Securities

SEC Chief Accountant Discusses Importance of Statement of Cash Flows to Investors

Dec 04, 2023

On December 4, 2023, the Securities and Exchange Commission (SEC) Chief Accountant, Paul Munter released a statement emphasizing the importance of the statement of cash flows in providing investors with high-quality financial information.

Mr. Munter noted that preparers and auditors did not always apply the same rigor and attention to the statement of cash flows as they did to other financial statements. Accordingly, he reminded preparers and auditors of their professional responsibilities related to the statement of cash flows.

Key takeaways from Mr. Munter’s statement include the following:

  • To mitigate the risk of restatements, it is critical for issuers and auditors to perform an objective materiality analysis of “both the financial statement and ICFR impacts [footnote omitted] of an error in the statement of cash flows, including the significance of the statement of cash flows to the investor’s complete understanding of the financial condition of the company.”
  • With respect to disclosures related to the statement of cash flows, issuers should “focus on investor needs when determining how best to communicate relevant cash and noncash information.”
  • It is essential to have “appropriate risk assessment processes and controls in place to facilitate risk identification, analysis, and response related to the preparation and presentation of the statement of cash flows.”

Access the statement on SEC’s website.

Canadian Securities regulators announce results of ninth annual review of representation of women on boards and in executive officer positions in Canada

Oct 05, 2023

On October 5, 2023, the Canadian securities regulators have released the results of their ninth annual review on women's representation in corporate leadership roles. The report, based on data from 602 non-venture issuers, reveals that 27% of board seats are held by women, showing a 3% increase from the previous year.

However, there's a decline in the percentage of board vacancies being filled by women, dropping from 45% to 43%. Notably, 89% of issuers have at least one woman on their board, and 8% have a woman serving as the board chair. The data, gathered from public documents, aims to enhance transparency and support informed investment decisions.

Furthermore, the Canadian securities regulators are actively reviewing stakeholder feedback on proposed amendments related to corporate governance disclosure requirements and policies concerning director nominations, board renewal, and diversity.

Access the news release on the CSA website.

Canadian securities regulators provide update on proposed amendments to continuous disclosure requirements

Oct 03, 2023

On October 3, 2023, the Canadian Securities Administrators (the CSA) provided an update on proposed amendments to modernize the continuous disclosure requirements for non-investment fund reporting issuers that were published for comment in May 2021.

The proposed continuous disclosure amendments would streamline and clarify certain disclosure requirements for the management’s discussion and analysis (MD&A) and the annual information form (AIF). They would also combine interim and annual financial statements, MD&A, and, where applicable, the AIF into one reporting document for each reporting period (called the interim disclosure statement or annual disclosure statement, as applicable).

Re­view the news release on CSA's website.

SEC Adopts Rule Enhancements to Prevent Misleading or Deceptive Investment Fund Names

Sep 22, 2023

On September 22, 2023, The Securities and Exchange Commission (SEC) released a final rule that amends the “Names Rule” under the Investment Company Act of 1940, that addresses fund names that are likely to mislead investors about an investment company’s investments and risks.

The amendments modernize and enhance the Names Rule and other names-related regulatory requirements to further the Commission’s investor protection goals and to address developments in the fund industry in the approximately 20 years since the rule was adopted.

The final rule’s amendments “are designed to increase investor protection by improving, and broadening the scope of, the requirement for certain funds to adopt a policy to invest at least 80 percent of the value of their assets in accordance with the investment focus that the fund’s name suggests, updating the rule’s notice requirements, and establishing recordkeeping requirements.”

The final rule will become effective 60 days after the date of its publication in the Federal Register.

Access the press release and the fact sheet on the SEC website.

Canadian securities regulators propose introduction of expedited shelf prospectus regime for well-known seasoned issuers

Sep 21, 2023

On September 21, 2023, the Canadian Securities Administrators (the CSA) announced proposed amendments to National Instrument 44-102 Shelf Distributions and other securities law instruments (the Proposed Amendments) which, if adopted, would implement a permanent expedited shelf prospectus regime for “well-known seasoned issuers” (WKSIs).

The Proposed Amendments build upon a WKSI pilot program (the Pilot Program) launched on January 4, 2022, that is designed to reduce the regulatory burden for well-known issuers with established public reporting records in the Canadian capital markets. The Pilot Program has enjoyed widespread adoption by eligible issuers since its introduction, and the Proposed Amendments, if adopted, will help promote transaction certainty and even more closely align the Canadian WKSI regime with that of the United States.

Re­view the notice and request for comments on CSA's website.

Canadian securities regulators propose permanent WKSI program

Sep 21, 2023

On September 21, 2023, the Canadian Securities Administrators (the CSA) announced proposed amendments to National Instrument 44-102 Shelf Distributions and other securities law instruments (the Proposed Amendments) which, if adopted, would implement a permanent expedited shelf prospectus regime for “well-known seasoned issuers” (WKSIs).

The Proposed Amendments build upon a WKSI pilot program (the Pilot Program) launched on January 4, 2022, that is designed to reduce the regulatory burden for well-known issuers with established public reporting records in the Canadian capital markets. The Pilot Program has enjoyed widespread adoption by eligible issuers since its introduction, and the Proposed Amendments, if adopted, will help promote transaction certainty and even more closely align the Canadian WKSI regime with that of the United States.

Re­view the notice and request for comments on CSA's website.

SEC releases sample letter to companies regarding their XBRL disclosures

Sep 15, 2023

On September 15, 2023, the Division of Corporation Finance of the Securities and Exchange Commission (SEC) issued a sample letter addressing companies' XBRL and Inline XBRL disclosures in an ongoing effort to enhance the quality and utility of corporate financial data filed with the SEC.

The sample letter addresses several key areas, including Inline XBRL presentation, consistent reporting, compliance with Regulation S-K Item 402(v) related to pay versus performance, and proper tagging of financial statements and supplementary data. It emphasises the importance of correct XBRL tagging and compliance with SEC regulations.

Companies are encouraged to review this letter and consider its guidance as they prepare their XBRL and Inline XBRL disclosures. While the sample comments provided are not exhaustive, they offer valuable insights into common issues and best practices.

Re­view the sample letter on SEC’s website.

The Importance of a Comprehensive Risk Assessment by Auditors and Management

Aug 25, 2023

On August 25, 2023, the Securities and Exchange Commission (SEC) posted a statement highlighting the importance of a comprehensive risk assessment by auditors and management. Management’s and auditors’ risk assessment processes are critical to the decisions regarding financial reporting and the effectiveness of internal control over financial reporting.

This statement discusses management’s obligation to:

  • take a holistic approach when assessing information about the business and avoid the potential bias toward evaluating problems as isolated incidents, in order to timely identify risks, including entity-level risks;
  • design processes and controls that are responsive to identified risks;
  • effectively identify information that issuers are required to communicate to investors.

Additionally, it discusses auditors’ responsibilities as gatekeepers to hold management accountable in the public interest.

Re­view the statement on SEC’s website.

SEC releases sample letter to companies regarding China-specific disclosures

Jul 18, 2023

On July 18, 2023, the Securities and Exchange Commission (SEC) posted a sample comment letter regarding the disclosure obligations of companies based in or with a majority of their operations in the People’s Republic of China.

The explanation notes that Division of Corporation Finance is focused on the following three key areas of disclosure regarding China-specific matters:

  • Disclosure obligations under the Holding Foreign Companies Accountable Act
  • “Specific and prominent disclosure” about material risks related to the role of the government of the People’s Republic of China in the operations of China-based companies
  • Disclosures regarding the material impacts of certain statutes including, for example, the Uyghur Forced Labor Prevention Act (UFLPA)

Re­view the comment letter on SEC’s website.

Canadian securities regulators outline expectations for investment funds holding crypto assets

Jul 06, 2023

On July 6, 2023, the Canadian Securities Administrators (CSA) published guidance to help fund managers understand and comply with securities law requirements for public investment funds holding crypto assets (public crypto asset funds).

The guidance provides an overview of public crypto asset funds operating in Canada and describes related oversight initiatives by CSA members. The notice also covers:

  • Market characteristics of crypto assets that could impact their viability as investments for public crypto asset funds
  • Expectations concerning custody of crypto assets held on behalf of a fund
  • Issues relating to yield-generating activities, like staking, by public crypto asset funds
  • Know-your-client, know-your product and suitability obligations with respect to public crypto asset funds.

Re­view the news release on CSA's website.

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