What is the Multijurisdictional Disclosure System?
The Multijurisdictional Disclosure System (MJDS) was adopted in July 1991 by the U.S. Securities and Exchange Commission (SEC) and the Canadian Securities Administrators. The intention of the agreement was to facilitate cross-border public offerings of securities between the USA and Canada. 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.
Understanding the Multijurisdictional Disclosure System (MJDS)
The Multijurisdictional Disclosure System (MJDS) allows eligible Canadian companies to offer securities in the U.S. using a prospectus that is largely prepared to meet Canadian disclosure requirements. It 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). In addition, although the SEC retains the right to review filings made under MJDS, typically it does not and defers to the domestic Canadian jurisdiction review, unless it has reason to believe there is a problem with the filing. Effectively, therefore, the MJDS acknowledges that Canadian regulatory requirements are sufficient to protect US investors.
These allowances make it significantly easier for Canadian firms to raise funding in the U.S. through securities offerings, by reducing the cost, time and administrative burdens associated with issuing and reporting 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, though it is used less frequently.
There are a number of requirements for Canadian firms to be eligible to use MJDS, including provisions that ensure such firms are already publicly listed and that the public float is of a certain size. MJDS is thus not available for some Canadian companies, including smaller firms and new firms seeking to raise funds through initial public offerings. (Such companies can still raise funding in the U.S., but they may not do so using the streamlined advantages provided under MJDS.) All securities are eligible for companies to raise funds with under MJDS, with the exception of certain derivative instruments.