MJDS Allows Canadian Issuers Easy Access to the U.S. Capital Markets
Overview
The Multijurisdictional Disclosure System (“MJDS”) adopted by the Securities and Exchange Commission (the “SEC”) and the Canadian Securities Administrators provides Canadian issuers a streamlined opportunity to more easily gain access to U.S. Capital Markets for both financing needs and other strategic reasons, including the opportunity for Canadian issuers to be listed on a U.S. securities exchanges such as the Nasdaq Stock Market (“NASDAQ”) or New York Stock Exchange (“NYSE”).
In general, under MJDS, Canadian issuers are able to make U.S. based public offerings of its securities either in connection with a concurrent Canadian public offering or on a U.S.-only basis, by registering their securities offerings with the SEC using a Canadian prospectus, in accordance with Canadian disclosure requirements. Ideally, the registration statement will be declared effective by the SEC upon receipt of notification of clearance from the principal Canadian securities regulator, allowing underwriters to market the proposed offering to U.S. investors in compliance with SEC rules and regulations.
Registering Securities in the U.S. with a MJDS Registration Statement
The Securities Act of 1933, as amended (the “Securities Act”), regulates offerings of securities in the United States. Unlike registration statements that are generally filed in an offering of securities in the U.S. under the Securities Act that must be prepared in accordance with the form and contents requirements of Form S-1 or S-3 (or Form F-1 or F-3 for foreign companies), a MJDS registration statement filed with the SEC will include a prospectus prepared in accordance with Canadian form and content requirements, with only slight modifications, such as the inclusion of certain legends relevant to U.S. investor and of U.S. federal tax considerations, and incorporating by reference copies of all documents filed into the Canadian prospectus (such as annual information forms, financial statements, material reports, etc.) Specific U.S. form and content disclosure requirements for executive compensation, risk factors, management’s discussion and analysis (“MD&A”), and exhibits, do not apply to a MJDS registration statement, although MJDS filers may voluntarily choose to include such information.
In addition, the Securities Exchange Act of 1934, as amended (the “Exchange Act”) establishes ongoing reporting requirements for companies that have securities listed on a U.S. securities exchange, such as NASDAQ. To comply with these sometimes onerous reporting obligations, MJDS filers are able to use their Canadian disclosure documents to meet these obligations, subject to certain corporate governance and disclosure requirements under U.S. federal legislation and the respective exchange requirements, as the case may be.
Key Advantages of MJDS
MJDS offers Canadian issuers a number of significant advantages over using other types of Securities Act registration forms when accessing the U.S. public capital markets such as:
- Streamlined process for Canadian issuers to be listed on a U.S. securities exchange, enhancing potential for coverage of a company by research analysts which may result in a higher valuation of the company.
- Canadian issuers are able to meet extensive SEC registration statement requirements by complying with more familiar Canadian form and content requirements.
- Avoids duplicative regulatory review of Canadian issuer’s registration statements and disclosures which reduces costs, time and other burdens that would otherwise exist.
- Canadian issuers can file a registration statement with the SEC that becomes effective immediately at the election of the Canadian issuer, generally without SEC review.
- Simplifies ongoing periodic reporting requirements by filing their Canadian continues disclosure documents with the SEC, subject to the addition of limited supplemental information.
- Canadian issuers are able to include financial statements in MJDS registration statements in accordance with IFRS without reconciliation to U.S. GAAP.
MJDS Eligibility
In order to be eligible to use a MJDS registration statement, as a starting point, a Canadian issue must:
- be a foreign private issuer incorporated or organized under the laws of Canada or a province or territory of Canada;
- have been subject to the continuous disclosure requirements of any securities commission or equivalent regulatory authority in Canada for at least 12 months (or, in some cases, 36 months) immediately preceding the filing of the applicable form and be currently in compliance with those disclosure requirements; and
- not be an “investment company” within the meaning of the Investment Company Act of 1940, as amended (the “1940 Act”), registered or required to be registered under the 1940 Act.
SRF Represented mCloud Technologies Corp in MJDS Offering and NASDAQ Listing
Sichenzia Ross Ference LLP recently represented mCloud Technologies Corp (Nasdaq: MCLD) (“mCloud”), a leading provider of AI-powered asset management and Environmental, Social, and Governance solutions, in an approximately $9.5 million MJDS public offering in connection with its listing on the Nasdaq Stock Market. mCloud was eligible to use the Canadian “short-form” prospectus system, which allowed the company to incorporate by reference its Canadian continuous disclosure documents, and use its Canadian short-form prospectus as the base document for its MJDS registration statement filed with the SEC. Specifically, the public offering was a U.S.-based only offering made pursuant to an effective registration statement on Form F-10 (File No. 333-260264) under the MJDS. Maxim Group LLC acted as sole book-running manager for the offering.
Utilizing the MJDS process, mCloud’s common shares began trading on The Nasdaq Capital Market on November 24, 2021 under the symbol “MCLD”, shortly after the initial filing of the MJDS registration statement with the SEC. mCloud’s common shares continue to trade in Canada on the TSX Venture Exchange under the symbol MCLD.
The information in this article is for general, educational purposes only and should not be taken as specific legal advice. If you have any questions, please contact Marc J. Ross at mross@srf.law, Glenn Burlingame at gburlingame@srf.law or Matt Siracusa at msiracusa@srf.law
About The Authors
In the securities and corporate area, Mr. Ross advises companies, mainly small to mid-cap public companies, with their 1934 Act reporting requirements as well as their NASDAQ, AMEX and NYSE and other exchange listing and compliance matters. He also assists companies wanting to go public, whether through a reverse merger, initial public offering, or company offering, and advises clients on a wide range of investment and capital raising transactions, including private investments in public equity transactions (PIPEs), initial public offerings (IPOs), registered direct offerings (RDs), and shelf offerings.
Glenn advises emerging and established clients in connection with corporate finance transactions, mergers and acquisitions and securities law matters including initial public offerings, secondary offerings, shelf takedowns, private investments in public equity (PIPEs), registered direct transactions, venture financings and other securities offerings. He has extensive experience representing both buyers and sellers in connection with stock purchases, asset purchases and merger transactions, including acquisitions and divestitures of distressed companies. Glenn advises public and private companies in connection with commercial contracts, executive employment agreements, separation agreements and compensation plans .He also provides ongoing counsel to public companies regarding SEC reporting, securities law compliance, and corporate governance. He represents companies in a wide range of industries, including manufacturing, pharmaceutical, medical device, e-commerce, media, entertainment, food and beverage, software and financial services(including fintech and cryptocurrency). His international experience includes representing companies in Europe and Israel.
