CSA propose expanding passport system

April 17, 2015

The Canadian Securities Administrators yesterday released proposed amendments to the passport system of securities regulation that would expand the regime to cover applications to cease to be a reporting issuer and failure-to-file case trade orders. While the OSC is not a passport regulator, under the proposal, it will continue to coordinate with the passport systems and all passport regulators, as is currently the case.

Under the passport system, the process for registration, prospectus reviews and exemptive relief applications are generally harmonized across Canada, with issuers being able to access markets while dealing only with their principal regulator. Currently, applications to cease to be a reporting issuer are filed and reviewed by each applicable securities regulator in a coordinated review procedure set out in National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions. Pursuant to the proposed amendments to MI 11-102 Passport System and new proposed national policies announced today, applications to cease to be a reporting issuer would no longer need to be filed with and reviewed by each provincial or territorial regulator. Instead, an issuer can engage with its principal regulator to obtain an order to cease to be a reporting issuer. In addition, no coordinated process currently exists for when regulators will reciprocate a cease-trade order issued against a reporting issuer for being in default of certain continuous disclosure obligations. Under the proposed amendments, an initial cease trade order granted because of a failure to comply with continuous disclosure obligations would be coordinated across participating passport jurisdictions.

In addition to the foregoing amendments, the Canadian Securities Administrators, including the Ontario Securities Commission, published two new proposed National Policies: NP 11-206 Process for Cease to be a Reporting Issuer Applications and NP 11-207 Failure-to-File Cease Trade Orders and Revocations under Passport. The CSA, including the OSC is also proposing to replace NP 12-202 Revocation of a Compliance-Related Cease Trade Order with NP 12-202 Revocations of Non-Passport Cease Trade Orders and NP 12-203 Cease Trade Orders for Continuous Disclosure Defaults with NP 12-203 Management Cease Trade Orders.

Stakeholders comments are being accepted by the CSA for 60 days.

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