The Ontario Securities Commission (the Commission) recently announced that it will be implementing a new rule that will make electronic filing mandatory for a number of regulatory documents that are currently filed with the Commission in paper format, including Form 45-106F1 Report of Exempt Distribution and Form 31-103F1 Calculation of Excess Working Capital.
OSC Rule 11-501 Electronic Delivery of Documents to the Ontario Securities Commission (the Rule) [available here] comes into force on February 19, 2014 and will apply to regulatory documents required to be filed with or delivered to the Commission after that date, subject to certain carve outs as described below. This approach raises obvious challenges, chief among them the potential for increased burdens for market participants in Ontario, particularly considering that other provincial regulators, such as the British Columbia have their own electronic systems for certain documents and others may follow. We commented on the proposed rule in July 2013 and urged the Commission to work with its fellow securities regulators to adopt a harmonized platform for electronic filing. While the Commission acknowledged that the transition from existing paper filing processes to electronic filing may result in additional burden for some market participants, it explained that such impact is proportionate to the benefits it seeks, including streaming the filing process for market participants in the long-term. The Commission also noted in response to our comments that it will work closely with the other provincial and territorial regulators to develop harmonized web-based forms as part of a Canadian Securities Administrator's (CSA) initiative to replace the core CSA national electronic filing systems.
Currently, market participants in Ontario – issuers of securities, mutual funds and registrants – are faced with a variety of methods when filing or delivering documents to the Commission. Certain documents are to be filed electronically through the System for Electronic Document Analysis and Retrieval (SEDAR), the System for Electronic Disclosure by Insiders (SEDI) or the National Registration Database (NRD), while others are to be filed or delivered to the Commission in paper format (typically as a PDF email attachment or by courier).
The Rule will require a variety of documents that are currently filed in paper format to be filed electronically, in accordance with instructions found on the Commission's website at https://www.osc.gov.on.ca/filings. While this web-page is currently under construction, the Commission expects that it will be ready and available for use on a voluntary basis by January 10, 2014. Filing and delivery will, for many documents, be accomplished by the entry of data into required fields on online web-based forms. An example of such a form is the electronic Form 45-106F1 Report of Exempt Distribution that is currently available for use on a voluntary basis [available here]
Documents covered by the Rule include:
- Form 13-502F4 Capital Markets Participation Fee Calculation
- Form 21-101F3 Quarterly Report of Marketplace Activities
- Form 24-101F1 Registered Firm Exception Report of DAP/RAP Trade Reporting and Matching
- Form 31-103F1 Calculation of Excess Working Capital
- Form 45-106F1 Report of Exempt Distribution (Form 45-106F1);
- Notices pursuant to sections 11.9 and 11.10 of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations, and
- Applications for exemptive relief or regulatory approval (other than those filed through SEDAR and NRD).
The Rule will not apply to documents already filed electronically through SEDAR, SEDI or NRD, documents submitted under the Commission Rules of Procedure, or documents submitted in connection with enforcement investigations, compliance reviews or continuous disclosure reviews.
The Commission's adoption of the Rule is, in many ways, one step forward but two steps back. While the Commission's approach of moving towards the electronic filing and delivery of documents is positive, the lack of coordination with other CSA members is troubling. As we noted in our comment letter, the use of online web-based forms that only apply in Ontario is of particular concern. Such a requirement could increase the burden on market participants by requiring them to complete multiple versions of the same form for different Canadian jurisdictions. For example, the time to file reports of exempt distribution on Form 45-106F1 would be greatly magnified if filers were required to use different online systems, and potentially provide different information, in different Canadian jurisdictions.
The Commission has responded to such concerns by adding the ability to save the "in progress" electronic Form 45-106F1. The electronic Form 45-106F1 has also been modified so that it can be printed in a format substantially similar to its paper version counterpart. The Commission has also initiated discussions with the other CSA jurisdictions (except British Columbia, which generally requires its own report of exempt distribution) to determine whether they will accept a print-out of the completed electronic Form 45-106F1 to be filed in lieu of the paper form. The Commission expects to provide further guidance before the date electronic filing becomes mandatory.
Although the Commission has stated it will work closely with the CSA to develop harmonized web-based forms as part of CSA's larger initiative to replace the CSA's national filing systems, the adoption of the Rule appears to be continuing the trend of different regulators taking different approaches to the collection of information. It will be particularly unfortunate if the Commission uses the new electronic filing system to require additional Ontario-only disclosure over time. Given the Commission's explanation that the Rule will enhance the Commission's ability to collect, use and organize the information provided in the various regulatory documents, we consider this is an issue that must be watched carefully.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
