CSA Notice of Consultation: Draft Amendments to Policy Statement to Regulation 41-101 respecting General Prospectus Requirements

CSA Notice of Consultation
Financial Statement Requirements
Draft Amendments to Policy Statement to Regulation 41-101 respecting General Prospectus Requirements August 12, 2021 Introduction The Canadian Securities Administrators (CSA or we) are publishing for a 60-day comment period draft Amendments to Policy Statement to Regulation 41-101 respecting General Prospectus Requirements (the Draft Amendments). We are also proposing consequential Amendments to Policy Statement to Regulation 51-102 respecting Continuous Disclosure Obligations (the Consequential Amendments). We are issuing this Notice to solicit your comments on the Draft Amendments and on the Consequential Amendments. The public comment period expires on October 11, 2021. The text of the Draft Amendments and Consequential Amendments is published with this notice, and local matters are attached as Annex A. The Notice will also be available on the following websites of CSA jurisdictions:
www.lautorite.qc.ca www.bcsc.bc.ca www.albertasecurities.com www.osc.gov.on.ca nssc.novascotia.ca www.fcaa.gov.sk.ca www.fcnb.ca www.mbsecurities.ca Substance and Purpose of the Draft Amendments Form 41-101F1 Information Required in a Prospectus (Form 41-101F1) requires an issuer that is not an investment fund to include certain financial statements in its long form prospectus. These required inclusions include the financial statements of the issuer and any business or businesses

acquired, or proposed to be acquired, if a reasonable investor reading the prospectus would regard the primary business of the issuer to be the business or businesses acquired, or proposed to be acquired (collectively, the Primary Business Requirements). The purpose of the Primary Business Requirements is to provide investors with financial history of the business of the issuer even if this financial history spanned multiple legal entities over the relevant time period. The Primary Business Requirements also apply to instances where securities legislation and exchange requirements refer to disclosure prepared in accordance with Form 41-101F1. An example of this would be the requirement in Form 51-102F5 for an information circular relating to a restructuring transaction to contain prospectus-level disclosure. In practice, when acquisitions are involved, issuers and their advisors often consult with CSA staff to consider what financial statements must be included in the prospectus and to confirm whether one or more businesses comprised part of the primary business of the issuer. Sometimes these discussions result in inconsistent interpretation that adds time, cost and uncertainty for issuers. The Draft Amendments aim to reduce the regulatory burden resulting from uncertainty about the interpretation of the Primary Business Requirements, without compromising investor protection. Background In April 2017, the CSA published CSA Consultation Paper 51-404 Considerations for Reducing Regulatory Burden for Non-Investment Fund Reporting Issuers (the Consultation Paper) to identify and consider areas of securities legislation that could benefit from a reduction of undue regulatory burden, without compromising investor protection or the efficiency of the capital markets. While not specifically identified as an option in the Consultation Paper, commenters suggested that CSA staff revisit the interpretation of Item 32 in Form 41-101F1. These comments reflected a range of suggestions, including revisiting the requirements for an issuer to include three years of historical financial statements for each entity considered the primary business. Commenters also noted that inconsistent interpretation of these requirements across the CSA can lead to additional regulatory burden. The Draft Amendments are informed by the comment letters received in response to the Consultation Paper and other stakeholder feedback. The comment letters were summarized in CSA Staff Notice 51-353 Update on CSA Consultation Paper 51-404 Considerations for Reducing Regulatory Burden for Non-Investment Fund Reporting Issuers. In considering the Draft Amendments, we monitored amendments to the financial disclosure requirements of Regulation S-X issued by the U.S. Securities and Exchange Commission on May 21, 2020. We also considered our experiences with pre-file discussions and applications. Based on our work, we have determined that investors and issuers would benefit from a harmonized
approach to the interpretation of the Primary Business Requirements among CSA jurisdictions and from additional clarity regarding historical financial information required in an initial public offering (IPO) prospectus. We think that the Draft Amendments will reduce regulatory burden without compromising investor protection by eliminating the time and cost of

many pre-file discussions and applications required in connection with the Primary Business Requirements. Summary of the Draft Amendments and Consequential Amendments The Draft Amendments provide additional explanation in Policy Statement to Regulation 41-101 respecting General Prospectus Requirements for both IPO venture and non-venture issuers regarding:

• the interpretation of primary business and predecessor entity;
• clarification on when an issuer can use an optional test to calculate the significance of an
  acquisition;
• guidance as to when and for what time periods financial statements would be required in
  certain circumstances;
• guidance on the circumstances when we may require additional information to meet the
  requirement for full, true and plain disclosure and the nature of that information;
• clarification of when we would not consider an acquisition of mining assets to be a
  business.
  The Draft Amendments include various examples that illustrate different scenarios of when a reasonable investor would consider certain acquisitions to be the primary business of an issuer and the financial statements required by Item 32 of Form 41-101F1 in those scenarios. The Draft Amendments further align with consultation feedback to revisit the interpretation of the Primary Business Requirements and seek to reduce inconsistent interpretation of requirements. We also expect that the number of pre-file applications will decrease significantly if the Draft Amendments are implemented. The Consequential Amendments add clarification of when we would not consider an acquisition of mining assets to be a business requiring a business acquisition report. Local Matters An annex to this notice outlines the consequential changes to local securities legislation and includes additional text, as required, to respond to local matters in a local jurisdiction. Each jurisdiction that is proposing local amendments will publish such an annex. Request for Comments We welcome your comments on the Draft Amendments and on the Consequential Amendments. Please submit your comments in writing on or before October 11, 2021. Address your submission to all of the CSA as follows:

British Columbia Securities Commission
Alberta Securities Commission
Financial and Consumer Affairs Authority of Saskatchewan Manitoba Securities Commission Ontario Securities Commission Autorité des marchés financiers Financial and Consumer Services Commission, New Brunswick Superintendent of Securities, Department of Justice and Public Safety, Prince Edward Island Nova Scotia Securities Commission Office of the Superintendent of Securities, Service NL Northwest Territories Office of the Superintendent of Securities Office of the Yukon Superintendent of Securities Superintendent of Securities, Nunavut Deliver your comments only to the addresses listed below. Your comments will be distributed to the other participating CSA jurisdictions. Me Philippe Lebel Corporate Secretary and Executive Director, Legal Affairs Autorité des marchés financiers Place de la Cité, tour Cominar 2640, boulevard Laurier, bureau 400 Québec (Québec) G1V 5C1 Fax: 514 864-6381 consultation-en-cours@lautorite.qc.ca The Secretary Ontario Securities Commission 20 Queen Street West 22nd Floor, Box 55 Toronto, Ontario M5H 3S8 Fax: 416 593-2318 comment@osc.gov.on.ca We cannot keep submissions confidential because securities legislation in certain provinces requires publication of the written comments received during the comment period. All comments received will be posted on the websites of each of the Alberta Securities Commission at www.albertasecurities.com, the Autorité des marchés financiers at www.lautorite.qc.ca and the Ontario Securities Commission at www.osc.gov.on.ca. Therefore, you should not include personal information directly in comments to be published. It is important that you state on whose behalf you are making the submission.

Questions
If you have any questions, please contact any of the CSA staff listed below. Autorité des marchés financiers Nadine Gamelin Senior Analyst, Direction de l’information financière 514 395-0337, ext. 4417 nadine.gamelin@lautorite.qc.ca Carolyne Lassonde Senior Policy Advisor, Direction du financement des sociétés 514 395-0337, ext. 4373 carolyne.lassonde2@lautorite.qc.ca British Columbia Securities Commission Allan Lim Manager, Corporate Finance 604 899-6780 alim@bcsc.bc.ca Larissa M. Streu Senior Legal Counsel, Corporate Finance 604 899-6888 lstreu@bcsc.bc.ca Alberta Securities Commission Roger Persaud Senior Securities Analyst 403 297-4324 roger.persaud@asc.ca Bhawani Sankaranarayanan Senior Securities Analyst 403 297-6263 bhawani.sankaranarayanan@asc.ca Financial and Consumer Affairs Authority of Saskatchewan Heather Kuchuran Director, Corporate Finance Securities Division 306 787-1009 heather.kuchuran@gov.sk.ca Manitoba Securities Commission Patrick Weeks Corporate Finance Analyst 204 945-3326 patrick.weeks@gov.mb.ca

Ontario Securities Commission
Matthew Au
Senior Accountant, Corporate Finance
416 593-8132 mau@osc.gov.on.ca
Leslie Milroy
Senior Legal Counsel, Corporate Finance
416 596-4272 lmilroy@osc.gov.on.ca
Michael Rizzuto
Accountant, Corporate Finance
416 263-7663 mrizzuto@osc.gov.on.ca
Financial Consumer Services Commission
New Brunswick
Joseph Adair
Senior Securities Analyst
506 643-7435
Joe.adair@fcnb.ca
Nova Scotia Securities Commission
Jack Jiang
Securities Analyst, Corporate Finance
902 424-7059 jack.jiang@novascotia.ca

ANNEX A
LOCAL MATTERS (QUÉBEC)
Withdrawal of a Notice
In Québec, if the Proposed Changes are adopted, the Notice relating to Financial Statement Requirements for IPO Issuers Acquiring Mining Claims (published initially in the Bulletin de l’Autorité des marchés financiers of May 3rd, 2012, Vol. 9, No. 18 and again in the Bulletin of May 10, 2012, Vol. 9, No.°19) will be withdrawn, since guidance as to when an acquisition of mining assets would not be considered an acquisition of a business will be included in Policy Statement to 41-101 respecting General Prospectus Requirements.