Because of their need to raise large amounts of money, some startups need to market their securities to a large number of investors and ensure that the securities received by such investors will be free of any resale restrictions. This can only be accomplished by offering the securities in accordance with the prospectus requirements contained in section 53 of the Act. Startups whose securities were originally distributed by way of a prospectus are reporting issuers under the Act. These startups are generally known in the market place as "public companies". The Act requires that a reporting issuer comply with the requirements for continuous disclosure, which are found in the Act and the Regulation, including a variety of Rules. Through the system of continuous disclosure, investors in the secondary market are assumed to have access to sufficient information on which to make informed investment decisions. Accordingly, the securities of reporting issuers are generally freely tradeable and may be bought and sold without restriction.
The continuous disclosure system primarily deals with the publication and distribution of financial information on an ongoing basis and the preparation of informational documents in conjunction with meetings of security holders. In addition, the effect of section 75 of the Act is to require a reporting issuer, where a "material change" occurs in the affairs of a reporting issuer, to forthwith issue and file a press release authorized by a senior officer disclosing the nature and substance of the change, and thereafter file a "material change report". For the purposes of the Act "materiality" is found to exist where the event would reasonable be expected to have a significant effect on the market price or value of the securities of the reporting issuer. However, in other contexts an event may be material where disclosure of the event would reasonably be expected to have a significant influence on a reasonable investor's investment decision.