Do Canada’s Securities Regulators Condone Selective Disclosure?

By Dominic Jones

I WAS reading a hefty academic research report on the Canadian disclosure system when I came across something that stopped me dead in my tracks.

The piece that caused my jaw to drop concerned Canada’s repository for regulatory filings. This is called SEDAR, and it’s a sad effort by the country’s provincial securities regulators to offer something vaguely similar to the US Securities and Exchange Commission’s Edgar database.

As I’ve written before, SEDAR is in a sorry state for lots of reasons, not least of which is the fact that many filings only appear on the public site up to 24 hours after they are filed.

But here’s the thing that shocked me: If you are prepared to pay CDS INC., the company which operates SEDAR on behalf of the country’s securities regulators, you can get access to those filings 12 to 24 hours before they’re posted on the public website.

As the report’s author, Dr. Janis Sarra, Associate Dean and Associate Professor of Law at the University of British Columbia states:

“Arguably, this could be creating a two-tiered electronic disclosure system, with more timely disclosure for those market participants that can afford to pay. If disclosure is a good that as a public policy we want to be uniformly accessible, then the appropriateness of this service may have to be examined.”

Note the last part of that quote — “appropriateness of this service may have to be examined.” That’s polite Canadian speak for “This is a digrace. Stop it immediately.”

I spoke with someone yesterday with intimate knowledge of this CDS product, which is called SEDAR-SCRIBE, and he confirmed the gist of what the service provides.

Imagine, securities regulators being party to a service that gives a select few investors access to non-public information before the rest of the public has a chance to access the same information. It’s stranger than fiction.

This is just one of a long string of bungles that CDS is responsible for.

I think it is high time Canada’s securities regulators found a new administrator for SEDAR.

If you’re interested, here is the study I am referring to. See page 47:

Modernizing Disclosure in Canadian Securities Law: An Assessment of Recent Developments in Canada and Selected Jurisdictions (PDF 644KB, 140 pages)

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