Ontario and Quebec (which provinces regulate the majority of offerings in Canada)
to develop an integrated disclosure system that would permit Canadian issuers to ac-
cess the U.S. capital markets using their home-country disclosure documents and of-
fering practices and that would permit U.S. issuers to raise capital in Canada using
U.S. documents and practices. In 1989, the SEC proposed for public comment the
rules, schedules, and forms that would form a basis for a multijurisdictional disclo-
sure system (MJDS). At the same time, the two Canadian provinces proposed that a
similar system be adopted in Canada for U.S. issuers. In 1990, the SEC reproposed
its rules, and in 1991, the MJDS was adopted by the SEC and the two Canadian
provinces (some adjustments were made to the system in 1993). The MJDS goes fur-
ther than just providing a framework for public offerings to be made simultaneously
in two or more jurisdictions. It also permits periodic disclosure requirements of one
of the participating countries to be met by the provision of disclosure documents pre-
pared in accordance with the other country’s requirements and additionally covers
cross-border tender offers and rights offers.
The system is a hybrid between the “common prospectus” approach and the “re-
ciprocal prospectus” approach. While it looks like a reciprocal system in that, in most
cases, documents prepared in accordance with the issuer’s home country’s require-
ments would be automatically accepted as having met the disclosure requirements of
the country into which the offering was made, the SEC stated in the proposing release
that Canada was chosen as the initial partner for the experiment because its require-
ments were so close to those of the United States. In other words, some degree of har-
monization (the first steps towards the development of a common prospectus) had al-
ready taken place.
Multijurisdictional and cross-border offerings by Canadian issuers in the United
States on the basis of Canadian documents is permitted in order to encourage cross-
border public offers and to facilitate the free flow of capital. The system also covers
specified rights and exchange offers in order to encourage Canadian issuers to extend
such offers to U.S. shareholders. At the time the MJDS was adopted, U.S. share-
holders were frequently “cashed out” of such offers and denied the investment op-
portunities they represent. The multijurisdictional disclosure system also permits ten-
der offers that are primarily Canadian in character to comply with the provisions of
the Williams Act (the portion of the Exchange Act that regulates tender offers) by
complying with the applicable Canadian tender offer regulations, again in order to
encourage such offers to be made to U.S. investors. The SEC stated that, given the
extensive Canadian regulator provisions that it discussed in its proposing release, the
United States did not have an overriding investor protection interest in insisting on
compliance with the specific regulatory provisions of the Williams Act.
An eligible issuer using the system may prepare a disclosure document according
to the requirements of its home jurisdiction and use that document for securities or
cash offerings in the other jurisdiction. Review of the document is as prescribed by
the issuer’s home country, and the home country’s regulatory authorities are respon-
sible for applying disclosure standards. Thus, documents prepared in accordance
with Canadian requirements generally are subject to no review by the SEC. Except
where the SEC has reason to believe that there is a problem, it does not independ-
ently review the filings made under the MJDS by Canadian issuers but relies on the
review conducted in Canada. Prospective investors in the United States receive the
Canadian disclosure document, plus a brief “wraparound” form that identifies the is-
suer’s agent for service in the United States, lists the documents regarding the issuer
14 • 14 GLOBALIZATION OF WORLD FINANCIAL MARKETS