In Canada, the prospectus review process generally begins on the filing by an issuer of its preliminary prospectus. A challenge that issuers sometimes face with this approach flows from the potential for issues to be raised in the course of a review by the securities regulators, particularly when the steps taken by the issuer to address these issues cause a delay in the timeline of the offering. During periods of market instability, any delay in the prospectus review process can have a significant, detrimental impact on an offering’s success.
Many issuers and their advisors have pushed for the availability of pre-file review to limit uncertainty surrounding prospectus offerings. In response, the Canadian Securities Administrators (“CSA”) introduced a harmonized process to review prospectuses on a confidential, pre-file basis, which is intended to address any issues prior to publicly filing the preliminary prospectus. The process is available to non-investment fund issuers across all CSA jurisdictions, except in connection with non-offering prospectuses (unless related to cross-border financings) or prospectuses filed solely to qualify the issuance of securities on conversion of convertible securities. The purpose of the process is to foster capital formation, as well as issuer flexibility and certainty regarding prospectus offerings.
The process may be applied to the pre-file of a long-form prospectus, a short-form prospectus and a base-shelf prospectus. The level of review conducted by the CSA for prospectus pre-files will be similar to that for a publicly-filed preliminary prospectus. That said, an issuer may choose to receive confidential pre-file comments only in respect of certain aspects of its prospectus, leaving the balance to be reviewed when publicly filed. Regardless of the extent to which the CSA reviews a pre-filed prospectus, the CSA may provide comments at the public-filing stage that pertain to any part of the prospectus.
The CSA has highlighted the following additional key guidelines:
- issuers who chose to engage the confidential pre-filing process should submit their prospectuses well in advance of filing of the public preliminary prospectus, as it may take 10 business days or more for comments to be turned by CSA staff;
- a pre-filed prospectus should be submitted only to the issuer’s applicable principal regulator. The principal regulator will in turn determine if the involvement of non-principal regulators may be warranted;
- the terms and conditions of the offering to which a pre-filed prospectus relates should be clearly determined, and the applicable underwriters need to have substantially completed their own review of the prospectus prior to pre-file; and
- all documents required to be publicly filed with the prospectus, as applicable, must be submitted with the pre-filed prospectus.
The CSA’s new pre-file process will be useful for issuers, especially to the extent that it will provide issuers with the flexibility to go to market with an offering when conditions are favourable; a far-reaching consideration in light of ongoing market uncertainty related to, among other things, the COVID-19 outbreak.