Regulatory Review – Canada

Regulatory Review

NI 51-102 – Continuous Disclosure Obligations

The Canadian Securities Administrators (CSA) introduced NI 51-102 in March 2004. The underlying principle of NI 51-102 was to institute nationally harmonized continuous disclosure requirements for public corporations. It also introduced the “investor choice model.” Under the rule, a beneficial securityholder is required to “opt-in” if they wish to receive annual and/or quarterly financial statements.

To support this new rule, Broadridge introduced our Consent Management Service as an integrated component of the proxy process. Through the service, we collect securityholder consents regarding Annual and/or Interim Financials on the Voting Instruction Form. For those investors who “opt-in,” Broadridge then sends the annuals and Management’s Discussion and Analysis in the securityholder’s proxy package. This approach demonstrates the convergence of NI 51-102 and NI 54-101, and represents a significant savings opportunity for issuers.

In tracking opt-in rates, we have found that an average of 3% of beneficial securityholders elect to receive annual financial statements. This numbers drops to 1.3% for investors who wish to receive interim financial statements. It is interesting to note that investor participation for either “opt-in” or “opt-out” (the option offered to registered holders) is typically the same.

NI 51-102 has benefited public corporations by affording them the opportunity to reduce print and postage costs. It has also benefited investors by giving them more choice in the securityholder communication process.

NI 51-102 – Summary of Changes – October 13, 2006

On October 13, 2006, the Canadian Securities Administrators published changes to NI 51-102 – Continuous Disclosure Obligations. In its Summary of Comments1, the CSA states,

“We have not proceeded with the proposal to remove the request form. We decided that the best way to protect the fundamental right of securityholders to receive financial information is to continue [to have] the issuer initiate the process by sending a request form. We were not satisfied that the request form was an onerous requirement. We also considered that the request form system had not been in effect long enough to conclude that it was not working or that we should change it.”

1. Notice of Amendments to NI 51-102 Supplement to the OSC Bulletin dated October 13, 2006, Appendix B, Summary of Comments, Answers in response to questions in the CSA Notice, question number 2.

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