CSA proposes WKSI model

As part of an ongoing effort to curb needless regulatory costs and to encourage capital formation, the Canadian Securities Administrators (CSA) are proposing rule changes that would allow large well-known companies to raise capital without regulators first signing off.

The CSA is proposing to introduce a prospectus regime for so-called well-known seasoned issuers (WKSIs), which would allow mature companies that meet certain conditions to issue securities without undergoing regulatory reviews.

The proposal follows consultations on curbing regulatory burdens, and recommendations from Ontario’s Capital Markets Modernization Taskforce, which resulted in the regulators adopting temporary measures in late 2021 to reduce needless offering costs for WKSIs.

The CSA’s proposal builds on those temporary exemptions but includes some fundamental changes, such as increasing the required seasoning period (to three years from one) and doing away with the need for a prospectus receipt.

In a notice outlining the proposal, the CSA said prospectus reviews are costly. And, while these costs are “necessary and proportionate to the regulatory objectives” for newer issuers, these costs typically aren’t justified for mature well-established companies.

“In our experience, the review of base shelf prospectuses filed by WKSIs are unlikely to identify substantive deficiencies that require regulatory intervention,” it said.

As a result, the regulators are proposing rule changes that “aim to reduce unnecessary regulatory burden for issuers that are well-known reporting issuers, have a strong market following, complete public disclosure record and sufficient public equity.”

By giving these companies greater flexibility and regulatory certainty, they would be able to raise capital more easily, while cross-border offerings would also be facilitated, the CSA noted.

“The proposed introduction of an expedited shelf prospectus regime will make it more efficient for well-known issuers to raise capital,” said Stan Magidson, CSA chair, and chair and CEO of the Alberta Securities Commission, in a release.

“This will reduce the regulatory burden for these particular issuers with a strong market following and a complete continuous disclosure record that meets specific conditions,” he said.

The proposal is out for a 90-day comment period to Dec. 20.

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.