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Notice and National Policy (effective January 1, 2000): NP - 11-201- Delivery of Documents by Electronic Means
Notice and National Policy (effective January 1, 2000): NP - 11-201- Delivery of Documents by Electronic Means
NATIONAL POLICY 11-201
DELIVERY OF DOCUMENTS BY
ELECTRONIC MEANS
Notice of Policy
The Commission has, under Section 143.8 of the Securities Act (the "Act"), adopted National Policy 11-201,Delivery of Documents by Electronic Means ("NP 11-201" or the "Policy"). NP 11-201 is an initiative of theCanadian Securities Administrators ("CSA") and has been or is expected to be implemented as a policy in allof the jurisdictions represented by the CSA. NP 11-201 is being adopted concurrently with National Policy 47-201 ("NP 47-201"), Trading Securities Using the Internet and Other Electronic Means.
On June 13, 1997, the CSA published a Concept Proposal Respecting Delivery of Documents by IssuersUsing Electronic Media (1997), 20 OSCB 3075 and solicited comments in connection therewith. As a resultof the CSA's consideration of the comments received, on December 18, 1998, the CSA published forcomment NP 11-201 and NP 47-201 at (1998), 21 OSCB 7782 (the "1998 Draft Policies").
During the comment period on the 1998 Draft Policies, which ended on February 17, 1999, the CSA receiveda number of submissions. The comments provided in these submissions have been considered by the CSA,and the final version of NP 11-201 being published with this Notice reflects the decisions of the CSA in thisregard. Appendix A of this Notice lists the commenters on the 1998 Draft Policies and Appendix B providesa summary of the comments received and the responses of the CSA.
After reviewing the comment letters received in connection with its request for comments, the CSA decidedto make a number of changes to NP 11-201. The changes made were not material and the CSAconsequently are not republishing NP 11-201 for comment.
NP 11-201 and NP 47-201 are effective January 1, 2000.
Substance and Purpose
The substance and purpose of NP 11-201 is to state the views of the CSA on how obligations imposed bysecurities legislation (as defined in NP11-201) to deliver documents can be satisfied by electronic means.Under the Policy, the CSA indicate that, as a general principle, the delivery requirements of securitieslegislation may be satisfied by electronic means. The CSA state their views that there are four componentsto electronic delivery that should be satisfied in order to show good delivery: notice of delivery to the recipient,access of the recipient to the document, evidence of delivery and non-corruption or alteration of the documentin the delivery process. The first three components can be satisfied through the use of a consent to electronicdelivery delivered by a person or company to a proposed recipient of documents by electronic means.
Summary of Changes
The following changes have been made to NP 11-201:
a) Drafting and clarification changes:
i) inconsequential drafting changes have been made to subsections 1.3(2)(b), 2.2(4), 2.5(2)5,2.5(5), 2.6(2), 2.7, 3.1(1) and 3.1(2),
ii) paragraph 2.5(2)1 has been amended to refer to a list of the types of documents that areelectronically deliverable,
iii) subsection 2.1(7) has been amended to clarify the circumstances under which an issuermay refer an intended recipient to a third party provider's website,
iv) subsection 2.5(2) has been amended to clarify the following matters to be set out in aconsent form:
A) notice of the availability of a paper version of the document need only be given if thedeliverer will make a paper version available in accordance with the guidelines setout in subsection 2.3(6),
B) the procedures to be used by the deliverer to maintain the confidentiality ofinformation about the recipient where necessary, and
C) that the intended recipient is not obligated to consent to electronic delivery,
and corresponding changes have been made to the sample consent form (Appendix A tothe Policy),
v) clarification has been provided in subsection 3.4(1) regarding the use of multimediacommunications; specifically, the CSA have stated their view that any informationpresented in multimedia communications that cannot be reproduced identically in non-electronic form should not be included in statutorily mandated disclosure documents, and
vi) a new subsection 3.4(2) has been added to clarify that issuers may use multimediacommunications to compile and disseminate publicly available information;
b) subsection 2.3(6) has been changed to state that registrants such as brokers and dealers are notrequired to make available a paper version of electronically delivered documents in the conductof newly established businesses or divisions that operate on an electronic basis without paper,provided that such deliverers continue to comply with all applicable securities legislation in theconduct of their business;
c) subsection 2.5(6) has been changed to permit a deliverer to request a "blanket" consent toelectronic delivery, provided that the intended recipient is made aware of the scope of the consentand has the technological capability to access documents to be delivered by each deliverer thatproposes to rely on the consent; and
d) section 2.8 has been added to provide that electronic delivery of materials to recipients shouldbe made contemporaneously with the mailing of the paper version of such materials even thoughthe deliverer is able to electronically deliver such materials sooner.
Outstanding Matters
The CSA intend to pursue several issues arising from the comment letters received, including the following:
a) establishment of a mechanism by which issuers and other market participants can obtain relief fromcertain provisions which currently preclude electronic delivery;
b) permitting the use of electronic media for the proxy-solicitation and voting process; and
c) the use of authentication technologies as "digital signatures".
Text of Policy
The text of NP 11-201 follows. Apart from minor changes described under the heading "Summary ofChanges", NP 11-201 is unchanged from the version published at (1998), 21 OSCB 7782.
DATED: December 15, 1999.
List of Commenters
1. Tupper Jonsson & Yeadon by letter dated February 4, 1999.
2. CMG-Worldsource Financial Services Inc. by letters dated February 8, 1999.
3. Toronto Stock Exchange by letter dated February 10, 1999.
4. The Canadian Depository for Securities Limited by letter dated February 15, 1999.
5. Royal Trust Corporation of Canada by letter dated February 15, 1999.
6. ADP Independent Investor Communications Corporation by letter dated February 15, 1999.
7. Canadian Bankers Association by letter dated February 17, 1999
8. Sun Life Assurance Company of Canada by letter dated February 17, 1999.
9. Security Transfer Association of Canada by letter dated February 17, 1999.
10. Investment Funds Institute of Canada by letters dated February 17, 1999.
11. Bennett Jones by letter dated February 17, 1999.
12. McCarthy Tetrault by letter dated February 22, 1999.
13. Osler, Hoskin & Harcourt by letter dated March 25, 1999.
APPENDIX B to Notice of National Policy 11-201
The following is a summary of the comments received and the CSA's responses thereto.
General Comments
Comments
Most commenters agreed with the CSA's view that information technology advances can besuccessfully incorporated into the existing securities legislation framework without undermining investorprotection. Many commenters expressed their support for the CSA's efforts in developing NP 11-201and NP 47-201, which will facilitate more efficient and cost-effective communications with investors andwill give investors more choice and flexibility in how they receive information.
One commenter asked that the CSA consider further the desirability of implementing NP 11-201 as amandatory rule. Two commenters asked for greater clarity, requesting that some of the commentarypublished with the 1998 Draft Policies be included in NP 11-201. A number of the commenters raisedconcerns regarding the interaction of National Policy Statement No. 41 ("NP 41") with NP 11-201 andthe procedure, form and content respecting investors' consent to electronic delivery of documents.While commenters generally provided favourable comments regarding the broad, facilitative approachoutlined in both NP 11-201 and NP 47-201, concerns were raised that NP 11-201 does not specificallycontemplate two-way communications between investors and market participants. One commenterasked that NP 11-201 clarify that the policies currently followed for mailed distribution of materials willbe carried forward into the electronic environment without imposing additional burdens on marketparticipants.
Response
The CSA considered enacting NP 11-201 and NP 47-201 as mandatory rules. However, the CSAdecided not to do so because of the constant and rapid change of the electronic medium.Consequently, NP 11-201 does not mandate any particular procedures or rules regarding the use ofthe electronic medium by market participants. Instead, NP 11-201 sets out guidelines while allowingparticipants to determine how they wish to comply with corporate and securities law requirements forthe delivery of materials to securityholders. NP 11-201 does not change any substantive lawrequirement.
In response to the comments received, certain changes have been made to the sample consent formto add items not previously set out therein. The CSA have also liaised with the CSA committeeresponsible for reformulating NP 41, which will be replaced by National Instrument 54-101 ("NI 54-101").The CSA forwarded commenters' views regarding the interaction of NP 11-201 with the rules regardingcommunications with beneficial owners of securities. The CSA intend to revisit the issue of two-waycommunication between investors and market participants after additional work is done to determinehow best to address this matter.
Specific Comments
1. Consent to Electronic Delivery
A. "Blanket" Consents and Multiple Deliverers
Comments
A majority of the commenters raised concerns about the provisions in NP 11-201 regarding the use ofconsent forms, particularly the requirement that a consent form should only authorize electronic deliveryby one deliverer. One commenter submitted that NP 11-201 could be interpreted such that a singleconsent form provided to a transfer agent could be treated by that agent as a consent to the electronicdelivery of materials for all applicable issuers represented by that agent. Several commenters alsostated that an intermediary such as a trustee, custodian, broker, or mutual fund dealer should not berequired to obtain a separate consent each time a client invested in a new issuer's securities orpurchased new funds through a broker or dealer. Additionally, four commenters suggested that botha dealer and the fund companies from whom an investor purchased funds through such dealer shouldbe entitled to rely on a single consent obtained by the dealer. One commenter felt that if anintermediary obtained a consent to electronic delivery, and there were several intermediaries in a"chain", that consent received by such intermediary, which was also an intermediary itself, should bedeemed to be a consent on behalf of all clients in the "chain". Another commenter, however, thoughtthat as a general rule, a blanket consent would not be appropriate, but suggested that NP 11-201provide an exception where the business of the deliverer is carried on wholly electronically. Twocommenters stated that the various provisions of section 2.5 raised doubts as to whether a "blanket"consent could be obtained and suggested that the matter be clarified to allow an issuer or intermediaryto secure a "universal" or "blanket" consent.
Response
The CSA have amended subsection 2.5(6) of NP 11-201 to allow for a "blanket" consent to be usedwhere appropriate, for example, for all mutual funds managed by one manager or for all funds withina fund family. Likewise, an intermediary such as a dealer, trustee or custodian will be able to obtain ablanket consent in respect of more than one issuer provided that the method of electronic delivery andthe hardware and software required to access electronically delivered documents will be consistentacross different issuers. However, the CSA maintain their position that a blanket consent to electronicdelivery will not generally be acceptable unless: (a) the intended recipient is aware that consent is beingsought in respect of more than one deliverer (potentially including deliverers not presently contemplatedby the recipient), and (b) the recipient has the technological capability to access the documents to bedelivered by each proposed deliverer. Market participants, including intermediaries, are encouragedto structure their affairs to take advantage of the efficiencies and cost savings offered by the electronicmedium as long as appropriate steps are taken in obtaining an informed consent.
B. Notice and Evidentiary Burden
Comments
Three commenters stated that it should be mandatory for a deliverer to obtain a written consent toelectronic delivery and to specify the steps that the deliverer will take to give notice to the investor. Oneof these commenters also suggested that a deliverer should not be allowed to give an intended recipientthe option of monitoring the deliverer's website on a regular basis, thereby eliminating any need for thedeliverer to give separate notice that a document has become available; the commenter furthersuggested that it is not appropriate for NP 11-201 to provide that notice can be effected "in any manner"(such as solely through newspaper advertisements, for example). Additionally, one of the commentersfelt strongly that deliverers should not be allowed to deliver documents electronically without obtaininga recipient's prior consent because the result could be a further disenfranchisement of securityholders,who at the present time do not always receive documents on a timely basis. On the other hand, othercommenters were not opposed to allowing deliverers to decide whether or not to obtain prior consentto electronic delivery, although one commenter suggested that subsection 2.1(5) of NP 11-201specifically outline the evidentiary burden that deliverers would have to meet to prove due delivery if theychose to deliver documents electronically without obtaining prior consent.
Response
In light of the overriding approach taken by the CSA, NP 11-201 will not mandate that deliverers obtainprior written consent to electronic delivery. NP 11-201 is intended to allow parties to take advantage oftechnological advancements by providing general guidance to market participants regarding the useof electronic media, rather then set out particular mandatory procedures or rules. The responsibilityremains with market participants to determine what is reasonable to comply with the laws as set out inapplicable governing legislation. Market participants are reminded that they bear the evidentiary burdenof providing that documents were in fact delivered. The CSA are of the view that it is not practicableto outline specifically the evidentiary burden if a deliverer chooses not to seek prior consent. Finally,market participants are reminded that they continue to be responsible for complying with their legalobligations under securities legislation regardless of the form of delivery employed.
C. "Paperless" Market Participants
Comments
One commenter suggested that NP 11-201 should not preclude market participants from setting upoperations where all communications would be effected electronically and that such deliverers shouldnot be under any obligation to provide a paper version of documents delivered electronically. Twocommenters disagreed with this approach noting that, at least for certain types of corporate actions,documents should continue to be available in paper format.
Response
Given the current technological climate and the fact that not all investors have the ability to utilizeelectronic communications, the CSA are of the view that, for most market participants, it is notappropriate at this time to do away with a paper-based system. Nevertheless, the CSA recognize thatsome market participants may wish to set up completely paperless systems. The CSA have thereforemade certain changes to subsection 2.3(6) of NP 11-201 to account for such a business model forbrokers and dealers who establish new businesses or divisions that are intended to operate on anelectronic basis without paper. Registrants are reminded, however, that refusal to deliver a paperversion of documents may constitute a breach of their obligations under securities legislation. The CSAremain of the view that it is not appropriate at this time for issuers, and for market participants who areor may be required to deliver documents on behalf of issuers, to use an entirely paperless businessmodel. It is recommended that such parties continue to make available, at no cost to investors, paperversions of documents delivered electronically if requested to do so.
It had also been brought to the CSA's attention that an issuer or other deliverer may be in a position tosend documents electronically several weeks prior to being able to send out paper versions of the samedocuments because of the time involved in preparing paper copies for mailing. The CSA are of the viewthat electronic delivery of materials to investors should be made contemporaneously with the mailingof the paper version of such materials, even if the capability exists to deliver the electronic versionsooner. A new section 2.8 has been added to the Policy to address this matter. The CSA also note thatdelivery requirements under securities legislation contemplate that delivery will be made at the sametime to all securityholders.
D. Draft Form of Consent
Comments
Two commenters suggested that the phrase "list of documents" used in the sample consent formshould be clarified to refer to a list of the types of documents to which a consent would apply. Twocommenters suggested that the consent form itself contain, at a minimum, the information set out inparagraphs 2.5(2)1 through 7. Additionally, one of the commenters recommended that the consent formstate that consent to electronic delivery cannot be required as a condition of doing business.
Response
The consent form is intended to provide guidance and can be modified to fit the circumstancesapplicable to a particular market participant. The CSA note that the contents of paragraphs 2.5(2)1through 7 are already referenced in the consent form. In response to the comments received, the formhas been modified to refer to a list of the types of documents that can be delivered. The form has alsobeen modified to state that a recipient is under no obligation to consent to electronic delivery. Finally,the form has been changed to include a reference to procedures to be taken by a deliverer to maintainconfidentiality and to specify that in certain circumstances, a paper version of documents deliveredelectronically may not be made available by the deliverer.
2. Interface of NP 11-201 with Policy on Communication with Beneficial Owners of Securities
Comments
Four of the commenters felt that it was important that NP 11-201 be integrated with NI 54-101, theproposed instrument dealing with communications with beneficial owners of securities. Twocommenters stated that to adopt NP 11-201 in isolation would lead to inequities between the treatmentof registered and non-registered securityholders; three of the commenters suggested that the CSAconsider the adoption of an interim rule permitting electronic delivery of documents to beneficial ownersof securities, provided such delivery satisfies the criteria set out in NP 11-201.
With regard to the interface between NP 11-201 and NI 54-101, one commenter submitted that it wasinconsistent to allow an intermediary to obtain a "blanket" consent to not deliver certain documents(which is allowed under NI 54-101) while at the same time requiring such an intermediary to secureconsent to electronic delivery of documents on an issuer by issuer basis. One commenter suggestedthat NI 54-101 should be amended to eliminate the requirement to obtain prior consent to electronicdelivery and another stated that NP 11-201 should specify that a trustee or custodian can be the"deliverer" of documents to beneficial owners of securities.
One commenter requested that NP 11-201 be amended to state explicitly that the term "prepaid mail"found in securities legislation cannot be interpreted expansively so as to include the sending ofdocuments electronically and that NP 11-201 should set out which delivery obligations in securitieslegislation preclude electronic delivery. Another commenter asked that the definitions in NP 11-201 beclarified so that there was no uncertainty regarding the ability to deliver trade confirmationselectronically.
Response
The CSA will not delay implementing NP 11-201 pending reformulation of NI 54-101. The CSA have,however, liaised with the committee reformulating NI 54-101 to achieve integration of NP 11-201 withNI 54-101 in order to facilitate the use of electronic delivery methods in the procedures established forcommunications with beneficial owners of securities.
The CSA are of the view that market participants should satisfy themselves as to which legislativeprovisions preclude electronic delivery. The CSA are currently considering possible solutions tolegislative impediments to electronic delivery, including permitting applications for exemptions fromcertain legislative provisions in securities legislation that currently preclude the use of electronicmethods of delivery. The CSA will also undertake to liaise with the provincial and federal authoritiesresponsible for the administration of applicable corporate statutes to assist in the process of removinglegislative barriers to electronic methods of delivery.
The CSA are of the view that NP 11-201 does not preclude a trustee or custodian from deliveringdocuments to beneficial owners of securities.
The CSA note that subsection 1.3(1) explicitly includes trade confirmations within the list of documentsthat can be delivered electronically.
4. Electronic Delivery Using SEDAR or Other Third Party Providers
Comments
Two commenters requested that subsection 2.1(7) of NP 11-201 be clarified because the currentwording may lead to uncertainty regarding:
1. whether it is acceptable for deliverers to obtain written consent from securityholders to enablesuch deliverers to refer securityholders to the SEDAR website to access public filings (providedSEDAR continues to offer ready access to filed documents on a timely basis); and
2. whether third party providers of electronic delivery services can post documents to be deliveredon a website or whether actual "delivery" of documents by such third party providers is required.
One commenter suggested that if prior consent is obtained, a deliverer should be allowed to refer anintended recipient to a third party provider such as SEDAR. Another commenter wanted assurance thatthe SEDAR website would be able to handle the projected increased volume of traffic, especially onceproxy-related materials are permitted to be sent and voting is permitted to be done electronically.Another commenter suggested that SEDAR satisfies the requirements of NP 11-201 and that it can beused successfully in the disclosure, dissemination and shareholder communication processes.
Response
The CSA have made changes to subsection 2.1(7) to make it clear that referring an intended recipientto a third party website will generally not constitute valid delivery unless the recipient has previouslyconsented to this form of delivery. Further, the CSA note that subsection 2.1(7) does not prohibitreferrals to third party sites; it merely recommends that there be prior agreement with the third party forthis arrangement and that, in such case, the third party may deliver the documents by sending them tothe recipient or by sending notification to the recipient each time a document is available on its website,unless consent to an alternative method of delivery has first been obtained (i.e., prior agreement byrecipient to monitor the third party's website).
5. Delivery of Unaltered Documents
Comment
One commenter suggested that deliverers should only be obliged to take "reasonable" as opposed to"appropriate" measures to ensure that electronic documents are not tampered with or altered.
Response
The CSA are of view that it is not sufficient to take reasonable steps if such reasonable steps are notappropriate to ensure that electronic documents are not tampered with or altered. The CSA haveamended subsection 2.6(2) of NP 11-201 to provide that deliverers should ensure that all reasonablyappropriate and necessary technical steps are taken to ensure that documents are not altered.
6. Inability to Effect Electronic Delivery
Comments
One commenter was of the opinion that section 2.7 of NP 11-201 imposes a higher burden on issuersto effect delivery than is currently the case because securities legislation does not generally requireredelivery of documents if there is a failure in delivery. The commenter suggested that, at most, anobligation to redeliver should arise only if documents are not delivered due to a "systemic failure" ratherthan because the recipient has not kept the deliverer apprised of his or her current e-mail address, forexample. Another commenter, while not questioning the requirement to effect delivery by alternativemeans if electronic delivery is not successful, specified that NP 11-201 should provide sufficient timefor alternative methods of delivery to be effected, especially if a chain of intermediaries is involved.
Response
NP 11-201 sets out guidelines rather than specific requirements for electronic delivery. The obligationto deliver documents is found in applicable governing legislation and NP 11-201 is not intended to alterthat obligation so as to impose additional burdens on market participants. Market participants shouldadopt reasonable policies and procedures to deal with failed electronic delivery.
7. Confidentiality of Documents
Comment
One commenter suggested specific revisions to section 3.2 of NP 11-201 to make it clear that adeliverer's obligation to maintain confidentiality extends only to confidential information in a documentrather than to the document itself, where the document contains a mix of confidential and non-confidential information.
Response
The CSA agree that the obligation to maintain confidentiality extends only to confidential information,but believe no change is necessary to clarify this matter.
8. Liability for Hyperlinked Information
Comments
Two commenters were of the view that if a deliverer uses hyperlinks to provide access to otherdocuments and information, only the original information provider should be held responsible for anymisrepresentations or inaccuracies in the hyperlinked information. Similarly, another commenter statedthat it would be unacceptable, for example, to impose liability for inaccurate or misleading hyperlinkedinformation on a transfer agent carrying out its responsibilities in the course of an electronic distributionof proxy-related materials.
Response
NP 11-201 is not proscriptive but rather contains a warning as to the possible consequences ofincorporating hyperlinks into a statutorily mandated disclosure document. Ultimately, whether liabilitywould attach for errors and misrepresentations in hyperlinked information and the persons liabletherefor is a question of law to be applied to the particular facts of a case.
9. Delivery of Proxy-Related Materials
Comments
Several commenters suggested that the CSA should ensure that all potential barriers to electroniccommunications are resolved coincidentally with the adoption of NP 11-201, including legislativechanges to permit electronic delivery of proxy-related materials. Other commenters similarly suggestedthat the Policy should be amended to permit a two-way flow of information by electronic means,including the electronic delivery of proxy-related materials and the electronic return of completed proxiesand voting instructions. Another commenter requested that NP 11-201 set out which proxy-relatedmaterials can be delivered electronically and which are required to be delivered by pre-paid mail. Thecommenter also noted that there appeared to be a conflict between subsections 1.3(1) and 1.3(3) ofNP 11-201.
Response
The CSA will conduct further deliberations regarding the manner in which the rules regarding deliveryof proxy-related materials and proxy solicitation can be incorporated into the electronic medium. TheCSA are of the view that market participants should satisfy themselves as to which proxy-relatedmaterials can be sent electronically and which must be sent in paper format.
The CSA also note that there is no conflict between subsections 1.3(1) and 1.3(3) of NP 11-201because the former is expressly made subject to the latter.
10. Multimedia Communications
Comments
One commenter recommended that NP 11-201 provide more guidance regarding the allowable use ofmultimedia communications in statutorily mandated disclosure documents. This commenter requestedthat a definition of "multimedia communications" be added into NP 11-201. The commenter alsosuggested that the potential for misrepresentation when information is presented other than in textformat should not result in a complete bar to the use of multimedia communications in presentinginformation in statutorily mandated disclosure documents. The commenter urged the CSA toreconsider its position on this issue and suggested that the prospectus review process could be used,during a trial period, to establish standards with respect to the types of multimedia communications thatwould be acceptable in statutorily mandated disclosure documents.
Response
Clarification regarding the use of "multimedia communications" in statutorily mandated disclosuredocuments has been provided in section 3.4 of the Policy. The CSA are of the view that graphics,charts and photographs can be included in statutorily mandated disclosure documents so long as suchinformation can be provided in both electronic and non-electronic formats. Communications in the formof video, animation, audio, etc. cannot be readily reproduced in a non-electronic format. The CSAtherefore remain of the view that it is not appropriate for issuers to incorporate these types of multimediacommunications into statutorily mandated disclosure documents. There are other avenues availablefor multimedia communications that can be used by issuers and other market participants. Whereissuers are of the view that a certain proposed form of multimedia communications would materiallyenhance an investor's understanding of a proposed offering of securities, issuers may discuss thismatter with staff of the appropriate securities regulatory authority. Issuers wishing to use the electronicmedium to compile and disseminate publicly available information (e.g., prepare a CD-Rom withhistorical financial statements) may do so, as provided in subsection 3.4(2) of the Policy. The CSA willalso recommend that the issue of multimedia communications be canvassed in the course of the reviewof the current rules relating to permissible methods of advertising and the continuous disclosure regime.
NATIONAL POLICY 11-201
DELIVERY OF DOCUMENTS BY ELECTRONIC MEANS
TABLE OF CONTENTS
PART TITLE
PART 1 GENERAL
1.1 Definitions
1.2 Purpose of this Policy
1.3 Application of this Policy
1.4 No Waiver
1.5 National Policy 47-201
PART 2 ELECTRONIC DELIVERY OF DOCUMENTS
2.1 Basic Components of Electronic Delivery of Documents
2.2 Notice
2.3 Access
2.4 Evidence of Delivery
2.5 Consent to Electronic Delivery
2.6 Delivery of an Unaltered Document
2.7 Inability to Effect Electronic Delivery
PART 3 MISCELLANEOUS ELECTRONIC DELIVERY MATTERS
3.1 Form and Content of Documents
3.2 Confidentiality of Documents
3.3 Hyperlinks
3.4 Multimedia Communications
PART 4 EFFECTIVE DATE
4.1 Effective Date
APPENDIX A - Sample Consent Form
NATIONAL POLICY 11-201
DELIVERY OF DOCUMENTS BY ELECTRONIC MEANS
PART 1 GENERAL
1.1 Definitions
In this Policy
"delivered" means sent, delivered or otherwise communicated, and "deliver", "delivery" and similarwords have corresponding meanings;
"delivery requirements" means the requirements in securities legislation that documents be delivered;and
"electronic delivery" means the delivery of documents by facsimile, electronic mail, CD-ROM, diskette,the Internet or other electronic means;
"securities legislation" means the statutes and other instruments listed in Appendix B of NationalInstrument 14-101 Definintions;
"securities regulatory authorities" means the securities commissions and similar regulatory authoritieslisted in Appendix C of National Instrument 14-101 Definitions;
1.2 Purpose of this Policy
(1) Developments in information technology provide market participants with the opportunity todisseminate documents to securityholders and investors in a more timely, cost-efficient, user-friendly and widespread manner than by use of paper-based methods. The securitiesregulatory authorities recognize that information technology is an important and useful tool inimproving communications to securityholders and investors, and wish to ensure that theprovisions of securities legislation that impose delivery requirements are applied in a mannerthat recognizes and accommodates technological developments without undermining investorprotection.
(2) Securities legislation contains many delivery requirements. In some cases, the method ofdelivery is mandated by the legislation; for instance, delivery may be required to be made by"prepaid mail". In many cases, however, the method of delivery is not mandated. In light ofrapid technological developments, issues have arisen as to whether, or in what circumstances,delivery of documents by electronic means would satisfy the delivery requirements of securitieslegislation if the method of delivery is not mandated. The purpose of this Policy is to state theviews of the securities regulatory authorities on these issues in light of the general policy goalsreferred to in subsection (1).
1.3 Application of this Policy
(1) Subject to subsections (3) and (4), this Policy applies to any documents required to bedelivered under the delivery requirements. This includes prospectuses, financial statements,trade confirmations, account statements and proxy-related materials. Examples of documentsthat are not required by securities legislation to be delivered, and which are therefore notsubject to this Policy, are documents delivered by securityholders or investors to issuers orregistrants, for instance, in connection with the return of completed proxies or votinginstructions.
(2) For greater certainty, this Policy applies in the circumstances described in subsection (1), andtherefore applies to documents delivered by
(a) issuers, registrants or persons or companies acting on behalf of issuers or registrants,such as transfer agents or other service providers; and
(b) persons or companies required to send documents under National Policy Statement No.41 and any successor instrument thereto, including depositories, participants indepositories, intermediaries and service providers to those persons or companies.
(3) This Policy does not apply to deliveries where the method of delivery is mandated by securitieslegislation and that method does not include electronic means. Market participants are alsoreminded that certain corporate law statutes may also impose requirements concerning themethod of delivery in some circumstances, without permitting electronic means of delivery. Forexample, some statutes require the use of prepaid mail for the delivery of proxy-relatedmaterials.
(4) This Policy does not apply to documents filed with or delivered by or to a securities regulatoryauthority or regulator.
1.4 No Waiver - This Policy addresses only the method of delivery of documents and issues relating tothe delivery of documents. This Policy does not address, and should not be construed as a waiverof, any requirements of securities legislation relating to content, accuracy, currency, amending ofinformation or timing of delivery of documents or information. Deliverers are reminded that adocument that is intended to be delivered by electronic delivery should not be less complete, timely,comprehensive or, if applicable, confidential than a paper version of the same document.
1.5 National Policy 47-201 - Market participants are referred to National Policy 47-201 TradingSecurities Using the Internet and Other Electronic Means, which states the views of the securitiesregulatory authorities on issues relating to the use of the Internet and other electronic means ofcommunication to facilitate trading in securities.
PART 2 ELECTRONIC DELIVERY OF DOCUMENTS
2.1 Basic Components of Electronic Delivery of Documents
(1) The securities regulatory authorities are of the view that electronic delivery of a document maybe effected in a manner that satisfies the delivery requirements.
(2) There are four basic components to the electronic delivery of a document. Those componentsare as follows:
1. The recipient of the document receives notice that the document has been, or will be,sent electronically or otherwise electronically made available, as described in section 2.2.
2. The recipient of the document has easy access to the document, as described in section2.3.
3. The deliverer of the document has evidence that the document has been delivered orotherwise made available to the recipient, as described in section 2.4.
4. The document that is received by the recipient is not different from the documentdelivered or made available by the deliverer, as described in section 2.6.
(3) An electronic delivery of a document would satisfy the delivery requirements if each of the fourcomponents were satisfied. If any one of these components were absent, however, theeffectiveness of the delivery would be uncertain.
(4) A deliverer generally may satisfy the notice, evidence and, subject to subsections 2.3(3) to (6),the access components of electronic delivery by obtaining, in accordance with section 2.5, theinformed consent of an intended recipient to the electronic delivery of a document, and thendelivering the document in accordance with the consent. The process of seeking and obtaininga consent is suggested as a mechanism to permit the deliverer to inform the recipient of themanner in which the deliverer proposes to make electronic delivery of a document ordocuments, and to permit the recipient to consider and agree to that manner of delivery. Oncegiven, a consent is evidence that the deliverer and the recipient have agreed on all relevantaspects concerning the manner of the electronic delivery of a document. Therefore, theconsent gives rise to the inferences that, if a document is sent by electronic delivery inaccordance with the terms of a consent
(a) the recipient will receive notice of the electronic delivery of the document;
(b) the recipient has the necessary technical ability and resources to access the document;and
(c) the recipient will actually receive the document.
(5) A deliverer may effect electronic delivery without the benefit of a consent, but does so at therisk of bearing a more difficult evidentiary burden of proving that the intended recipient hadnotice of, and access to, the document, and that the intended recipient actually received thedocument, than if a consent had been obtained.
(6) In addition to the methods of electronic delivery described in this Policy, a deliverer may useany means it has at its disposal to deliver a document, subject to securities legislation.Deliverers are reminded that if a question arises as to whether a deliverer is in compliance withdelivery requirements, a deliverer will have to satisfy the securities regulatory authorities and,in some cases, a court that it has used appropriate and reasonable means to effect delivery.
(7) An attempt to deliver documents by referring an intended recipient to a third party provider ofthe document, such as SEDAR, will likely not constitute valid delivery of the document, in theabsence of consent given by the intended recipient to such method of delivery. However, theCSA are of the view that valid delivery can be made by a third party provider where it hasagreed to act as agent for the deliverer in connection with the delivery of documents andactually effects the delivery.
2.2 Notice
(1) As stated in paragraph 1 of subsection 2.1(2), one of the basic components of electronicdelivery of a document is that an intended recipient of the document have notice of theelectronic delivery of the document. Notice can be effected in any manner, electronic or non-electronic, that advises the recipient of the proposed electronic delivery. Examples of ways thatnotice can be provided are electronic mail, telephone or communication in paper form.
(2) Some forms of electronic delivery, such as delivery by electronic mail, may not require aseparate notice, as the transmission of the electronic mail delivery itself will be sufficient noticeto a recipient. On the other hand, a deliverer intending to effect electronic delivery by placinga document on a website and permitting intended recipients to retrieve or download thedocument should not assume that the availability of the document will be known to recipientswithout separate notice of its availability being given.
(3) As described in section 2.1, it is recommended that a deliverer of a document obtain theconsent of an intended recipient to electronic delivery, and deliver the document in accordancewith the terms of the consent, in order to satisfy the notice component. The consent could setout the steps that the deliverer will take to give notice to the recipient that a document is beingdelivered by way of electronic delivery. If a deliverer intended to effect electronic delivery byplacing a document on a website, the consent would indicate this fact and indicate how thedeliverer would bring to the attention of the intended recipient that a document was available.Alternatively, the consent could evidence the agreement of the recipient to monitor thedeliverer's website on a regular basis, thereby eliminating any need for the deliverer to provideseparate notice to the recipient.
(4) It would be appropriate, in certain circumstances, for a deliverer to provide special or additionalnotice of the electronic delivery of a document to a recipient, even if the recipient has agreed,for example, to monitor a website on an ongoing basis as discussed in subsection (3). Thisspecial or additional notice may be appropriate, for example, in cases of special meetings.
2.3 Access
(1) As stated in paragraph 2 of subsection 2.1(2), one of the basic components of electronicdelivery of a document is that the recipient of the document have easy access to the document.As noted above, it is recommended that a consent be used to ensure that the intendedrecipient can acknowledge possession of the necessary technical ability and resources toaccess the document.
(2) The securities regulatory authorities are of the view that there are certain aspects of accessthat are fundamental to electronic delivery and that cannot be waived by a consent. Regardlessof the contents of a consent, the securities regulatory authorities would question theeffectiveness of an electronic delivery if those components were not satisfied. Thosecomponents are described in subsections (3) to (6).
(3) Deliverers should take reasonable steps to ensure that electronic access to documents is notburdensome or overly complicated for recipients. In that respect, the electronic systemsemployed by deliverers should be sufficiently powerful to ensure quick downloading,appropriate formatting and general availability. For example, a deliverer delivering a documentby posting it on a website should ensure that the server for the website is capable of handlingthe volume of recipients attempting to access the document.
(4) A document should remain available to intended recipients for whatever period of time isappropriate and relevant, given the nature of the document. For example, meeting materialsdelivered by way of posting to a website should remain posted until at least the date of themeeting.
(5) A document sent by electronic delivery should be sent in a way that enables the recipient toretain a permanent record of the document, as is the case with paper delivery of a document,if the recipient so chooses.
(6) It is recommended that deliverers make a paper version of every document delivered byelectronic means available at no cost to a recipient upon request by such recipient, regardlessof the form in which the document was originally delivered. However, the CSA are aware thatsome market participants may wish to set up entirely paperless systems. The CSA are of theview that registrants (i.e., brokers and dealers) may use such a business model for newlyestablished businesses or business divisions, but caution that such registrants remainresponsible for complying with all of their obligations under securities legislation. The CSAremain of the view that it is not appropriate at this time for issuers, and for market participantswho are or may be required to deliver documents on behalf of issuers, to use an entirelypaperless business model. It is recommended that such parties continue to make availableat no cost to investors paper versions of documents delivered electronically if requested to doso.
2.4 Evidence of Delivery
(1) As stated in paragraph 3 of subsection 2.1(2), if a deliverer receives a consent given inaccordance with this Policy to the electronic delivery of a document, the deliverer is entitled toinfer that a recipient actually received the document if it was sent in accordance with the termsof the consent.
(2) In the absence of consent received from an intended recipient, the securities regulatoryauthorities emphasize the importance of deliverers obtaining evidence of delivery of adocument to a recipient.
2.5 Consent to Electronic Delivery
(1) As described in subsection 2.1(4), the receipt by a deliverer of a consent by an intendedrecipient to electronic delivery, before the delivery of the document, satisfies the notice,evidence and, subject to subsections 2.3(3) to (6), access components of electronic deliverydescribed in subsection 2.1(2) if the electronic delivery is made in accordance with the termsof the consent.
(2) In order to ensure the adequacy and informed nature of a consent, it is recommended that aconsent deal with the following matters:
1. A list of the types of documents that are electronically deliverable.
2. A detailed explanation of the electronic delivery process, including whether separatenotice will be provided and, if so, how and when that notice will be provided.
3. Technical requirements for proper electronic retrieval of a document.
4. Software requirements for proper viewing of a document.
5. Notice of the availability at no cost to the recipient of a paper version of a document uponrequest to the deliverer, together with information about how to make this request, if apaper version is to be made available by the deliverer in accordance with the guidelinesprovided in subsection 2.3(6) of this Policy.
6. Information about the length of time that a document will be available for electronicdelivery.
7. Details of the process for revoking consent to electronic delivery.
8. Procedures to be used by the deliverer for maintaining the confidentiality of informationregarding the recipient, where necessary.
9. A statement that the intended recipient is not required to consent to electronic delivery.
(3) A sample consent form that would evidence understanding of, and agreement to, theinformation listed in subsection (2) is attached to this Policy as Appendix A. The securitiesregulatory authorities encourage deliverers to make use of this or a similar type of consentform. A consent may be given electronically or non-electronically.
(4) The securities regulatory authorities have no objection to a recipient consenting to theelectronic delivery of more than one type of document on an ongoing basis with the sameconsent form, so that repeated requests for consent will be unnecessary.
(5) Despite subsection (4), the securities regulatory authorities suggest that blanket consents to"any documents" sent by a deliverer be used with caution, unless care has been taken toensure that any distinctions between the delivery of different types of documents areadequately dealt with in the consent form.
(6) The CSA suggest that a consent form address electronic delivery by only one deliverer unless:
a) it is clear to the recipient that consent is being sought for the delivery, including futuredeliveries, of documents by more than one deliverer; and
b) the methods of electronic delivery to be used by each deliverer are acceptable to therecipient.
(7) It is reasonable for a deliverer to consider consent to electronic delivery provided by a recipientto be valid until the deliverer is notified otherwise by the recipient, either in writing orelectronically.
(8) The securities regulatory authorities would not consider a request by a recipient for a paperversion of a document to constitute a revocation of prior consent to receive documents byelectronic delivery if there is no other indication of revocation of consent.
(9) The securities regulatory authorities consider it inappropriate for a deliverer to require that arecipient agree to electronic delivery.
2.6 Delivery of an Unaltered Document
(1) As described in paragraph 4 of subsection 2.1(2), effective electronic delivery of a documentrequires that the document that is received by the recipient not be different from the documentdelivered or made available by the deliverer. The deliverer should ensure, to the extentpossible, that no alteration or corruption of a document occurs during the electronic deliveryprocess. Deficiencies in the completeness or integrity of an electronically delivered documentwill raise questions as to whether the document has in fact been delivered.
(2) The issue of the completeness of a document that has been sent by electronic delivery is onethat cannot be dealt with by obtaining consents from intended recipients. Deliverers shouldensure that all reasonably appropriate and necessary technical steps are taken to ensure thatdocuments sent by electronic delivery arrive at their destination in a complete and unalteredform. These steps may entail adopting appropriate security measures to ensure that a thirdparty cannot tamper with the document.
2.7 Inability to Effect Electronic Delivery - If electronic delivery of documents is attempted by adeliverer but cannot be accomplished for any reason, delivery should be accomplished by analternative method, such as delivery of the document in paper form.
2.8 Timing of Electronic Delivery - Electronic delivery of materials to recipients should be madecontemporaneously with the mailing of the paper version of such materials even though the deliverermay be capable of electronically delivering such materials sooner.
PART 3 MISCELLANEOUS ELECTRONIC DELIVERY MATTERS
3.1 Form and Content of Documents
(1) For the sake of consistency, documents sent by electronic delivery may follow the formattingrequirements set out in the SEDAR Filer Manual, and the securities regulatory authorities haveno objection to a document delivered by electronic delivery being altered from the paper versionin accordance with these formatting requirements. For example, signatures may appear intyped form rather than graphical signature and text that is required to be in red ink may bepresented in capital letters using bold face type. Documents need not necessarily be inSEDAR-acceptable electronic format.
(2) As with documents filed under SEDAR, documents proposed to be sent by electronic deliveryshould be recreated in electronic format, rather than scanned into electronic format. This isrecommended because scanned documents can be difficult to transmit, store and retrieve ona cost-efficient basis and may be difficult to view upon retrieval.
3.2 Confidentiality of Documents - Some documents that may be sent by electronic delivery, such astrade confirmations, are confidential to the recipients. Deliverers should take all reasonablynecessary steps to ensure that the confidentiality of those documents is preserved in the electronicdelivery process, and are reminded that failure to do so may constitute a breach of obligations owedto clients under securities legislation.
3.3 Hyperlinks
(1) The hyperlink function can provide the ability to access information instantly, in the samedocument or in a different document on the same or another website.
(2) The use of hyperlinks within a document may not be appropriate for the reasons described insubsection (3), unless the hyperlink is to another point in that same document.
(3) A deliverer that provides a hyperlink in a document to information outside the document risksincorporating that hyperlinked information into the document and thereby becoming legallyresponsible for the accuracy of that hyperlinked information. Also, the existence of hyperlinksin a document delivered by electronic delivery to a separate document raises the question ofwhich documents are being delivered - only the base document, or the base document anddocuments to which the base document is linked. This issue may be particularly relevant in thedelivery of a prospectus, in which case care should be taken to ensure that it is clear to arecipient which of the documents being delivered constitute the prospectus.
(4) For documents sent by electronic delivery that contain hyperlinks to other documents,deliverers are encouraged to clearly distinguish which of the documents are governed bystatutory disclosure requirements, and which documents are not. This may be effected, forexample, by the use of appropriate headings on each page of the document.
(5) Deliverers are also reminded that paragraph 7.2(e) of the SEDAR Filer Manual prohibitshyperlinks between documents.
3.4 Multimedia Communications
(1) Multimedia communications are sometimes used to present information in varied combinationsof text, graphics, video, animation and sound. It is recommended that any informationpresented through multimedia communications that cannot be reproduced identically in non-electronic form not be included in statutorily required disclosure documents. This will ensurethat all recipients receive the same statutorily required information, regardless of theirmultimedia capabilities.
(2) Issuers may use multimedia communications to compile and disseminate publicly availableinformation.
(3) Deliverers are reminded that multimedia communications are subject to any applicablepromotional or advertising restrictions contained in securities legislation. These restrictionsmay be relevant, for example, when the multimedia communications appear on a deliverer'swebsite or are hyperlinked to a deliverer's website.
PART 4 EFFECTIVE DATE
4.1 Effective Date - This National Policy comes into force on January 1, 2000.
DELIVERY OF DOCUMENTS BY ELECTRONIC MEANS
APPENDIX A
SAMPLE CONSENT FORM
CONSENT TO ELECTRONIC DELIVERY OF DOCUMENTS
Securityholder Name:
TO: Name of Deliverer[s]
I have read and understand this "Consent to Electronic Delivery of Documents" and consent to the electronicdelivery of the documents [and/or types of documents] listed below that the deliverer[s] elect[s] to deliver tome electronically, all in accordance with my instructions below.
1. [list the documents and/or types of documents which are covered by this consent to electronicdelivery]
2. [give a detailed explanation of the electronic delivery process, including whether separate notice willbe provided, and if so, how and when that notice will be provided]
3. [state the technical requirements for proper electronic retrieval of documents]
4. [state the software requirements for proper viewing of a document]
5. I acknowledge that I may receive from the deliverer a paper copy of any documents deliveredelectronically at no cost if I contact the deliverer by telephone, regular mail or electronic mail at [insertphone, address, electronic mail, etc.] (may not be applicable in certain circumstances).
6. [describe the length of time that a document will be available for viewing and downloading]
7. I understand that I will be provided with a paper copy of any documents delivered electronically ifelectronic delivery fails.
8. [explain procedures to be used to maintain confidentiality of information regarding the recipient, wherenecessary]
9. I understand that my consent may be revoked or changed, including any change in the electronic mailaddress to which documents are delivered (if I have provided an electronic mail address), at any timeby notifying the deliverer of such revised or revoked consent by telephone, regular mail or electronicmail at [insert phone, address, electronic mail, etc.].
10. I understand that I am not required to consent to electronic delivery.