Access Equals Delivery. Really?

Imagine you order dinner from a restaurant that offers free delivery. When nothing arrives, you find out that you must go to the restaurant website, check if your order is ready, then drive over and pick it up yourself and then take it back home to enjoy. In a nutshell, that’s what securities regulators are putting forward as the modern way to “deliver” regulation-required disclosure documents to investors.

Canadian securities regulators are proposing that an “access equals delivery” model should replace the defaulted delivery of disclosure documents of all issuers. (Investment funds would be excluded, at least for now). The idea put forward states that an issuer is considered to have affected disclosure delivery to an investor once:

(a) the document has been filed on the System for Electronic Document Analysis and Retrieval (SEDAR). SEDAR is the electronic filing system for the disclosure documents of issuers across Canada. You can learn more about SEDAR at SEDAR Frequently Asked Questions. and the issuer’s website,

(b) the document has been posted on the issuer’s website, and

(c) the issuer has issued a news release (filed on SEDAR and posted on its website) indicating that the document is available electronically on SEDAR and the issuer’s website. A paper copy can be obtained (presumably free of charge) from the issuer upon request. This idea turns the concepts of “delivery” and “disclosure” on its head.

Recognizing its deficiencies, securities regulators are working to improve SEDAR to provide better functionality through a modernized user interface, with search function improvements and harmonized processes for all filings and enhanced cybersecurity and privacy management.

Most retail investors are not aware of SEDAR or how to use it, and few routinely access issuers’ websites. Even if they did, SEDAR is an antiquated system and is not user-friendly. There is currently no mechanism through SEDAR by which a person might receive alerts that a SEDAR filing has been made.

Regulators believe an access equals delivery model could benefit both issuers and investors. This model, they say, could further facilitate the communication of information by enabling issuers to reach more investors in a faster, more cost-effective, and more environmentally friendly manner. The regulators assert, but do not provide objective evidence, that SEDAR and the issuer’s websites provide ease and convenience of use for investors, allowing them to access and search for information more efficiently than they would otherwise be able to with paper copies of documents.

Specifically, the regulators propose that notification that these disclosure documents are available would not be required. As long as the documents are accessible on the internet, investors are considered to have received delivery of these documents.

Access equals delivery can broaden the concept of delivery to include public electronic access and could promote market efficiency by reducing some costs (such as printing and mailing costs) faced by reporting issuers and asset managers. This may work for institutional investors, analysts, and investment industry professionals. But what about Main Street investors? Does the model adequately protect them?

A cornerstone of contemporary investor protection is full, accurate and timely disclosure. Disclosure is the critical means for investors to know and understand their investments, and to adequately manage and plan for their retirement security.

Disclosure makes available the information needed for informed investment decisions, thus promoting efficient securities markets which, in turn, result in better allocation of Canada’s capital resources.

The proposed disclosure model is not really disclosure delivery at all for retail investors. News releases should not be the exclusive source of notice and should supplemented by email notification to investors. Actual delivery by email (with a direct link to a document or with the document attached) or paper delivery (at no cost to investors) must remain a disclosure delivery option. Retail investors should have the choice as to the best way they wish to receive disclosures regarding investments, such as stocks and bonds, they have made.

Current regulations provide that “delivery” can generally be satisfied through electronic distribution, provided:

• the investor receives notice that the document has been, or will be, delivered electronically.
• the investor has easy access to the document.
• the document received is the same as the document delivered and
• the issuer has evidence that the document has been delivered.

Current policy allows for notice-and-access. This seems to be working well for those who choose to use it.

The Canadian Coalition for Good Governance (CCGG) does not support the access equals delivery model for proxy-related materials and other documents on which investors rely to exercise their rights as shareholders and which require action on the part of shareholders within a specified timeframe. They point out that voting is one of the key mechanisms that investors have to exercise oversight over the companies in which they are invested and therefore it is important for companies to be required to continue to provide notice to shareholders to facilitate shareholder participation in votes on both routine and special resolutions.

Investor advocates generally support the migration toward increased electronic dissemination of information in the capital markets and the movement toward a default electronic delivery of some disclosure documents. But retail investors should retain a right to “opt-in” to receive a paper copy and that the needs and preferences of investors (such as investors’ standing instructions) should continue.

Some corporate entities view disclosure as a “burden” rather than as an obligation and investor right. In fact, the North American Securities Administrators Association Investor Bill of Rights states that the right to “Receive complete information about the risks, obligations, and costs of any investment before investing… is fundamental to investor protection.” Access equals delivery should not be used to remove that right especially those saving for retirement. Regulators seem to be ignoring the basic fact that disclosure (full, true and plain) has not been made unless/until the information has been clearly communicated to the recipient.

Some consequences of access equals delivery are still to be determined, such as how to address investors’ withdrawal rights (the right to withdraw from an agreement to purchase securities within two business days of receipt of the latest prospectus.) Securities regulators are also cognizant that introducing this model for documents requiring immediate shareholder attention and participation, such as proxy voting, could raise investor protection concerns and could have a negative impact on shareholder/investor engagement.

Access equals delivery seems designed to reduce investor engagement, investor understanding of their investments and keep retail investors from exercising their rights as shareholders. Conversely, Bay Street will save money on printing and postage, keep the masses uninformed and continue to sell risky products to people trying to save for retirement. This is merely a continuation of the caveat emptor environment securities regulators have created for Main Street investors.

While regulators and corporations are proposing less retail investor access to disclosure, some groups are going further in wanting to reduce the frequency of reporting or opposing enhanced disclosure of gender diversity matters and use of child labour. The Ontario Capital Markets Modernization Task force recommendations appear to extend access equals delivery to investment funds and related documents. Mutual funds are one of the most popular investments employed by Main Street, with assets in excess of $1.6 trillion. Currently, retail investors must be provided a copy of Fund Facts, a useful disclosure document, before a sale can take place. Fund Facts provides information on a fund’s objectives, costs, risk rating, holdings, historical returns, and other information required to assist in making an informed investment decision.

On the other hand, as Canadian financial literacy improves, Canadians are increasingly asking for better and more readable disclosure. Canadians are also demanding better disclosure of climate change and governance related risks. There is a growing movement for better disclosure of racial diversity, supply chains, corporate alliances, and international business practices.

It should be noted that the retail investor now participates in the market as never before due to the decline of defined benefit pension plans and low Guaranteed Investment Certificate (GIC) rates. In addition, the senior population is growing in absolute and proportionate terms and living longer. Furthermore, regulators should acknowledge that certain households—primarily lower wage workers, workers with lower educational attainment, persons who live in rural communities, racial minorities, older workers, retirees and techno-peasants may disproportionately bear the negative impacts of the recommendations because they suffer from technophobia, are just more comfortable with paper copy for financial disclosures or do not have ready access to computers or the internet.

Investor advocates suggest that regulators should expend more resources on improving access to disclosure, using technology to enhance disclosure, improving disclosure effectiveness, increasing investor education on the value of disclosure, and enforcing disclosure laws instead of reducing disclosure access.

Regulators do not review whether an investment is a good one, only whether enough information is available to judge the potential risks and rewards. Less access to disclosure would make that assessment more burdensome and leave Main Street investors guessing whether an opportunity is a good one—or a sinkhole for their hard-earned money.

The regulator consultation on access equals delivery closed on March 9, 2020. We should soon find out how regulators want to proceed. Stay tuned.

Ken Kivenko, PEng, President , Kenmar Associates, Etobicoke, ON (416) 244-5803, kenkiv@sympatico.ca, www.canadianfundwatch.com