The Ontario Securities Commission (OSC) has issued new best practice guidance for issuers looking to confidentially pre-file a prospectus and reminds issuers of timing considerations.  

  • The OSC will triage all prospectus filings and will prioritize the most time-sensitive filings, such as bought deal prospectuses, which may result in a confidential review taking more than 10 working days.
  • Prospectuses being confidentially pre-filed should include all disclosure (including financial disclosure) that would be included in the publicly filed prospectus.
  • If the issuer has any legal or accounting questions for the OSC, they should be highlighted in the prospectus.
  • Issuers should provide the OSC with a deal timeline in the cover letter to the confidential filing.
  • The OSC will generally not review pre-filed non-offering prospectuses or prospectuses that only qualify the issuance of securities on conversion of convertible securities.

Timing of Reviews

As we had previously discussed, in March 2020 the Canadian Securities Administrators (CSA) published CSA Staff Notice 43-310 Confidential Pre-File Review of Prospectuses (for non-investment fund issuers) (Staff Notice) which set out a harmonized process for the full review of prospectuses on a confidential pre-file basis. Pursuant to the Staff Notice, issuers seeking to confidentially pre-file a prospectus can file their prospectus with their principal regulator once the prospectus is substantially in the form of preliminary prospectus the issuer would have otherwise publicly filed.

The Staff Notice indicates that the CSA will use best efforts to provide initial comments within 10 working days of the pre-filing. The Staff Notice further provides that the CSA will prioritize the review of publicly filed prospectuses and therefore may not be able to meet the 10-working day timeline, particularly when a pre-filing is complex or involves novel and substantial issues, raises a novel policy concern or contains incomplete disclosure.

The OSC's new guidance indicates that, as a result of a 54% increase in prospectus volume between October and December 2020 (as compared to the same quarter in 2019), the OSC will triage all filings and prioritize filings that are time sensitive and most urgent, such as bought deal and overnight marketed offering prospectuses. Specifically, the OSC has indicated that a base shelf prospectus with no imminent drawdown would not be considered urgent or time sensitive. Where the OSC has determined that the review timeline will be extended, the OSC will promptly notify the issuer and their counsel.

Given the potential for an extended review period, issuers should give due consideration to the overall timeline of their proposed offerings as using the confidential pre-filing process outlined in the Staff Notice may result in a delayed offering.    

Best Practices

Since the publication of the Staff Notice, the OSC has provided input to 40 issuers who have confidentially pre-filed prospectuses. Based on its experience with the pre-file process, the OSC has issued the following best practice guidance:

  • When pre-filing a prospectus, issuers should make sure that the prospectus contains all financial and non-financial disclosure that would be included in the public prospectus filing. Where disclosure is missing, the timeline of the OSC's review may be extended.
  • The cover letter that the issuer filed with its pre-filed prospectus should include a deal timeline to provide the OSC with a better understanding of when the review should ideally be completed. It is the OSC's expectation that the issuer will file the preliminary prospectus shortly after the pre-filed prospectus has been reviewed.
  • The issuer should highlight any legal or accounting questions that require OSC input.

While the confidential pre-filing process can be used by any non-investment fund issuer, the Staff Notice and the OSC have indicated that non-offering prospectuses will not be reviewed on a pre-file basis unless the non-offering prospectus is being filed in connection with a cross-border financing or where there is a specific legal or accounting matter that requires OSC input. Additionally, prospectuses filed solely to qualify the issuance of securities on conversion of convertible securities will not be able to use the pre-filing process.

Originally Published by Stikeman Elliott, January 2021

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