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Bulletin

Electronic Delivery of Documents for Securities Industry Participants

Fasken
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Securities and Mergers & Acquisitions Bulletin

In November 2011, the Canadian Securities Administrators (CSA) issued a notice of amendments to National Policy 11-201 Delivery of Documents by Electronic Means; in Québec, Notice 11-201 related to the Delivery of Documents by Electronic Means. The policy as amended has been renamed National Policy 11-201 Electronic Delivery of Documents (Policy). The purpose of the Policy is to provide guidance to securities industry participants in order to ensure that the delivery requirements imposed by securities legislation can "accommodate technological developments without undermining investor protection".

Legal Framework

The revisions to the Policy make it part of an increasingly large regulatory regime aimed at circumscribing the use of electronic documents and their delivery to intended recipients. Quite rightly, the CSA point out that the electronic delivery of documents by a corporation may be subject to securities legislation, electronic commerce legislation, corporate legislation, SRO rules, stock exchange rules, and even a corporation's own articles or by-laws.

Application

The Policy provides guidance on documents which are required to be delivered under securities legislation (prospectuses, financial statements, etc.). More specific guidance is also directed at the use of proxy documents in electronic format.

Delivering Documents Electronically

Four elements are set out in the Policy which the CSA believe are sufficient to satisfy the requirements for the delivery of documents under securities legislation:

Notice that the document has been, or will be, delivered electronically must have been received by the recipient

In the world of email and instant communication, this may seem like a strange directive as electronic versions of documents can simply be attached to emails and delivered. However, the guidance provided here is actually from the perspective of the corporation which posts copies of electronic documents on its website. Generally, public markets participants will provide an "Investors" section on their websites where information is posted. However, it would be inadvisable to simply assume that the intended recipients of such documents regularly visit the website. As a result, notice of the electronic delivery of the document (i.e., the posting of the electronic document on a website) should be given to the intended recipients (whether electronically or non-electronically).

The document must be easily accessible by the recipient

This is simply a matter of best-practice. Documents need to be easily accessible, and not buried under pages and pages of a website. Moreover, documents delivered electronically should remain available to recipients for whatever period of time is appropriate and enable a recipient to save and store a permanent copy for subsequent use (including printing).

The integrity of the document must be maintained so as to ensure that the document received by the recipient is the same as the document delivered

In the age of hackers and digital corporate espionage, this is a fundamental requirement. A public market participant that seeks to deliver documents electronically must ensure that adequate security measures, firewalls and other safeguards are provided for. 

The deliverer of the document must keep a record of delivery for evidentiary purposes

The CSA's guidance on record-keeping forces us to ask a simple a question: How can electronic delivery be confirmed? If the electronic delivery amounts to making a document available online, then it is important to ensure that the document remains online. One way of evidencing that a document was online is tracking the number of times a document has been viewed or downloaded over a period of time. Website analytics software can certainly provide this type of information for little or no cost. However, it is important to understand that such information is aggregated and will not provide the specific identity of the person viewing or downloading the document at any given moment. That would be contrary to privacy legislation, absent the express consent of the website visitor.

Consent to Electronic Delivery

Although there is no requirement under securities legislation to obtain express consent for electronic delivery, electronic commerce legislation may impose such a requirement. Nevertheless, obtaining express consent to deliver documents electronically is recommended as a best practice.

Proxy Documents

Proxy documents require particular attention as they are a means by which securityholders can communicate with issuers. Requirements under securities legislation that a form of proxy or proxy be in written form can certainly be accomplished through electronic means. Even the execution of a proxy document can be accomplished without a manual signature, provided the means by which the execution of the document is obtained provides a reliable means of confirming the person's identity, and establishing that the electronic signature is incorporated, attached or associated with a specific proxy.

Conclusion

As the delivery of electronic documents becomes more and more prevalent, it is important for securities industry participants to ensure that their practices fall within the bounds of the legal framework established for electronic communication and delivery of documents.

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