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Nov 15, 2023

Proposed changes to US legislation spark concerns for Canadian companies’ reporting costs

‘Considerable confusion and undue burden’ top concerns for Canadian regulators

The Canadian Securities Administrators (CSA) has urged the US ambassador to Canada to act to reverse potential legislation that would remove a key exemption for all foreign issuers from having to disclose their trades in both their country and the US.

In a recent letter addressed to US ambassador to Canada David Cohen, CSA chair Stan Magidson expresses deep reservations regarding some changes to the National Defense Authorization Act for fiscal year 2024. More specifically, the letter addresses the amendments to one of the sections of the act that would require dual-listed companies to disclose their trades twice, triggering additional reporting work.

The CSA is an umbrella organization representing Canada’s provincial and territorial securities regulators. Concerns expressed in Magidson’s letter primarily revolve around the additional reporting costs that would impact Canadian foreign private issuers.

‘As comparable insider-reporting requirements already apply in Canada, removing the foreign private issuer exemption would trigger significant and unnecessary additional reporting costs in the US for Canadian companies that are foreign private issuers, typically after listing in both Canada and the US,’ the letter states.

‘If Canadian foreign private issuers were required to comply with both insider-reporting regimes, it could lead to considerable confusion and undue burden for insiders, inconsistent filings across jurisdictions and unnecessary duplicative compliance reviews by both the SEC and Canadian securities regulatory authorities.’

Grant Vingoe, CEO of the Ontario Securities Commission – Canada’s largest capital markets regulator and a member of the CSA – echoes Magidson’s concerns. ‘Legislation pending in the US Congress could lead to a duplication of effort in insider reporting between Canada and the US and the extra-territorial effect of certain trading restrictions on insiders,’ he comments in a LinkedIn post.

Vingoe also highlights the long-standing collaboration between the SEC and Canadian securities regulatory authorities: ‘Canada and the United States have a long history of regulatory comity and have similar approaches to securities regulation.’

The CSA further notes that the collaboration between the two countries has always aimed ‘to reduce the cost of capital for North American companies by minimizing duplicative substantive and procedural regulation and barriers to cross-border offerings, issuer bids, takeover bids, business combinations, continuous disclosure and other filings.’

In addition, Magidson points out that US issuers that disclose their trades to regulators in the US are not requested to duplicate their disclosure in Canada and urges the ambassador to continue to grant exemption to Canada-domiciled foreign private issuers and their insiders.