Proposals aim to streamline regulatory requirements

A group of Canadian securities regulators are contemplating a new approach to regulating venture issuers in an effort to streamline regulation for this market.

Regulators in Alberta, British Columbia, Manitoba, New Brunswick, Nova Scotia and Saskatchewan, published a consultation paper Monday that seeks input on the current venture market regulatory regime could be reformed to reduce costs for issuers and enhance investor protection. It proposes alternative continuous disclosure and governance regimes for venture issuers.

Among the ideas the group proposes:

– eliminating the requirement for three- and nine-month interim financial statements and associated MD&A;

– introducing an annual report that provides streamlined and simplified disclosure of the venture issuer’s business, management, governance and executive compensation, replacing the current requirements for separate annual financial statements, MD&A, and CEO/CFO certifications;

– adding corporate governance requirements, such as addressing related party transactions and insider trading; and,

– eliminating business acquisition reports and enhancing material change reporting.

The paper indicates that the current regulatory regime is “largely one size fits all” and may not be sensitive enough to the needs of venture issuers. The current regime may impose a bigger compliance burden on venture firms, it suggests, and duplicative disclosure requirements add unnecessary costs. Moreover, it suggests that regulatory concerns in the venture market may not attract attention as readily as issues affecting senior issuers do, and that having separate rules for venture issuers ma make it easier for them to comply as they won’t have to wade through all of the reqirements that only apply to senior issuers.

Written comments on these proposals will be accepted until September 17. In addition, the participating regulators will be holding consultation sessions across Canada beginning in June to solicit feedback from venture market participants, to gauge interest in the proposals, and identify any regional differences.

The regulators report that the CSA jurisdictions who have not participated in developing the consultation proposals, including the Ontario Securities Commission and the Autorité des marchés financiers “are very supportive of the effort to widely consult with all affected market participants on these proposals, will continue to have an interest in the development of regulation tailored to venture issuers and intend to cooperate with CSA participating jurisdictions in the consultation process.”

“Canada has one of the most unique and successful public venture capital markets in the world,” says Bill Rice, chair of the Alberta Securities Commission. “These proposals aim to foster the continued success of this market by streamlining and tailoring regulatory requirements to the needs of both venture issuers and their investors.”

IE