Offering statements for co-operatives: how much disclosure is too much?
Ontario co-operatives have a unique exemption from the requirements of the Ontario Securities Act. Subject to some limited exemptions, co-operatives that have more than 35 members/investors or will have more than 35 members/investors with the offering, can file an Offering Statement with the Financial Services Commission of Ontario (“FSCO”) and obtain a receipt therefore in order to be able to sell the securities being offered in lieu of obtaining a prospectus pursuant to the provisions of the Ontario Securities Act. Once the receipt has been issued, securities can then be offered for the sale by the Co-operative.
What is a little known fact is that for several years members of the general public could attend at FSCO’s offices and make a copy of any receipted Offering Statement. However, effective July 1, 2016, FSCO is now publishing the following information on their website in connection with receipted Offering Statements: the name of the co-operative, its corporation number, the date of receipt, the date of expiry, the minimum and maximum amount of the offering and the website contact information of the co-operative involved.
While this change seems relatively innocuous, FSCO has advised it is their intention to at some point in the future post all receipted Offering Statements on its website in their entirety. The level of disclosure of information required in an Offering Statement is “full true and plain disclosure of all material facts”. Many co-operatives are in competition with private businesses that do not have the level of public disclosure that co-operatives do. Although this information is currently available to the general public, an effort must be undertaken to obtain it. The posting of receipted Offering Statements online will make this information easily accessible to anyone, including competitors of a co-operative.
Will FSCO allow sensitive business information to be withheld from an Offering Statement for commercially competitive reasons? That remains to be seen. However, this is an issue that should be on the radar screen of co-operatives who do or are planning to issue an Offering Statement at some future date.