What Is the Multijurisdictional Disclosure System (MJDS)?
The Multijurisdictional Disclosure System (MJDS) was adopted jointly in July 1991 by the U.S. Securities and Exchange Commission (SEC) and the Canadian Securities Administrators. The agreement makes it easier for companies on both sides of the border to list their stocks on exchanges in both countries.
The SEC notes that the MJDS allows eligible Canadian issuers to register securities under the Securities Act and to register securities and report under the Exchange Act by use of documents prepared largely in accordance with Canadian requirements.
The Multijurisdictional Disclosure System allows eligible Canadian companies to offer securities in the U.S. using a prospectus that is largely prepared to meet Canadian disclosure requirements.
- Under the MJDS, the U.S. Securities and Exchange Commission accepts documents prepared for its Canadian counterpart for review of applications to sell securities in the U.S. markets, with minor additions.
- The agreement cuts down on the cost and administrative burden of filing on both sides of the border.
- The process is open only to larger publicly-listed companies, not to small companies or startups preparing to launch an initial public offering (IPO).
Understanding the Multijurisdictional Disclosure System (MJDS)
The MJDS also allows such eligible issuers to comply with U.S. continuous reporting requirements by filing their Canadian disclosure documents with the SEC, subject to certain additional U.S. requirements. The companies also can file the Canadian versions of their routine disclosure documents with the SEC, again with the addition of a few more U.S. requirements.
A although the SEC retains the right to review filings made under MJDS, it generally defers to the Canadian jurisdiction review, unless it has reason to believe there is a problem with the filing. Effectively, the MJDS acknowledges that the Canadian regulatory requirements are sufficient to protect U.S. investors.
Effect of the Multijurisdictional Disclosure System
The effect of the MJDS agreement is to make it significantly easier for Canadian companies to raise funding through securities offerings in the U.S. as well as in Canada. It reduces the cost, time, and administrative burdens associated with issuing a round of stock and reporting it under two separate disclosure regimes.
Canadian companies can raise such funding either in conjunction with issuing securities in Canada, or do it solely in the U.S. There is a reciprocal agreement that allows U.S. firms to raise funding through securities offerings in Canada, although it is used less frequently.
There are a number of requirements for Canadian companies to be eligible to use MJDS. These include a provision that the companies must already be publicly listed in Canada. The public float must also be a certain size.
Eligibility Rules for Multijurisdictional Disclosure System
The MJDS is thus not an option for smaller Canadian companies and startups seeking to raise funds through initial public offerings. These companies can still raise funding in the U.S., but they are not eligible for the streamlined system available under MJDS.
The MJDS allows for companies to raise funds with any type of securities with the exception of certain derivative instruments.