Disclosure Review Program
January 1, 2023
The Canadian Securities Administrators (CSA) recently released a report called CSA Staff Notice 51-364, which summarizes the findings of its Continuous Disclosure Review Program (the “Program”) for the fiscal years ending March 31, 2022, and March 31, 2021. The program aimed to improve the completeness, quality, and timeliness of disclosure provided by reporting issuers.
The Program conducted 466 reviews and the majority of reviews resulted in issuers being required to take action to improve their disclosure or file necessary documents. Some issuers faced enforcement actions or were placed on the default list. As a result, issuers should carefully evaluate and explain how economic uncertainty and changing assumptions affect their operations and financial statements.
The following are the main deficiencies found in the program:
Financial Statement Deficiencies: The CSA observed that some issuers failed to comply with International Financial Reporting Standards (IFRS) requirements. Deficiencies included inadequate disclosure of revenue and cash flows from contracts with customers, lack of disaggregated revenue information, insufficient disclosure related to credit risk, and incomplete information about business combinations.
MD&A Deficiencies: Venture and early-stage/development-stage issuers were found to lack sufficient disclosure about significant projects, including timing and costs. Disclosure about costs incurred in operations, exploration, and research and development was also insufficient. Issuers were reminded to provide detailed information on projects, milestones, expenditures, and updates in their MD&A.
Forward-looking Information (FLI): Some issuers disclosed FLI without a reasonable basis or provided overly optimistic financial outlooks without reasonable assumptions. Issuers must have a reasonable basis for FLI, disclose material factors and assumptions, and update FLI when results differ materially from previous disclosures.
Other Regulatory Deficiencies: The CSA identified deficiencies related to business acquisitions, inconsistencies and outdated information in disclosures, improper audit committee composition, overly promotional disclosure (greenwashing), mineral project disclosure, and compliance with non-GAAP financial measures requirements.
Guidance for Compliance: The Staff Notice provides illustrative examples of deficient disclosure and encourages issuers to review their practices and strengthen compliance with continuous disclosure obligations using the CSA's guidance and findings.
Takeaways:
Staff recommended specific examples of deficient disclosure. Issuers are recommended to review their own disclosure practices and to use the CSA's guidance and findings to strengthen their compliance with their continuous disclosure obligations.
This publication is not intended to constitute legal advice. No one should act on it or refrain from acting on it without consulting with a lawyer.
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