase.

Summary of Proposed National Policy

The following is a brief summary of the MRRS principles as they apply to the filing and review of prospectuses (including mutual fund prospectuses), prospectus amendments, waiver applications, pre-filing discussions and initial AIFs for issuers eligible to participate in the prompt offering qualification system.

  • The principal regulator of a filer is the regulator in the jurisdiction in which the head office of the filer is located. If the head office is located in a jurisdiction in which the regulator is not willing to act as principal regulator (or if the filer has a head office outside Canada), the filer can select its principal regulator provided the filer has reasonable connections with the jurisdiction in which the regulator is located. For mutual funds, the principal regulator is the regulator in the jurisdiction in which the manager’s head office is located. If that regulator has not agreed to act as principal regulator (or if the mutual fund manager has its head office outside Canada), the filer can select its principal regulator provided the filer has reasonable connections with the jurisdiction in which the regulator is located. A non-principal regulator will decline to act as principal regulator if it has been incorrectly identified by the filer as the principal regulator.
The proposed National Policy does not provide for a list of filers and their principal regulators similar to the one in Schedule A to the Expedited Review MOU. For those filers who have requested and were granted a change of principal regulator under the Expedited Review MOU, the principal regulator will be the regulator assigned to that filer following the application for change. For those filers whose head office is located in a jurisdiction in which the regulator is not willing to act as principal regulator, the filer may continue to use the principal regulator attributed to the filer under the Expedited Review MOU. Filers should note in their cover letter if they have requested a change under the Expedited Review MOU.
  • The principal regulator is responsible for reviewing the filer’s materials; therefore, even if the filer does not propose to offer securities by way of prospectus in the jurisdiction of the principal regulator, the materials should also be filed with the principal regulator and the materials will be reviewed by the principal regulator.
The materials to be filed are as currently listed in the table of documents forming part of NP 1 with necessary changes arising out of the filing of documents through SEDAR and, in certain circumstances, changes to legislation and administrative practices. An appendix listing the materials to be filed will be published for comment in the near future.
  • The periods for the review by the principal regulator and the non-principal regulators are consistent with those in the Expedited Review MOU and in NPS 1 except where the review periods have been reduced because of selective review procedures.
  • A non-principal regulator is entitled to opt out of the MRRS for any particular filing by advising the filer, the principal regulator and the other non-principal regulators of its decision to opt out and its reasons for doing so. A non-principal regulator that has opted out of the MRRS will continue its review of the materials, deal directly with the filer, make a determination with respect to the filing and where appropriate, issue its own decision document. It can opt back into the MRRS at any time before a MRRS decision document is issued.
  • The MRRS will not be available if the principal regulator refuses to issue a receipt or a notice of acceptance for the AIF. A filer can pursue its right of appeal against all jurisdictions.
  • Waiver applications and pre-filing discussions
The proposed National Policy contains procedures that apply to applications for relief that are evidenced by the issue of the receipt ("waiver applications"). All other applications for relief will be filed under a separate applications policy.
The proposed National Policy provides for a consultative process where the principal regulator determines that a waiver application or pre-filing discussion involves a novel and substantive issue or raises a novel public policy issue. Where the principal regulator determines that waiver applications or pre-filing discussions are routine (as determined by the regulators), these will be dealt with by the principal regulator.
  • Prospectus amendments
For preliminary prospectus amendments, the principal regulator will issue a preliminary prospectus amendment MRRS decision document. The principal regulator will review the amendment and issue its comment letter within 5 working days (2 working days in the case of a short form prospectus) after issuance of the preliminary prospectus amendment MRRS decision document, if the prospectus comment letter has been issued, or within normal prospectus review period, if the prospectus comment letter has not been issued.
The non-principal regulators will advise of material concerns within the later of 3 working days (1 working day in the case of a short form prospectus) of receipt of the prospectus amendment or the expiry of the prospectus review period for the non-principal regulators.

For an amendment to a final prospectus, the review period is 5 working days for the principal regulator and 3 working days from the receipt of the prospectus amendment for the non-principal regulator (2 working days and 1 working day, respectively, in the case of a short form prospectus).

For the reasons set out below, a filer should include in the cover letter accompanying the amendment materials a statement that it waives its right to a decision within two days and that it undertakes to cease distributing securities in Québec until the prospectus amendment MRRS decision document is issued.

Anticipated Costs and Benefits

The proposed National Policy will reduce unnecessary duplication in the review of materials filed in multiple jurisdictions and is an important step towards increasing harmonization.

Specific Request for Comments

In addition to welcoming submissions on any provision in the proposed National Policy, the CSA seek comments on the specific matters referred to below.

Prospectus Amendments

1. Prospectus Amendments

The Securities Act (Québec) requires the Commission des valeurs mobilières du Québec to issue or to refuse to issue the receipt for an amendment to a final prospectus within 2 working days of the filing of the amendment. A 2-day review period, especially where an amendment presents complex issues, may not be sufficient to review and clear the amendment in a mutual reliance environment, given the communication procedures between the regulators. To address this issue, the policy currently states that the filer should include with its materials a waiver of its right to a decision within the 2-day period and an undertaking to cease distribution in Québec. Comments are specifically requested on this approach and any other alternative approaches.

2. Pre-filing Discussions and Waiver Applications

Comments are also specifically sought on the procedures for the review and determination of pre-filing discussions and waiver applications set out in Part 9 of the proposed National Policy.

Comments

Interested parties are invited to make written submissions with respect to the proposed National Policy. Submissions received by September 19, 1998 will be considered.

Submissions should be made to all of the Canadian Securities Administrators listed below in care of the Commission des valeurs mobilières du Québec in duplicate, as indicated below

British Columbia Securities Commission
Alberta Securities Commission
Saskatchewan Securities Commission
Manitoba Securities Commission
Ontario Securities Commission
Commission des valeurs mobilières du Québec
Nova Scotia Securities Commission

c/o Rosetta Gagliardi, Mutual Reliance Committee Chair
cc: Claude St Pierre, Secretary
Commission des valeurs mobilières du Québec
800 Square Victoria
Stock Exchange Tower
P.O. Box 246, 17th Floor
Montréal, Québec H4Z 1G3
Telephone: 514-873-5009 ext. 252
Fax: 514-864-6381
e-mail: rosetta.gagliardi@cvmq.gouv.qc.ca

A diskette containing the submission (in DOS or Windows format, preferably Word) should also be submitted to the Chair of the Committee.

Comment letters submitted in response to requests for comments are placed on the public file in certain jurisdictions and form part of the public record, unless confidentiality is requested. Comment letters will be circulated amongst the securities regulatory authorities, whether or not confidentiality is requested. Although comment letters requesting confidentiality will not be placed on the public file, freedom of information legislation in certain jurisdictions may require the securities regulatory authorities in those jurisdictions to make comment letters available. Persons submitting comment letters should therefore be aware that the press and members of the public may be able to obtain access to any comment letters.

Questions and/or requests to participate in the testing of the system may be referred to the Chair and/or any of the following members of the Committee:

Brenda Benham
British Columbia Securities Commission
899-6635
Or 1-800-373-6393 (in B.C.)

Wayne Redwick
British Columbia Securities Commission
(604) 899-6699
Or 1-800-373-6393 (in B.C.)

Glenda Campbell
Alberta Securities Commission
297-4230

Kenneth Parker
Alberta Securities Commission
(403) 297-3251

Ian McIntosh
Saskatchewan Securities Commission
(306) 787-5867

Bob Bouchard
Manitoba Securities Commission
(204) 945-2555

Rose Fergusson
Ontario Securities Commission
(416) 593-8116

Winfield Liu
Ontario Securities Commission
(416) 593-8250

Amy Macfarlane
Ontario Securities Commission
(416) 593-8135

Kathryn Soden
Ontario Securities Commission
(416) 593-8149

Bill Slattery
Nova Scotia Securities Commission
(902) 424-7768

DATED at Vancouver, British Columbia, on June 18, 1998.

Douglas M. Hyndman
Chair

REF: NIN#98/29
NP 1
NI 44-101
NI 44-101CP