Capital Markets Insights

What is the “Equal Access Delivery” model for prospectus offerings

For years, investment dealers have had to bear the burden of distributing preliminary and final prospectuses to investors for public offerings. In addition to the costs associated with printing and mailing these documents, investment dealers must log final iterations of a prospectus. There is also administrative effort for Investment Advisors, who are responsible for sending their clients any amendments to preliminary or interim prospectuses.

A recent Canadian Securities Administrators (CSA) announcement changes this for investment dealers by implementing an “access equals delivery” model for prospectuses. This change, expected to come into force in April 2024, allows issuers and dealers to provide access to prospectuses electronically.

While the requirements allow firms to do this by posting prospectus documents and a news release on Sedar+, many firms want to provide a more proactive approach to their clients by distributing prospectus documents while simultaneously reducing costs and administrative efforts.

Launched in 2023, Sedar+ is a detailed and comprehensive resource for the Canadian securities industry. However, even the most seasoned users can struggle to use the website effectively to find information about issuers. Investors wanting to download prospectuses could face an uphill task of seeking documentation when presented with the myriad of information from which to choose when attempting to locate a prospectus.

The prospectus distribution feature in Katipult DealFlow enables broker-dealers to electronically send prospectus documents to investors, lowering costs, time and resources. As a digital system, complete version control and delivery receipts are logged for each potential investor, giving compliance teams detailed distribution records for the regulator should they be needed.

This approach circumvents one potential issue with the new regulations - where liability lies in the event of litigation. There is some controversy around the idea of putting the responsibility on the investor to seek out the latest version of a prospectus.

In addition to the time and cost savings and the regulatory grey areas, broker-dealers who are shown to be proactive in providing prospectus updates will be able to use this as proof of innovation and a value-added service when looking to win new client business.

Beth Shaw, Capital Markets veteran and advisor to Katipult, commented, “This is a welcome milestone and continues the ongoing modernization of capital markets in Canada. The digitization of this workflow offers firms the opportunity for cost and time control, which is a positive. Still, I am interested in seeing what the regulators advise regarding the onus being on the investor to stay informed about the latest version of a prospectus.  Katipult’s solution offers the best of both worlds - providing investors with transparency and visibility of prospectus documents and disclosure while reducing the cost burden of printing and mailing documents.”

Shaw continued, “I think the real winners here could be Investment Advisors. For deals with multiple changes to the prospectus and, or a large number of interested investors, being able to quickly and easily distribute the documents electronically, tracked, and version-controlled ensures compliance will be happy. At the same time, IAs can build strong relationships with investors by proactively getting them up-to-date information about an investment opportunity.”

For more information about the prospectus distribution feature in Katipult DealFlow and to learn more about how this helps investment dealers with this change, contact our team today.