Offering Securities to the Public

The Corporate Finance Branch (the Branch or we) of the Ontario Securities Commission (OSC) has a broad regulatory mandate which we execute in pursuing the three purposes of the Securities Act (Ontario), which are to protect investors from unfair, improper or fraudulent practices, to foster fair and efficient capital markets and confidence in capital markets, and to contribute to the stability of the financial system and the reduction of systemic risk.

A key part of our mandate is the regulation of public companies in various industry segments (excluding investment funds) that offer securities for sale to the public in Ontario.

A company that wants to offer its securities to the public in Ontario must prepare a detailed disclosure document known as a prospectus.  A prospectus includes specific, detailed disclosure about a company, its business and the securities being offered.  It must provide “full, true and plain disclosure of all material facts relating to the securities issued or proposed to be distributed” as required by subsection 56(1) of the Securities Act (Ontario).

Securities legislation prohibits the issuance of a receipt for a final prospectus if the granting of the receipt would be prejudicial to the public interest or if any of the receipt refusal grounds exist as enumerated in subsection 61(2) of the Securities Act (Ontario).  

Prospectus Review Process

We use a risk-based approach for prospectus reviews and to determine the type of reviews to conduct. The prospectus review process allows for scrutiny by a regulator of the documents prior to the public relying on them.

Companies that plan to offer securities in Ontario typically begin by filing a preliminary prospectus with the OSC. The OSC will issue a receipt for the preliminary prospectus if all filing requirements are met.

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We review the preliminary prospectus and may provide comments to the company.  We review prospectuses for compliance with disclosure requirements, as investors use these documents in making an investment decision on the offering. Disclosure of complete, accurate and timely information is the cornerstone of investor protection and efficient capital markets.

As part of our prospectus review process we obtain a sound understanding of the company and its industry and other relevant information including its business, how it makes money and the key risks facing the business. We focus on material issues in the prospectus review process and our materiality analysis must consider investor protection and market efficiency concerns along with the regulatory burden of compliance.

The prospectus review process promotes robust disclosure for investors by:

  • Identifying material disclosure deficiencies that affect the reliability and accuracy of a company’s disclosure record and dealing with the non-compliance where required.
  • Educating companies and their advisors so that they have a sound understanding of how to comply with the rules, policies and notices and OSC staff’s expectations of compliance.
  • Using the learnings gathered from our reviews to propose rule changes or to publish proactive guidance in various forms including policies and notices.

Once all comments are resolved to the satisfaction of the OSC, the company typically files a final prospectus with the OSC.

If a receipt is issued for a final prospectus, the prospectus can then be used to offer and sell securities to the public.

If the securities are going to be sold both inside and outside of Ontario, the company may also need to consider the laws of another province or territory in Canada. For information on the filing and review process for prospectuses in multiple jurisdictions, see National Policy 11-202 Process for Prospectus Reviews in Multiple Jurisdictions. For more information on issuance of receipts see OSC Staff Notice 41-702 Prospectus Practice Directive # 1 Personal information forms and other procedural matters regarding preliminary prospectus filings.

Corporate Finance Prospectus Related Matters

The OSC also works closely with members of the Canadian Securities Administrators (CSA), in an effort to harmonize our legislation and regulatory practices for the benefit of the Ontario and Canadian capital markets. The OSC and the CSA have issued guidance in the form of various notices and policies relating specifically to prospectus offerings.

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