Guidance for disclosure improvements following a review of investment entities

Mar 16, 2017

On March 16, 2017, the securities regulatory authorities in Ontario, Alberta, and Saskatchewan (the participating jurisdictions) released CSA Multilateral Staff Notice 51-349 "Report on the Review of Investment Entities and Guide for Disclosure Improvements," which summarizes key findings from an Ontario Securities Commission staff review of the continuous disclosure of reporting issuers that meet the definition of an investment entity under IFRS 10, Consolidated Financial Statements.

OSC staff reviewed the compliance of 12 investment entities, which represent over 90 per cent of the collective market capitalization of the investment entities subsector in Ontario. The purpose of the review was to improve disclosure in material areas, assess accounting areas which require the exercise of significant judgement, and to inform policy related issues.

Review the press release on the CSA's website and Staff Notice on the participating jurisdictions' websites.

IOSCO approves the enhanced standard for cross-border enforcement cooperation

Mar 31, 2017

On March 31, 2017, the members of the International Organization of Securities Commissions (IOSCO) approved the "Enhanced Multilateral Memorandum of Understanding Concerning Consultation and Cooperation and the Exchange of Information" (EMMoU), which offers securities regulators new enforcement powers for responding to the challenges arising from recent developments in global financial markets.

The EMMoU provides for additional enforcement powers that IOSCO believes are necessary for continuing to safeguard the integrity and stability of markets, protect investors, and deter misconduct and fraud.

Review the press release on the IOSCO's website.

More Active Investors Rely on Non-GAAP vs. GAAP Reporting in Analyzing Stocks

Oct 16, 2017

On October 16, 2017, Clermont Partners announced the results of a proprietary survey designed to reveal how active (not passive) investors factor GAAP and non-GAAP measures, intangible assets and non-financial metrics into their stock selection process.

The survey was conducted to learn more specifically how the Street uses company-reported and SEC-mandated metrics, and provide insights to help management teams better communicate with investors.

Key findings:

  • Almost three-quarters (74%) of respondents rely on non-GAAP more than GAAP reporting in evaluating a company’s performance. Forty-four percent of respondents believe that non-GAAP measures have become more important over time.
  • Most respondents (90%) will frequently make their own adjustments to a company’s GAAP results based on what they believe is relevant in evaluating performance.
  • Intangible assets are considered important factors in evaluating stocks for nearly two-thirds (64%) of the respondents.

Review the press release and the survey on Clermont Partners' website.

Non-GAAP Financial Measures: SEC Staff Comments Focus on Compliance With 2016 Guidance

Apr 19, 2017

On April 19, 2017, Sullivan & Cromwell LLP issued an analysis of the comment letters released by the SEC staff to nearly 250 companies challenging the calculation and presentation of non-GAAP financial measures in filings made subsequent to the issuance of the 2016 guidance.

Based on their analysis of these comment letters, they have identified a number of areas of SEC staff focus during this period, in descending order of frequency:

  • Failure to present GAAP measure with equal or greater prominence (C&DI 102.10)
  • Inadequate explanation of usefulness of non-GAAP measure
  • Misleading adjustments, such as exclusion of normal, recurring cash expenses (C&DI 100.01)
  • Inadequate presentation of income tax effects of non-GAAP measure (C&DI 102.11)
  • Individually tailored revenue recognition or measurement methods (C&DI 100.04)
  • Misleading title or description of non-GAAP measure
  • Use of per share liquidity measures (C&DI 102.05)

Review the publication on the Sullivan & Cromwell LLP's website.

OSC Potential Securities Law Requirements for Businesses Using Blockchain

Mar 08, 2017

On March 8, 2017, the Ontario Securities Commission (OSC) advised businesses that use distributed ledger technologies (DLT), such as blockchain, as part of their financial products or service offerings that they may be subject to Ontario securities law requirements.

Businesses are using DLT in a variety of ways. DLT may be used as the underlying technology in trading, clearing and settling securities.

“Many uses of distributed ledger technologies have the potential to increase transparency and efficiencies in our capital markets, and we are keen to support this type of innovation,” said Pat Chaukos, Chief of OSC LaunchPad. “Because this is a novel area, businesses may not be aware that some uses of this technology could trigger securities law requirements. We encourage these businesses to speak with us about securities law and investor protection requirements that may apply.”

Review the press release on the OSC's website.

OSC Publishes 2017-2018 Statement of Priorities

Jun 29, 2017

On June 29, 2017, the Ontario Securities Commission (OSC) published its 2017-2018 Statement of Priorities, which sets out the 15 priority areas where the OSC intends to focus its resources and actions over the coming fiscal year, as well as the expected outcomes.

The OSC received 21 comment letters on its draft 2017-2018 Statement of Priorities. The feedback was broadly supportive of reducing regulatory burden, working with fintech businesses to foster innovation in capital markets, and implementing targeted approaches to address seniors’ issues.

The final 2017-2018 Statement of Priorities includes an additional priority related to the work required to transfer regulatory oversight of syndicated mortgages to the OSC.

Re­view the press re­lease and the 2017-2018 Statement of Priorities on the OSC's web­site.

OSC Publishes Corporate Finance Branch 2016-2017 Annual Report

Sep 21, 2017

On September 21, 2017, the Ontario Securities Commission (OSC) published OSC Staff Notice 51-728 Corporate Finance Branch 2016-2017 Annual Report. The publication provides guidance to the individuals and entities the OSC oversees, and their advisors, to help them comply with regulatory obligations.

This year’s report focuses on issues and trends related to Management's Discussion and Analysis (MD&A), non-GAAP financial measures, and forward-looking information, among other areas.

Review the press release and the Annual Report on the OSC's website.

OSC Publishes Report on Exempt Market Activity

Jun 15, 2017

On June 15, 2017, the Ontario Securities Commission (OSC) published OSC Staff Notice 45-715 "2017 Ontario Exempt Market Report," which provides a snapshot of the current state of Ontario’s exempt market and a preliminary assessment of recent regulatory reforms.

The report summarizes capital raising activity by corporate (non-investment fund) issuers in Ontario’s exempt market during 2015 and 2016. Additionally, the report examines capital formation by small Canadian issuers in Ontario’s exempt market, and the impact of recently introduced prospectus exemptions.

The report revealed increased activity in Ontario’s exempt market, especially among Canadian issuers and among small businesses.

The report also found that the new prospectus exemptions have gained traction among a sizeable proportion (25 per cent) of Canadian issuers participating in the exempt market.

Review the press release and the Staff Notice on the OSC's website.

OSFI welcomes final Basel III reforms

Dec 07, 2017

On December 7, 2017, the Office of the Superintendent of Financial Institutions (OSFI) welcomed the announcement that the final pieces of the Basel III reforms have been endorsed by the Group of Central Bank Governors and Heads of Supervision, the committee that oversees the Basel Committee on Banking Supervision.

The Basel III reforms have been introduced through a series of regulatory changes in recent years, designed to address weaknesses in banks’ resiliency that were revealed during the financial crisis. Previous changes were designed to deal with the quantity and quality of bank capital and liquidity. This final set of reforms is aimed at improving the risk sensitivity of capital standards and will increase the transparency and consistency in the way banks measure and report their exposure to various risks, and the capital held against those risks.

OSFI will launch a public consultation on the domestic implementation of the Basel III reforms in spring 2018. The consultation will focus on potential modifications required for the Canadian context and on the implementation timelines.

Review the press release on the OSFI's website.

PCAOB Publishes Staff Inspection Brief Detailing Scope of 2017 Inspections of Auditors of Broker-Dealers

Jun 29, 2017

On June 29, 2017, the Public Company Accounting Oversight Board (PCAOB) issued a staff inspection brief detailing the scope, focus, and objectives of its ongoing 2017 inspections of auditors of brokers and dealers.

In 2017, PCAOB inspectors are focusing on audit areas and attestation procedures where inspectors previously found deficiencies, including auditor independence, engagement quality reviews, and certain areas of the financial statement audit (including revenue, the assessment and response to risks of material misstatement due to fraud, financial statement presentation and disclosure, fair value measurements, and related party transactions).

During the 2017 inspection cycle, the PCAOB plans to inspect 75 firms that audit broker-dealers, covering portions of 115 audits and the related attestation engagements for these broker-dealers. That number includes four firms that audit more than 100 broker-dealers, 16 firms that audit 21 to 100 broker-dealers, and 55 firms that audit one to 20 broker-dealers.  .

Re­view the press release and the staff inspection brief on the PCAOB's web­site.

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