Securities Law & Instruments

PDF Version

PDF Version



NOTICE AND REQUEST FOR COMMENT

PROPOSED ONTARIO SECURITIES COMMISSION RULE 11-501
ELECTRONIC DELIVERY OF DOCUMENTS TO THE ONTARIO SECURITIES COMMISSION

AND

PROPOSED CONSEQUENTIAL POLICY AMENDMENTS



Introduction

The Ontario Securites Commission (the OSC, the Commission or we) are publishing for a 90 day comment period proposed OSC Rule 11-501 (the Proposed Rule), together with proposed consequential amendments to National Policies 11-202 Process for Prospectus Reviews in Multiple Jurisdictions, 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions and 11-205 Process for Designation of Credit Rating Agencies in Multiple Jurisdictions (the Proposed Policy Amendments).

Substance and Purpose of the Proposed Rule and the Proposed Policy Amendments

The Proposed Rule would make electronic filing mandatory for a number of documents that may be currently filed with the Commission in paper format. The documents generally include the forms, notices and other materials required under Ontario's securities rules that are not covered already by SEDAR, SEDI and NRD, the CSA national electronic filing systems.

Electronic filing is a convenience to filers and would allow for the efficient collection and use of information by the OSC. For example, each year we receive more than 6,000 Reports of Exempt Distribution and more than 1,800 submissions of Form 31-103F1. We anticipate that mandatory electronic filing would:

• streamline the submission process and regulatory burden for market participants in Ontario;

• improve our data analysis, compliance and enforcement capabilities by requiring more reports in a machine-readable format; and

• reduce the effort and time required to process and analyze the documents, allowing the Commission to focus resources on more substantive matters.

We believe that requiring electronic filing would result in greater efficiencies than if electronic filing were simply a permitted option.

The Proposed Policy Amendments are consequential to the Proposed Rule.

Summary of the Proposed Rule and the Proposed Policy Amendments

Subsection 1(1) of the Proposed Rule sets out the definitions of "form filer" and "required document". The former expression refers to a person or company required or permitted by Ontario securities law to file or deliver a "required document". "Required documents" are those documents, information and material described in Appendix A of the Proposed Rule, together with other information, notices, forms and filings that are required to be submitted to the Commission by market participants or exempted entities under Ontario securities law. The documents referenced in Appendix A include documents filed by foreign issuers that are not required to file documents on SEDAR in accordance with section 2.1 of National Instrument 13-101 System for Electronic Document Analysis and Retrieval.

Initially, it is anticipated that many of the required documents will continue to be filed in unstructured format, typically PDF. Our intention is to migrate many of these documents to online web-based forms and structured data. At the time the rule becomes effective, we expect the following forms to be available only as online web-based forms:

• 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 45-501F1 Report of Exempt Distribution

Transitional details will be considered further, taking into account comments received.

The reference in Appendix A to "Applications, as defined in National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions" would mean that any application for relief or approval would have to be filed in electronic form, even if the relevant section number of the statutory provision, national instrument, rule or policy was not listed in Appendix A, such as:

• an application for written approval of the Director under section 38(3) of the Securities Act

• an application for an order or ruling under sections 74, 80, 104, 121(2), and 147 of the Securities Act

• an application under section 144 of the Securities Act to vary or revoke an earlier decision granting exemptive relief

• an application for consent to an amendment of an escrow agreement under section 8.1 of National Policy 46-201 Escrow for Initial Public Offerings

• an Ontario-only application under OSC Policy 2.1 Applications to the Ontario Securities Commission

• an application for an exemption under section 13.1 of National Instrument 51-102 Continuous Disclosure Obligations or other similar sections of national instruments and rules.

Subsection 2(1) of the Proposed Rule provides the obligation for a person or company to file required documents by electronic means, in accordance with system instructions on the OSC website.

Subsection 2(2) clarifies that this obligation does not apply to documents already filed electronically through SEDAR, SEDI or NRD, documents submitted under the OSC Rules of Procedure, or documents submitted in connection with enforcement investigations, compliance reviews or continuous disclosure reviews.

Section 3 of the Proposed Rule applies in the event of unanticipated technical difficulties. It provides that, in the case of unanticipated technical difficulties, a required document may simply be filed by email (within 2 business days after the day on which the filing was required) in the manner described in section 3. The document must also be filed electronically in the manner contemplated in section 2, no more than 3 business days after the resolution of the unanticipated technical difficulty. Section 3 contemplates that, in these circumstances, the filing deadline is effectively extended to the date subsequently filed under section 2.

Section 4 allows the Director to grant an exemption from the provisions of the Proposed Rule.

The Proposed Policy Amendments, relevant only in Ontario, are consequential to the Proposed Rule. The Proposed Policy Amendments, which are set out in Annex C, make cross-references to the Proposed Rule and to the url address contemplated in the Proposed Rule.

Legislative Authority for Rule Making

The rulemaking authority for the mandatory electronic transmission of documents is provided under paragraph 39 of subsection 143(1) of the Securities Act. Paragraph 39 authorizes the Commission to make rules requiring or respecting the media, format, preparation, form content, execution, certification, dissemination and other use, filing and review of documents required under or governed by the Act, regulation or rules (and all documents determined by the regulations and rules to be ancillary to the documents).

Alternatives Considered

While providing for the voluntary electronic transmission of documents has been facilitated in the past (for example, Form 45-106F1), for reasons set out above we are of the view that providing for the mandatory electronic transmission of documents is appropriate. Making electronic transmission mandatory requires the exercise of rule-making authority.

Unpublished Material

The Commission did not rely on any unpublished study, report or other written materials in connection with the Proposed Materials.

Amendments Proposed under Subsection 143(3) of the Act

If the Proposed Rule goes forward, we propose to amend Ontario Regulation 1015 under subsection 143(3) of the Act. Specifically,

1. Subection 3(1.2) of Ontario Regulation 1015 would be repealed,

2. Section 4 of Ontario Regulation 1015 would be amended by replacing "shall be marked "Confidential" and placed in an envelope addressed to the Secretary marked "Confidential -- s. 75"" with "shall be designated as confidential and refer to section 75 of the Act",

3. The text underlined below would be added to the preamble of section 161 of Ontario Regulation 1015 as follows:

"161. Except as otherwise provided in the Act, section 11, 174 or 181 of this Regulation, Ontario Securities Commission Rule 11-501 Electronic Delivery of Documents to the Ontario Securities Commission, Ontario Securities Commission Rule 55-502 Facsimile Filing or Delivery of Section 109 Reports, National Instrument 55-102 System for Electronic Disclosure by Insiders (SEDI) or National Instrument 71-102 Continuous Disclosure and Other Exemptions Relating to Foreign Issuers, ..."

Impact on Investors

This initiative does not directly affect investors. However, the better use of information that we seek to achieve under the Proposed Rule will help us better fulfill our investor protection mandate. We also anticipate that these changes will facilitate our ability to provide access to public records not filed through the CSA National Systems.

Anticipated Costs and Benefits

We believe that the impact of this initiative on market participants is proportionate to the benefits we seek. This initiative will provide benefits by automating processes that were previously manual (such as manual data entry and validation checks), streamlining processes at the Commission. The OSC will incur system development costs in implementing electronic filing, which will be paid for from existing OSC sources of funds.

While some market participants will incur costs in transitioning from existing paper filing processes to electronic filing, we anticipate that, in the long run, this initiative will streamline filing processes for market participants, improve the quality of submissions and reduce the volume of physical correspondence between market participants and the OSC.

Request for Comments

We welcome your comments on the Proposed Materials.

Please submit your comments in writing on or before July 10, 2013. If you are not sending your comments by email, please send a CD containing the submissions (in Microsoft Word format) to:

The Secretary
Ontario Securities Commission
20 Queen Street West
19th Floor, Box 55
Toronto, Ontario M5H 3S8
Fax: 416-593-2318
comments@osc.gov.on.ca

We cannot keep submissions confidential because there is a statutory requirement for publication of a summary of the written comments received during the comment period.

Contents of Annexes

Annex A contains the text of the Proposed Rule.

Annex B contains additional operational considerations and standards that relate to electronic filing on the OSC website. These will be posted on the OSC website and may be updated from time to time.

Annex C contains the text of the Proposed Policy Amendments.

Questions

Please refer your questions to any of the following:

Alina Bazavan
Michael Denyszyn
Data Analyst
Litigator
Market Regulation
Compliance & Registrant Regulation
416-593-8082
416-595-8775
abazavan@osc.gov.on.ca
mdenyszyn@osc.gov.on.ca
 
Lisa Enright
Robert Galea
Manager
Legal Counsel
Corporate Finance
General Counsel's Office
416-593-3686
416-593-2321
lenright@osc.gov.on.ca
rgalea@osc.gov.on.ca
 
Darren McKall
Paul Redman
Manager
Principal Economist
Investment Funds Branch
Strategy & Operations
416-593-8118
416-593-2396
dmckall@osc.gov.on.ca
predman@osc.gov.on.ca

April 11, 2013

 

ANNEX A

THE PROPOSED RULE

Interpretation

1. (1) In this Rule

"form filer" means a person or company required or permitted by Ontario securities law to file a required document with the Ontario Securities Commission;

"NRD" has the meaning ascribed to it in National Instrument 31-102 National Registration Database;

"required document" means

(a) a document listed in Appendix A; or

(b) any other document required to be filed with the Ontario Securities Commission under Ontario securities law by

(i) a market participant, or

(ii) another person or company exempted from a requirement of Ontario securities law by reason of section 147 of the Act or an application otherwise provided for in Ontario securities law;

"SEDAR" has the meaning ascribed to it in National Instrument 13-101 System for Electronic Document Analysis and Retrieval (SEDAR);

"SEDI" has the meaning ascribed to it in National Instrument 55-102 System for Electronic Disclosure by Insiders (SEDI).

(2) In this Rule, unless the context otherwise requires, "document" includes "information", "material" and "notice" as those words are used in Ontario securities law.

(3) In this Rule, a reference to a document that is required or permitted to be filed includes a document that is required or permitted to be deposited or filed with, or delivered, furnished, sent, provided or submitted to, the Ontario Securities Commission under Ontario securities law.

(4) The transmission of a document in electronic format to the Ontario Securities Commission under section 2 of this Rule constitutes

(a) if the document is required or permitted to be filed under Ontario securities law, the filing of that document under Ontario securities law; and

(b) if the document is required or permitted to be delivered, furnished, provided or submitted to the Ontario Securities Commission under Ontario securities law, the delivery of that document.

Electronic filing

2. (1) Each required document of a person or company must be transmitted to the Ontario Securities Commission electronically by the person or company following the steps set out at https://www.osc.gov.on.ca/filings.

(2) Subsection 2(1) does not apply to any required document that is

(a) filed through SEDAR, SEDI or NRD;

(b) filed under the Ontario Securities Commission Rules of Procedure; or

(c) filed under Part VI or Part VII of the Securities Act.

Temporary technical difficulties exemption

3. (1) If unanticipated technical difficulties prevent the timely transmission of an electronic filing of a required document, the form filer may file the document by e-mail as soon as practical and in any event no later than 2 business days after the day on which the filing was required.

(2) A filing under subsection (1) must include the following legend at the top of the first page:

THIS REPORT IS BEING FILED UNDER A TEMPORARY TECHNICAL DIFFICULTIES EXEMPTION

(3) In addition to filing under subsection (1), a copy of each completed required document of a form filer must be filed under section 2 as soon as practical after the unanticipated technical difficulty has been resolved and in any event no later than 3 business days after the filing has been made by email.

(4) If a document is filed as required under this section, the date by which the document is required to be filed under Ontario securities law is deemed to be the date on which the document is filed electronically under section 2.

Exemption

4. The Director may grant an exemption from the provisions of this Rule, in whole or in part, subject to such conditions or restrictions as may be imposed in the exemption.

 

Appendix A

Document Reference

Description of Document

 

Securities Act, s. 1(10)

Applications to the Commission under clause 1(10) of the Securities Act

 

Securities Act, s. 1(11)

Applications to the Commission under clause 1(11) of the Securities Act

 

Securities Act, Part VIII

Applications to the Commission for recognition or designation under Part VIII of the Securities Act

 

Securities Act, s. 21.4

Applications to the Commission for the voluntary surrender of a recognition or designation under section 21.4 of the Securities Act

 

Securities Act, s. 75(3) 51-102, s. 7.1(2)

Confidential material change reports permitted to be filed under subsection 75(3) of the Securities Act and subsection 7.1(2) of National Instrument 51-102 Continuous Disclosure Obligations

 

Securities Act, s. 75(4) 51-102, s. 7.1(5)

The notification required under subsection 75(4) of the Securities Act and subsection 7.1(5) of National Instrument 51-102 Continuous Disclosure Obligations

 

Securities Act, Part XXIII.1

Notices and other documents to be sent to the Commission under Part XXIII.1 of the Securities Act

 

Securities Act, s. 144

Applications to the Commission to vary or revoke a recognition or designation granted under Part VIII of the Securities Act

 

11-202

Pre-filings or waiver applications within the meaning of National Policy 11-202 Process for Prospectus Reviews in Multiple Jurisdictions

 

11-203

Pre-filings, as defined in National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions

 

11-203

Applications, as defined in National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions

 

11-205

Applications to become Designated Rating Organzation, under the process set out in National Policy 11-205 Process for Designation of Credit Rating Organizations in Multiple Jurisdictions

 

12-202

Applications to vary or revoke a CTO as defined in National Policy 12-202 Revocation of a Compliance-related Cease Trade Order

 

13-101 s.2.1

Documents to be filed with the Commission by issuers not required to comply with National Instrument 13-101 System for Electronic Document Analysis and Retrieval in accordance with section 2.1 of that Instrument

 

13-101 s.2.3

Documents to be filed with the Commission in paper format under section 2.3 of National Instrument 13-101 System for Electronic Document Analysis and Retrieval

 

13-502F4

Form 13-502F4 Capital Markets Participation Fee Calculation

 

13-502F5

Form 13-502F5 Adjustment of Fee for Registrant Firms and Unregistered Exempt International Firms

 

13-503F1

Form 13-503F1 Capital Markets Participation Fee Calculation (Firms registered only under the Commodity Futures Act)

 

13-503F2

Form 13-503F2 Adjustment of Fee for Registrant Firms registered only under the Commodity Futures Act

 

13-508F8

Form 13-508F8 Designated Rating Organizations -- Participation Fee

 

21-101F1

Form 21-101F1 Information Statement Exchange or Quotation and Trade Reporting System

 

21-101F2

Form 21-101F2 Initial Operation Report Alternative Trading System

 

21-101F3

Form 21-101F3 Quarterly Report of Alternative Trading System Activities

 

21-101F4

Form 21-101F4 Cessation of Operations Report for Alternative Trading System

 

21-101F5

Form 21-101F5 Initial Operation Report for Information Processor

 

21-101F6

Form 21-101F6 Cessation of Operations Report for Information Processor

 

24-101F1

Form 24-101F1 Registered Firm Exception Report of DAP/RAP Trade Reporting and Matching

 

24-101F2

Form 24-101F2 Clearing Agency -- Quarterly Operations Report of Institutional Trade Reporting and Matching

 

24-101F3

Form 24-101F3 Matching Service Utility -- Notice of Operations

 

24-101F4

Form 24-101F4 Matching Service Utility -- Notice of Cessation of Operations

 

24-101F5

Form 24-101F5 Matching Service Utility -- Quarterly Operations Report of Institutional Trade Reporting and Matching

 

25-101F1

Form 25-101F1 Designated Rating Organization Application and Annual Filing

 

25-101F2

Form 25-101F2 Submission to Jurisdiction and Appointment of Agent for Service of Process

 

31-103 s. 12.2

Notice of repayment or termination of subordination agreement pursuant to section 12.2 of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations

 

31-103 s. 12.7

Notice of change, claim or cancellation of insurance policy pursuant to section 12.7 of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations

 

31-103F1

Form 31-103F1 Calculation of Excess Working Capital, together with associated financial information as required by sections 12.12, 12.13 and 12.14 of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations

 

31-103F2

Form 31-103F2 Submission to Jurisdiction and Appointment of Agent for Service

 

31-103F3

Form 31-103F3 Use of Mobility Exemption

 

31-317

CSA Staff Notice: 31-317 (Revised) Reporting Obligations Related to Terrorist Financing

 

32-102F1

Form 32-102F1 Submission to Jurisdiction and Appointment of Agent for Service for International Investment Fund Manager

 

32-102F2

Form 32-102F2 Notice of Regulatory Action

 

33-109F5

Form 33-109F5 Change of Registration Information

 

33-109F6

Form 33-109F6 Firm Registration

 

33-506F6

Form 33-506F6 Firm Registration (Commodity Futures Act)

 

35-101F1

Form 35-101F1 Form of Submission to Jurisdiction and Appointment of Agent for Service of Process by Broker-Dealer

 

35-101F2

Form 35-101F2 Form of Submission to Jurisdiction and Appointment of Agent for Service of Process by Agents of the Broker-Dealer

 

43-101F1

Form 43-101F1 Technical Report

 

45-101F

Form 45-101F Information Required in a Rights Offering Circular

 

45-101 s. 3.1(1)2

A statement of the issuer sent pursuant to paragraph 2 of subsection 3.1(1) of National Instrument 45-101 Rights Offerings

 

45-101 s.10.1(2)

Notice to the Commission sent pursuant to subsection 10.1(2) of National Instrument 45-101 Rights Offerings

 

45-106F1

Form 45-106F1 Report of Exempt Distribution

 

45-106 s.2.42(2)(a)

Notice to the Commission given pursuant to paragraph 2.42(2)(a) of National Instrument 45-106 Prospectus and Registration Exemptions

 

45-106 s.4.1(4)

Letters filed with the Commission pursuant to subsection 4.1(4) of National Instrument 45-106 Prospectus and Registration Exemptions

 

45-501F1

Form 45-501F1 Report of Exempt Distribution

 

45-501 s.5.4

Delivery of an offering memorandum or any amendment to a previously delivered offering memorandum in accordance with section 5.4 of OSC Rule 45-501 Ontario Prospectus and Registration Exemptions

 

71-101F1

Form 71-101F1 Forms of Submission to Jurisdiction and Appointment of Agent for Service of Process

 

OTC Derivative Trade Reporting (not already reported to repository)

 

Business Corporations Act, s. 1(6)

Applications to the Commission under subsection 1(6) of the Business Corporations Act

 

Business Corporations Act, s. 46(4)

Applications to the Commission under subsection 46(4) of the Business Corporations Act

 

Business Corporations Act, s. 113

Applications to the Commission under section 113 of the Business Corporations Act

 

Business Corporations Act, s. 158(1.1)

Applications to the Commission under subsection 158(1.1) of the Business Corporations Act

 

Business Corporations Act, s. 190(6)

Applications to the Commission under subsection 190(6) of the Business Corporations Act

 

Ont. Reg. 289/00 made under the Business Corporations Act, s. 4(b)

Applications to the Commission for consents under subsection 4(b) of Ont. Reg. 289/00 made under the Business Corporations Act

 

Loan and Trust Corporations Act, s. 213(3)(b)

Applications to the Commission for approvals under subsection 213(3)(b) of the Loan and Trust Corporations Act

 

ANNEX B

PROPOSED OPERATIONAL CONSIDERATIONS AND STANDARDS

THAT RELATE TO ELECTRONIC FILING UNDER ONTARIO SECURITIES COMMISSION RULE 11-501

ELECTRONIC DELIVERY OF DOCUMENTS TO THE ONTARIO SECURITIES COMMISSION

1. Required documents may be transmitted to the Ontario Securities Commission on any business day between the hours of 7:00a.m. and 11:00p.m. Eastern Time. Electronic filings may also be transmitted outside of those business hours if the system is not shut down for regular maintenance or for any other reasons.

2. Technical support will be available on any business day between the hours of 8:30 a.m. and 5:00 p.m. local time.

3. A document filed in electronic format is, for purposes of securities legislation, filed on the day that the electronic transmission of the document is completed.

4. Although the obligation to file electronically falls on the person or company (defined as the "form filer") required or permitted by Ontario securities law to file an Appendix A document, the person or company may use an agent, such as its legal counsel, to file the document on its behalf.

5. The system may not accept files larger than 20 MB. Please contact • for direction on how to file a document that exceeds 20 MB.

6. The instrument provides a temporary exemption in the event a technical difficulty prevents the form filer from filing electronically. To use the exemption, the form filer must file the applicable document and consent by email to • within two business days. Once the technical difficulty is resolved and, in any event, within three business days of filing by email, the form filer is required to file the document electronically using the system. The fees payable for filing the applicable document should be paid at the time the form filer files the document electronically using the system.

 

ANNEX C

THE PROPOSED POLICY AMENDMENTS

Proposed Policy Amendment in Ontario to

National Policy 11-202 Process for Prospectus Reviews in Multiple Jurisdictions

1. Section 8.1 of National Policy 11-202 Process for Prospectus Reviews in Multiple Jurisdictions is changed by adding the following after subsection 8.1(1):

(1.1) Despite subsection (1), in Ontario prefilings and waiver applications are submitted in accordance with Ontario Securities Commission Rule 11-501 Electronic Delivery of Documents to the Ontario Securities Commission.

2. Section 1 becomes effective • 2013.

Proposed Policy Amendment in Ontario to

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions

1. Section 5.5 of National Policy 11-203 Process for Exemptive Relieve Applications in Multiple Jurisdictions is changed by replacing "applications@osc.gov.on.ca" with "https://www.osc.gov.on.ca/filings".

2. Section 1 becomes effective •, 2013.

Proposed Policy Amendment in Ontario to

National Policy 11-205 Process for Designation of Credit Rating Organizations in Multiple Jurisdictions

1. Section 13 of National Policy 11-205 Process for Designation of Credit Rating Organizations in Multiple Jurisdictions is changed by replacing "applications@osc.gov.on.ca" with "https://www.osc.gov.on.ca/filings".

2. Section 1 becomes effective •, 2013.