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Securities

OSC publishes 2020 Corporate Finance Branch Report

Nov 19, 2020

On November 19, 2020, the Ontario Securities Commission (OSC) published its annual Corporate Finance Branch Report, an important resource to help issuers and their advisors comply with their reporting obligations. Due to the ongoing impact of the COVID-19 pandemic, the report also provides issuers with guidance on additional considerations related to the impact of COVID-19.

The report provides issuers with guidance on trends and issues identified during compliance reviews. Key areas of focus in fiscal 2020 included MD&A disclosure, mining technical reports, the use of non-GAAP financial measures, forward-looking information and executive compensation. The report also outlines the Branch’s operational and policy work.

In addition, the report provides an update on the progress made on reducing burden for issuers, a key focus for the OSC. To date, eight of the 13 burden reduction recommendations for issuers have been completed and many of the remaining recommendations are on target for their estimated completion date. Key recommendations completed in 2020 include a program that allows issuers to file an entire prospectus confidentially for staff review and the adoption of a pre-filing review for mining reporting issuers seeking staff views on certain technical disclosure documents.

Review the press release and OSC Staff Notice 51-731 Corporate Finance Branch 2020 Annual Report on the OSC's website.

Canadian securities regulators provide guidance to issuers on reporting impact of COVID-19

Oct 29, 2020

On October 29, 2020, the Canadian Securities Administrators (CSA) published its biennial report on its continuous disclosure review program. Due to the ongoing impact of the COVID-19 pandemic, the report also includes guidance for issuers on reporting the impact of COVID-19.

The report outlines common deficiencies and provides examples of how to improve disclosure on select topics including: forward looking information; non-GAAP financial measures; overly promotional disclosure; insider reporting; and mineral project disclosure.

In fiscal 2020, 55 per cent (2019 - 67 per cent) of review outcomes required issuers to take action to improve and/or amend their disclosure, with some issuers being referred to enforcement, cease-traded or placed on the default list.

Review the press release and report on the CSA's website.

CSA 2019-2020 Enforcement Report

Sep 30, 2020

In September 2020, the Canadian Securities Administrators (CSA) released its 2019-2020 Enforcement Report. This annual report highlights actions taken across Canada to deter and sanction wrongdoing in the capital markets.

Review the report on the CSA's website.

AMF publishes annual summary of corporate finance oversight and regulatory activities

Sep 24, 2020

On September 24, 2020, the Autorité des marchés financiers (AMF) published its annual Summary of Oversight and Regulatory Activities, which details the key initiatives of the Direction principale du financement des sociétés (“Corporate Finance”) for the 2019-2020 fiscal year.

After presenting a profile of companies for which the AMF is the principal regulator, the summary outlines the outcomes of reviews of continuous disclosure documents and prospectuses filed by the companies. The summary also presents findings of reviews relating to AMF regulations and the guidance set out in international financial reporting standards.

In a spirit of openness and transparency, the summary also provides the market with information on the representation of women on boards and in executive officer positions and ongoing regulatory initiatives relating to company financing and continuous disclosure requirements.

The last part of the summary describes the many innovations that have been implemented by the AMF over the past year—particularly in response to the pandemic, which has had an impact on company disclosures and their analysis.

Review the press release and report on the AMF's website.

Canadian securities regulators propose changes to the offering memorandum prospectus exemption

Sep 17, 2020

On September 17, 2020, the Canadian Securities Administrators (CSA) published for comment proposed changes to the offering memorandum prospectus exemption. The changes are reflected in proposed amendments to National Instrument 45-106 "Prospectus Exemptions" (NI 45-106), as well as proposed changes to Companion Policy 45-106CP "Prospectus Exemptions".

The proposed amendments set out new disclosure requirements for issuers that are engaged in “real estate activities” or issuers that are “collective investment vehicles”. These include a new requirement for issuers with real estate activities to provide an independent appraisal of the real property, if it discloses a value for the real property other than in its financial statements, will use a material amount of the proceeds to acquire an interest in real property, or acquire an interest in real property from a related party. It is proposed that issuers that are collective investment vehicles will need to provide better disclosure to investors about the issuer’s investment decision-making process and the composition and performance of the issuer’s portfolio.

Many issuers using the offering memorandum prospectus exemption are issuers that would meet these proposed definitions, and some already provide disclosure that would meet the proposed requirements. The new requirements are intended to set out a clearer framework for these issuers, giving them greater certainty as to what they must disclose, while giving investors more complete and relevant information.

In addition, the proposed amendments include a number of general amendments, which are meant to clarify or streamline parts of NI 45-106 or improve disclosure for investors.

The CSA Notice and Request for Comment setting out the proposed amendments can be found on the websites of CSA members. Comments should be submitted in writing by December 16, 2020.

Review the press release on the CSA's website and the proposed changes on the OSC's website.

OSFI launches consultation on technology risks in the financial sector

Sep 15, 2020

On September 15, 2020, the Office of the Superintendent of Financial Institutions (OSFI) launched a three-month consultation with the publication of a discussion paper, "Developing financial sector resilience in a digital world". The paper focuses on risks arising from rapid technological advancement and digitalization, as these trends impact the stability of the Canadian financial sector.

This consultation supports OSFI's strategic objective to ensure that federally-regulated financial institutions and pension plans are better prepared to identify and develop resilience to non-financial risks before they negatively affect their financial condition. While technology is a key enabler for financial institutions and financial consumers, its widespread use and rapid adoption can pose risks in many different areas of the business if not properly understood and managed.

Understanding the financial sector's use of technology and how technology risks are managed is central to this consultation. OSFI's discussion paper focuses on the risk areas of cyber security, advanced analytics (artificial intelligence and machine learning), and the use of third party services such as cloud computing.

OSFI is seeking feedback from a wide range of stakeholders including financial sector participants, technology experts, and academics. Their input will help guide OSFI's regulatory and supervisory approaches to technology risks that meet our mandate of protecting depositors, policyholders and private pension plan beneficiaries while allowing institutions to compete and take risks.

Review the press release on the OSFI's website.

Canadian securities regulators reduce regulatory burden related to business acquisition reports

Aug 20, 2020

On August 20, 2020, the Canadian Securities Administrators (CSA) published amendments to the business acquisition report (BAR) requirements for reporting issuers that are not venture issuers.

The amendments aim to reduce regulatory burden and address certain concerns expressed by stakeholders.

For reporting issuers that are not venture issuers, the amendments will change the criteria for determining whether a completed acquisition is significant, based on three tests set out in National Instrument 51-102 Continuous Disclosure Obligations (NI 51-102). The amendments:

  • require that at least two of the three existing significance tests in NI 51-102 are triggered (previously, only one test had to be triggered)
  • increase the significance threshold in those tests from 20 per cent to 30 per cent.

The amendments are being adopted following an extensive consultation process, including comment letters and other stakeholder feedback, as well as consideration of historical data on past BAR filings and exemptive relief granted to assess the impact of the amendments.

Provided all necessary ministerial approvals are obtained, the amendments are effective on November 18, 2020.

Review the press release on the CSA's website and the amendments on the CSA members’ websites.

Ontario introduces interim registration and prospectus exemptions to facilitate start-up securities crowdfunding

Jul 30, 2020

On July 30, 2020, the Canadian Securities Administrators (CSA) announced that in light of COVID-19 and the challenges it presents to small businesses seeking to raise capital, the Ontario Securities Commission (OSC) made an interim local order that adopts the start-up crowdfunding regime currently in place in certain other Canadian jurisdictions (the Interim Order).

The Interim Order, which takes effect in Ontario on July 30, 2020, provides registration and prospectus exemptions for start-up crowdfunding that are substantially similar to the local exemptions in British Columbia, Alberta, Saskatchewan, Manitoba, Quebec, New Brunswick and Nova Scotia.

On February 27, 2020, the CSA published for comment National Instrument 45-110 Start-Up Crowdfunding Registration and Prospectus Exemptions (the Proposed National Instrument), which will replace and harmonize the local start-up crowdfunding exemptions in British Columbia, Alberta, Saskatchewan, Manitoba, Québec, New Brunswick and Nova Scotia (as well as those in Ontario adopted through the Interim Order). The comment period on the Proposed National Instrument ended on July 13, 2020.

The Interim Order can be found on the OSC’s website and remains in effect until the Proposed National Instrument is adopted or until 18 months from the effective date of the order. Other jurisdictions will make corresponding updates to their local guidance documents to include Ontario.

Review the press release on the CSA's website and the interim order on the OSC's website.

FRC publishes thematic review findings on financial reporting effects of COVID-19

Jul 21, 2020

On July 21, 2020, the UK Financial Reporting Council (FRC) has published the results of a thematic review looking at company reporting since the onset of the COVID-19 pandemic. The review found that some – particularly interim reports - would have benefited from more extensive disclosure

The review analyzed a sample of March 2020 interim and annual reports and accounts and found that although companies provided suf­fi­cient in­for­ma­tion to enable a user to un­der­stand the impact COVID-19 had on their per­for­mance, position and future prospects, some - par­tic­u­larly interim reports - would have benefited from more extensive dis­clo­sure.

The FRC reminds companies that they should: 
 

  • explain the sig­nif­i­cant judge­ments and estimates made in preparing their accounts and provide mean­ing­ful sen­si­tiv­ity analysis or details of a range of possible outcomes to support any disclosed es­ti­ma­tion un­cer­tainty;
  • describe any sig­nif­i­cant judge­ments made in de­ter­min­ing whether there is a material un­cer­tainty about their ability to continue as a going concern;
  • ensure that as­sump­tions used in de­ter­min­ing whether the company is a going concern are com­pat­i­ble with as­sump­tions used in other areas of the financial state­ments;
  • apply the re­quire­ments of IAS 1 to any ex­cep­tional or similar items, with income statement sub-to­tals com­pris­ing only items recog­nized and measured in ac­cor­dance with IFRS;
  • apply existing accounting policies for ex­cep­tional and other similar items to COVID-19 related income and ex­pen­di­ture con­sis­tently and should not split income and expenses between COVID-19 and non-COVID-19 financial statement captions ar­bi­trar­ily; and
  • prepare interim reports that provide suf­fi­cient in­for­ma­tion to explain the impact that COVID-19 has had on their per­for­mance, position and future prospects.

For further details, refer to the FRC press release and the Review Report.

AcSB publishes its Response Letter to the CSA on Proposed National Instrument 52-112

Jul 13, 2020

On July 13, 2020, the Accounting Standards Board (AcSB) published its response letter to the Canadian Securities Administrator’s (CSA) Second Notice and Request for Comment on Proposed National Instrument 52-112. This Notice sets out disclosure requirements for non-GAAP financial measures and other financial measures when presented outside of an issuer’s financial statements.

Overall, the AcSB commends the CSA for taking into consideration the comments received on the first version of the Proposed National Instrument to improve the application of these proposals. The response letter also highlights the AcSB’s support for the CSA’s objective of ensuring investors receive appropriate disclosure without unduly increasing regulatory burden on issuers. In particular, the letter encourages the CSA to consider the interaction of the CSA’s Proposed National Instrument and the IASB’s Primary Financial Statement project proposals. It also highlights the AcSB’s willingness to stand ready to work with stakeholders and the CSA to help clarify application challenges that may arise.

Re­view the response letter dated June 29, 2020 on the AcSB's web­site.

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