Concept Proposal: 12-401 - National Application System

CANADIAN SECURITIES ADMINISTRATORS'

REQUEST FOR COMMENTS 12-401

National Application System

Concept Proposal

Introduction

In 1994, the Canadian Securities Administrators ("CSA"), recognizing the need to fulfill their legislative mandates in a more efficient manner, constituted the Task Force on Operational Efficiencies in the Administration of Securities Regulation. The mandate of the Task Force was to catalogue and prioritize operational efficiencies that would result in streamlining securities regulation throughout Canada. In June 1995, the Task Force issued its final report. One of the three major recommendations made by the Task Force was to encourage the CSA to extend the concept of a "designated jurisdiction" to all prospectus filings, mutual fund filings, dealer registration, continuous disclosure filings, applications for discretionary relief, investigations and hearings.

As a consequence of the above initiatives, coupled with increasing demands by industry participants for timely service and increasing pressures on the resources dedicated to securities regulation, the CSA considered it necessary to extend mutual reliance to a number of operational areas.

Mutual reliance means that, in exercising discretion under securities regulation, a decision maker in a particular jurisdiction is prepared to rely primarily on the analysis, review and recommendation of staff of another jurisdiction for certain filings made in more than one jurisdiction in Canada. A mutual reliance system involves no surrender of jurisdiction or discretion by any participating jurisdiction.

The National Application System Committee was established by the CSA to develop the National Application System for the treatment of applications fordiscretionary relief made in multiple jurisdictions (other than those applications provided for in other mutual reliance systems) using a mutual reliance concept.The CSA has adopted the final report of the Committee and has authorized publication of this request for comment as well as the use of the System on a testbasis.

It is expected that the System (as described in the attached Concept Proposal) will form part of a single Memorandum of Understanding being developed for allmutual reliance systems.


Overview of the System

an application will be drafted with reference to the legislative requirements of a single jurisdiction (the "Principal Jurisdiction"). The application together withapplicable fees will be sent to the Principal Jurisdiction and other jurisdictions ("Participating Jurisdictions") where relief is required

the Principal Jurisdiction will review the application and communicate with the applicant prior to making a determination

the staff memorandum, recommendations and determination of the Principal Jurisdiction will be forwarded to all Participating Jurisdictions which will determinewhether to grant or deny discretionary relief consistent with the determination of the Principal Jurisdiction, or whether to opt out of the System for the purposesof that application

once a determination has been made by all Participating Jurisdictions, the Principal Jurisdiction will issue a Decision Document evidencing the decision of thePrincipal Jurisdiction and all Participating Jurisdictions that have not opted out of the System


Details of the System

Attached to this request for comment is a Concept Proposal and a flowchart detailing the operation of the System.


Comments

Interested parties are invited to make written submissions with respect to the Request for Comments. Submissions received by June 1, 1998 will be considered.

In particular, submissions are encouraged with respect to the following features of the System (section references are from the Concept Proposal):

the single application referencing the legislative requirements only of the Principal Jurisdiction (section 9.2)

the time lines for the application process (sections 9.5, 9.6 & 9.7)

the timing of an opt out by a Participating Jurisdiction (sections 9.7 & 9.8)

the generic form of Decision Document (section 10)

the imposition of standardized terms and conditions in a Decision Document

Submissions should be made to all of the Canadian Securities Administrators listed below in care of the Saskatchewan Securities Commission in duplicate, asindicated below:



Submissions should also be addressed to the Commission des valeurs mobilières du Québec as follows:

Claude St PierreSecretaryCommission des valeurs mobilières du QuébecTour de la BourseC.P. 246, 17th FloorMontréal, Québec H4Z 1G3

A diskette containing the submission (in DOS or Windows format, preferably WordPerfect) should also be submitted to the Chair of the Committee.

Comment letters submitted in response to requests for comments are placed on the public file in certain jurisdictions and form part of the public record, unlessconfidentiality is requested. Comment letters will be circulated amongst the securities regulatory authorities, whether or not confidentiality is requested.Although comment letters requesting confidentiality will not be placed on the public file, freedom of information legislation in certain jurisdictions may requirethe securities regulatory authorities in those jurisdictions to make comment letters available. Persons submitting comment letters should therefore be aware thatthe press and members of the public may be able to obtain access to any comment letters.

Questions and/or requests to participate in the testing of the System may be referred to the Chair and/or any of the following members of the Committee:




CONCEPT PROPOSAL FOR A NATIONAL APPLICATION SYSTEM

1. PURPOSE

The investor protection provisions of Canadian securities legislation are substantially similar. Applications are often made in several jurisdictions underprovisions of Canadian securities legislation that are the same or substantially similar. In most cases Canadian securities regulatory authorities grant substantiallysimilar Exemptive Relief for a particular application. Canadian securities regulatory authorities recognize the need to streamline the application process for theApplicant by facilitating a single filing, review and decision process that will reduce costs for both the Applicant and the regulator through more effective use ofresources.

Canadian securities regulatory authorities have agreed to create a national system for the review of applications for Exemptive Relief made in multiplejurisdictions and have developed this concept proposal with respect to the procedure to be followed by Participating Jurisdictions.

Under the National Application System, an Applicant will

file a single Application with all Participating Jurisdictions where Exemptive Relief is required

deal only with the Principal Jurisdiction

receive one Decision Document from the Principal Jurisdiction

The Participating Jurisdictions will work to simplify and reduce unnecessary duplication in their review and decision-making processes through mutual relianceon each other's review and recommendations.


2. INTERPRETATION

(1) Definitions - In this concept proposal

"Applicant" means a person or company making an application for Exemptive Relief under the National Application System;

"Application Materials" means the application to the Principal Jurisdiction, supporting materials and draft Decision Document to be filed with all ParticipatingJurisdictions to whom an application is being made;

"Decision Document" means a document issued under the National Application System by the Principal Jurisdiction evidencing a decision by each ParticipatingJurisdiction with whom an application was filed other than those that have opted out of the National Application System for that application;

"Exemptive Relief" means any relief sought under Canadian securities legislation, including declarations, determinations, exemption orders and rulings,extensions, permissions, recognitions, revocations and waivers;

"Facsimile" means a facsimile or other form of electronic transmission;

"National Application System" means the national system for review of applications for Exemptive Relief and the procedures provided for in this conceptproposal;

"Participating Jurisdiction" means a securities regulatory authority or regulator, as the context requires, of a province or territory that has agreed to participate inthe National Application System;

"Principal Determination Documents" means the Principal Jurisdiction's staff memo, recommendations and determination or reasons for denial that are circulatedto each Participating Jurisdiction with whom an application has been filed under the National Application System;

"Principal Jurisdiction" means the securities regulatory authority or regulator, as the context requires, of the province or territory selected by an Applicant inaccordance with the guidelines set out in 8; and

"Prospectus Review System" means any system for the review of prospectuses by a selected principal or designated jurisdiction adopted by Canadian securitiesregulatory authorities.

(2) Interpretation

Terms used and not defined in this concept proposal that are defined or interpreted in a definition instrument in force in a jurisdiction should be read inaccordance with that definition instrument, unless the context otherwise requires.


3. RETENTION OF DISCRETION

Each of the Participating Jurisdictions retains the statutory discretion to review and grant or deny Exemptive Relief for a particular application.


4. SCOPE

This concept proposal sets out the procedures proposed by the CSA to govern the implementation and operation of the National Application System.


5.. CONSULTATION

The CSA National Application System Committee will meet at least semi-annually to

discuss consistency of review of applications

recommend changes or amendments to and otherwise monitor the National Application System

identify and communicate common deficiencies in Application Materials

identify areas of potential rule/blanket relief for consideration by the CSA

and will report to the CSA Chairs on an annual basis.


6. STAFF DEVELOPMENT AND TRAINING

In order to achieve and maintain consistency in the review and decision drafting process, a national training seminar will be held on an annual basis for staff ofParticipating Jurisdictions. This will provide an opportunity for staff of each Participating Jurisdiction to acquire new skills, standardize review processes anddevelop new approaches to common problems.


7. ELIGIBILITY

An Applicant is eligible to elect to use the National Application System for any application for Exemptive Relief made in multiple jurisdictions, with theexception of those applications for which the granting of Exemptive Relief can be evidenced by a document issued under another system adopted by Canadiansecurities regulatory authorities. Appendix A sets out in tabular form the sections of Canadian securities legislation and fees for the most common types ofapplications made in each province or territory that could be made under the National Application System. Applicants should be aware that these fees maychange from time to time and although Appendix A will be updated periodically, the onus is on the Applicant to determine the current fee in each jurisdictionwhere an application will be filed.


8. SELECTING A PRINCIPAL JURISDICTION

An Applicant is responsible for selecting a Principal Jurisdiction (from those Participating Jurisdictions to whom an application will be made who have agreed toact as Principal Jurisdiction) in accordance with the following guidelines when electing to use the National Application System for a particular application:

(i) where the Applicant is eligible to use a Prospectus Review System, the Applicant should select the jurisdiction assigned or selected as its principal ordesignated jurisdiction under that Prospectus Review System;

(ii) where the Applicant is a Canadian issuer not eligible to use a Prospectus Review System, the Applicant should select the jurisdiction where the Applicant'shead office is located;

(iii) where the Applicant does not require Exemptive Relief in the jurisdiction referred to in (i) or (ii), the Applicant should select the jurisdiction with which theApplicant has the next most significant connection; or

(iv) where the Applicant has no significant connection to any Canadian jurisdiction, the Applicant may select any Participating Jurisdiction to act as the PrincipalJurisdiction.

A Participating Jurisdiction may decline to act as the Principal Jurisdiction where the Applicant's selection is not in accordance with these guidelines.


9. PROCEDURE

9.1 Pre-filing Discussions

If an Applicant is concerned that an application has particularly complex or novel features or raises public policy issues, the Applicant may discuss theapplication on a pre-filing basis with the Principal Jurisdiction. Pre-filing discussions with staff of other Participating Jurisdictions will be discouraged.

The Principal Jurisdiction will advise all other Participating Jurisdictions of substantive issues resulting from these discussions by circulating a memo byFacsimile to the designated contact person in each Participating Jurisdiction.

Participating Jurisdictions wishing to be notified of pre-filing discussions and their designated contact are identified in Appendix B.


9.2 Applications for Exemptive Relief

An Applicant wishing to use the National Application System is responsible for

selecting a Principal Jurisdiction in accordance with the criteria set out in 8

identifying the Participating Jurisdictions from whom Exemptive Relief is sought

filing the Application Materials and the application fee with the Principal Jurisdiction and concurrently filing a copy of the Application Materials and appropriateapplication fee with each of the other Participating Jurisdictions from whom Exemptive Relief is sought (this procedure will remain in place until the electronicfiling of all applications through SEDAR is mandated)

identifying in the Application Materials any additional Exemptive Relief relating to the application sought from any other Participating Jurisdiction,

notifying by Facsimile all Participating Jurisdictions with whom an application has been filed if the application is withdrawn at any time during the process


9.3 Application Fees

Each Participating Jurisdiction will be responsible for collecting its own application fees.


9.4 Acknowledgment of Receipt

The Principal Jurisdiction will provide by Facsimile an acknowledgment of receipt of the application to the Applicant and all Participating Jurisdictions withwhom the application has been filed.


9.5 Review

The Principal Jurisdiction is responsible for reviewing any application filed under the National Application System in accordance with its usual reviewprocedures, analysis and precedents together with the benefit of comments, if any, from Participating Jurisdictions. The Applicant will deal only with thePrincipal Jurisdiction, who will be responsible for issuing comments to and receiving responses from the Applicant.

The Participating Jurisdictions will have ten business days from receipt of the acknowledgment referred to in 9.4 from the Principal Jurisdiction to review theapplication and to forward to the Principal Jurisdiction comments on substantive issues. In most cases, this will be limited to specific policy concerns with theapplication, its surrounding circumstances or the nature of the Exemptive Relief sought.

The Principal Jurisdiction is not obligated to communicate comments received from the Participating Jurisdictions to the Applicant.

Where the Principal Jurisdiction considers it appropriate, the Principal Jurisdiction can abridge the ten business day period by notifying the contact person in eachParticipating Jurisdiction listed in Appendix B by Facsimile.

Following the expiration of the ten business day period, or such shorter period of time agreed to, for Participating Jurisdictions to comment on the application,staff of the Principal Jurisdiction will

complete their review of the application

prepare a staff memo that provides an analysis of the application and the Exemptive Relief sought as well as identifying any substantive issues raised byParticipating Jurisdictions and the view of staff of the Principal Jurisdiction on such issues

make recommendations to grant or deny the Exemptive Relief sought by the Applicant and concurrently notify each Participating Jurisdiction by Facsimilewhether their recommendation is to grant or deny the Exemptive Relief sought

where there is a recommendation to grant the Exemptive Relief sought, prepare a draft form of decision following the format of the form of decision attached asAppendix C

If at any time during the review process staff of the Principal Jurisdiction determine that an application has been abandoned by an Applicant, staff of the PrincipalJurisdiction will promptly notify by Facsimile all other Participating Jurisdictions with whom an application has been filed.


9.6 Decision of Principal Jurisdiction

Upon completion of the review process and after considering the recommendations of its staff, the Principal Jurisdiction will determine whether to grant or denythe Exemptive Relief sought.

Where the Principal Jurisdiction makes a determination to grant the Exemptive Relief sought, staff of the Principal Jurisdiction will promptly circulate byFacsimile the Principal Determination Documents to the Participating Jurisdictions with whom the application was filed.

The Principal Jurisdiction will not communicate its determination to the Applicant until after the opting out period described in 9.7 has elapsed unless allParticipating Jurisdictions have made their determinations prior to the expiry of the opting out period, in which case the Principal Jurisdiction may communicateits determination to the Applicant as soon as it receives all of the confirmations described in 9.7.

Where an Applicant has a right to a hearing as a result of a potential denial of the Exemptive Relief sought, the staff of the Principal Jurisdiction will promptlynotify by Facsimile the Participating Jurisdictions with whom the application was filed that the Applicant has requested a hearing and circulate their staff memoand recommendations.

The Principal Jurisdiction will hold a hearing. Other Participating Jurisdictions with whom the application was filed may make whatever arrangements they deemappropriate, including a hearing held contemporaneously with the hearing in the Principal Jurisdiction.

After the hearing, staff of the Principal Jurisdiction will promptly circulate by Facsimile the Principal Determination Documents to the Participating Jurisdictionswith whom the application was filed.


9.7 Decision of Participating Jurisdictions

Each Participating Jurisdiction, other than a Participating Jurisdiction that has held a hearing and made a determination, will have seven business days fromreceipt of the Principal Determination Documents to confirm to the Principal Jurisdiction by Facsimile whether it has made the same determination as thePrincipal Jurisdiction or is opting out of the National Application System for that application. Each Participating Jurisdiction may document for its own purposesthe determination made on each application in its jurisdiction in accordance with its own procedures.

After the opting-out period described above has elapsed, the Principal Jurisdiction will issue a Decision Document evidencing that a decision to grant or denythe Exemptive Relief sought has been issued by all Participating Jurisdictions with whom the application was filed other than those that have opted out of theNational Application System for that application.

Where the Decision Document evidences a denial of the Exemptive Relief sought, reasons for the denial will be provided in the Decision Document.


9.8 Opting Out of the National Application System

A Participating Jurisdiction electing to opt out of the National Application System on any particular application within the opting out period described in 9.7 willpromptly notify the Applicant, the Principal Jurisdiction and all other Participating Jurisdictions by Facsimile and briefly indicate reasons for opting out.

In opting out of the National Application System for a particular application, a Participating Jurisdiction is not making a determination on the merits of theapplication.

An Applicant is entitled to deal directly with a Participating Jurisdiction that has opted out of the National Application System to resolve outstanding issues andobtain a determination in respect of that particular application. In the event that the Applicant and Participating Jurisdiction are able to resolve all outstandingissues, the Participating Jurisdiction may opt back into the National Application System for that application by notifying the Principal Jurisdiction and all otherParticipating Jurisdictions by Facsimile within the opting out period described in 9.7.


9.9 Effect of Silence

Silence on the part of a Participating Jurisdiction at the end of the opting out period described in 9.7 will mean that the Participating Jurisdiction will have optedout of the National Application System for that particular application.


10. FORM OF NATIONAL DECISION

The Decision Document will consist of a generic form of decision applicable in all Participating Jurisdictions prepared in a format substantially similar to the formof decision attached as Appendix C. This will not preclude the issuance of a less formal Decision Document where it is the current practice. Where the decisionis a denial of the relief sought, the Decision Document will set out reasons for the decision.

The determinations of each Participating Jurisdiction as evidenced by a Decision Document will have the same effective date in all Participating Jurisdictions,which will be no earlier than the date on which the opting out period described in 9.7 elapses unless all of the Participating Jurisdictions make theirdeterminations prior to the opting out period. Where that is the case, the effective date of the Decision Document will be the date on which the PrincipalJurisdiction has received all of the confirmations described in 9.7.

The Principal Jurisdiction will promptly send by Facsimile the Decision Document to the Applicant and each Participating Jurisdiction with whom the applicationwas filed.



APPENDIX "A" - TABLE OF CONCORDANCE AND FEES


The following table was published in Issue #05 (1998), 21, O.S.C.B. 621 of 12-401 National Application System.



Appendix C


(Letterhead of Principal Jurisdiction)
IN THE MATTER OF

THE CANADIAN SECURITIES LEGISLATION

OF (list by name those Participating Jurisdictions to whom the application was made that have not opted out of system for this Application)

AND

IN THE MATTER OF

THE NATIONAL APPLICATION SYSTEM

AND

IN THE MATTER OF (Name(s) of parties)

DECISION DOCUMENT
WHEREAS an application has been received by (list by name those Participating Jurisdictions to whom the application was made that have notopted out of system for this application) (the "Commissions") from (Name(s) of applicants and relevant parties) ("Definitions as required" ) for adecision pursuant to the Canadian securities legislation of (Names of jurisdictions of Participating Jurisdictions where application was made that havenot opted out of the system for this application) (the "Legislation") that the requirement to (Describe in words - do not usestatutory references) contained in the Legislation shall not apply to (State who and if necessary or where a transaction is involved brieflydescribe the transaction in question - do not break down into parts - do not use statutory references - define as the "Transaction" )

AND WHEREAS pursuant to the National Application System (the " NAS"), the (Name of the Participating Jurisdiction that is PrincipalJurisdiction for this application) is the Principal Jurisdiction for this application;

AND WHEREAS it has been represented by to the Commissions that:

(Insert numbered representations disclosing all facts relevant to the granting of the relief. Do not use statutory references or refer to facts that are specific to anyone jurisdiction.)

AND WHEREAS pursuant to the NAS this Decision Document evidences the decision of the Commissions;

AND WHEREAS the Commissions are of the opinion that it would not be prejudicial to the public interest to grant this decision;

IT IS HEREBY DECIDED by the Commissions pursuant to the Legislation that the requirement to (Describe in words -do not use statutory references) contained in the Legislation shall not apply to (State who using the appropriate definition or ifapplicable use the definition "Transaction") provided that:

(Insert numbered terms and conditions. These should be generic and without statutory references for all Participating Jurisdictions with whom this applicationwas made that have not opted out of the system for this application)

DATED at , on , 199 .




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