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Securities

FASB adds taxonomy entry points to address FAST Act updates in the 2019 DEI Taxonomy

Jun 11, 2019

On June 11, 2019, the Fi­nan­cial Ac­count­ing Stan­dards Board (FASB) announced that the U.S. Securities and Exchange Commission (SEC) has issued the 2019 Document and Entity Information (DEI) Taxonomy. In connection with the issuance of the 2019 DEI Taxonomy, the FASB has incorporated additional entry points for the 2019 GAAP Financial Reporting Taxonomy and the 2019 SEC Reporting Taxonomy (SRT) to facilitate use of those taxonomies by constituents.

Re­view the alert on the FASB's web­site.

OSC takes action to reduce burden for mining issuers

Jun 06, 2019

On June 6, 2019, the On­tario Se­cu­ri­ties Com­mis­sion (OSC) announced that, effective immediately, mining issuers can request reviews of public technical disclosure before filing a preliminary short form prospectus. Mining issuers represent the largest population of Ontario head office reporting issuers, and this development will allow for material comments to be resolved promptly.

OSC staff will review mining issuers’ technical disclosure in documents previously filed on SEDAR and disclosure on issuers’ websites, including: current annual information forms; news releases and material change reports; current technical reports; and investor presentations. The pre-filing reviews will focus on any material issues that could affect the ability of an issuer to be granted a receipt from the OSC for a short form prospectus in a timely manner. 

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

Senator Rubio and colleagues propose legislation that could result in delisting Chinese companies from U.S. Exchanges

Jun 05, 2019

On June 5, 2019, U.S. Senators Marco Rubio (R-FL), Bob Menendez (D-NJ), Tom Cotton (R-AR) and Kirsten Gillibrand (D-NY) introduced the Ensuring Quality Information and Transparency for Abroad-Based Listings on our Exchanges Act (the Equitable Act), which would (i) increase oversight of Chinese and other foreign companies listed on American exchanges and (ii) delist firms that are out of compliance with U.S. regulators for a period of three years.

The Equitable Act would serve to resolve the longstanding conflict over the inability of the Public Company Oversight Board to examine the work of Chinese auditors that report on the financial statements of US listed Chinese companies.

There are presently over 156 Chinese companies traded on US exchanges with a market capitalization of over $1.2 trillion, including widely held Alibaba Group Holdings (NYSE: BABA).

The PCAOB has long been blocked by China from inspecting Chinese accounting firms (including the Chinese member firms of the Big Four).  China argues that allowing the US to enforce US laws on Chinese soil against Chinese persons violates its national sovereignty and risks disclosure of state secrets. US investors suffer because fraud prone Chinese companies are not subject to the same regulatory oversight as other companies that trade on US exchanges. 

The Rubio proposal is modelled after an earlier proposal by Representative Mike Conaway of Texas who introduced legislation late in the last session of Congress that effectively expired with the new Congress in January. 

The proposal effectively says that Chinese companies will be kicked off US exchanges in three years if a breakthrough in PCAOB inspections does not take place.

Re­view the press release on Senator Rubio’s web­site and a related posting to the China Accounting Blog.

Reporting on climate risk increasing but still needs more financial impact analysis

Jun 05, 2019

On June 5, 2019, The Task Force on Climate-related Financial Disclosures (TCFD) set up by the Financial Stability Board (FSB) to develop voluntary, consistent climate-related financial risk disclosures for use by companies in providing information to lenders, insurers, investors and other stakeholders has published a second status report providing an overview of the extent to which companies in their 2018 reports included information aligned with the core TCFD recommendations published in June 2017.

The TCFD surveyed disclosures of over 1,100 firms from diverse sectors with broad geographical representation (142 countries).

It found that: (i) disclosure of climate-related financial information has increased since 2016, but is still insufficient for investors; (ii) more clarity is needed on the potential financial impact of climate-related issues on companies; (iii) of companies using scenarios, the majority do not disclose information on the resilience of their strategies; and (iv) mainstreaming climate-related issues requires the involvement of multiple functions.

The FSB has asked the TCFD to deliver another status report to the FSB in September 2020. The TCFD will undertake further work during the course of the next year to promote and monitor adoption of the TCFD recommended disclosures. It is also considering additional work to: (a) clarify elements of the TCFD’s supplemental guidance, (b) develop process guidance around how to introduce and conduct climate-related scenario analysis, and (c) identify business-relevant and accessible climate-related scenarios.

Please click for the press release and the status report on the FSB website.

Canadian securities regulators outline next steps on the development of an integrated information system

May 02, 2019

On May 2, 2019, the Canadian Securities Administrators (CSA) set out next steps for a new integrated national information and filing system (the Renewed System) for Canada’s capital markets. The Renewed System will replace the System for Electronic Document Analysis and Retrieval (SEDAR), the System for Electronic Disclosure by Insiders (SEDI), the National Registration Database (NRD), and various local records filing systems.

To lay the groundwork for the Renewed System, the CSA has published two notices for comment that propose a new system fee structure and filing requirements. The CSA is proposing to revise Multilateral Instrument 13-102 System Fees for SEDAR and NRD to implement a flat-fee model, rather than the current model where system fees are based on the number of jurisdictions where documents are filed. The model has been designed to reflect the costs of using the new system, allow for future enhancements, and reduce the administrative burden for market participants.

The CSA is also proposing a new rule, National Instrument 13-103 [System Replacement Rule], which would require filers to electronically transmit all documents to securities regulators through the new system, subject to certain exceptions. Those exceptions include documents delivered in connection with a hearing, compliance review or investigation, or certain documents that are filed infrequently. In addition, the proposed rule would not apply to certain documents that would be required to be filed or delivered in the Renewed System in future phases of the project, as outlined in the Appendix.

The Renewed System will be rolled out in phases. The first phase, with an expected launch in early 2021, will replace issuer-related systems and filings: SEDAR, the National Cease Trade Order Database, the Disciplined List, and certain filings made in paper format or in local electronic filing systems. Later phases will replace SEDI, NRD, the National Registration Search, and the remaining filings in local systems.

The CSA expects to propose further changes to National Instrument 13-103 [System Replacement Rule] in future phases of the Renewed System.

The notices can be found on the websites of participating jurisdictions, and comments for both must be submitted by July 31, 2019.

Review the press release on the OSC's website.

President Trump nominates new SEC commissioner

Apr 02, 2019

On April 2, 2019, President Donald Trump has announced the nomination of Allison Herren Lee to serve as SEC commissioner.

If confirmed by the Senate, Ms. Lee will succeed Kara Stein.

For more information, see the press release on the White House’s Web site.

Overseeing the intersection of digital transformation and cybersecurity

Mar 21, 2019

On March 21, 2019, the National Association of Corporate Directors (NACD) published a blog by Tony Spinelli, CEO of S7 Advisors LLC. In his blog, he mentions how we’ve all heard the buzz word “digital,” and how he often gets asked questions about how to analyze and oversee the risks of enterprise-wide digital transformation.

While a possible nuisance to the person asking, his first answer tends to be a question: What do you believe it means for your enterprise to become digital?

Only once your company answers that question can the challenges and risks associated with a well-managed transformation be weighed. Invariably, the answers to this question are unique and divergent.

Review the full blog on NACD's website.

Canadian securities regulators consult on regulatory framework for crypto-asset trading platforms

Mar 14, 2019

On March 14, 2019, the Canadian Securities Administrators (CSA) and Investment Industry Regulatory Organization of Canada (IIROC) published Joint Canadian Securities Administrators/Investment Industry Regulatory Organization of Canada Consultation Paper 21-402 Proposed Framework for Crypto-Asset Trading Platforms. The consultation paper seeks input from the fintech community, market participants, investors and other stakeholders on how regulatory requirements may be tailored for crypto-asset trading platforms (platforms) operating in Canada. Comment are requested by May 15, 2019.

Platforms, depending on how they operate and the crypto assets they make available for trading, may be subject to securities and/or derivatives regulation. Depending on their structure, they may also introduce novel features that create risks to investors and Canada’s capital markets that may not be fully addressed by the existing regulatory framework. Where securities legislation applies to platforms, the CSA and IIROC are considering a tailored regulatory framework to address these novel features and risks.

The consultation paper seeks input on a number of areas that will assist in determining appropriate requirements for platforms. These include how to address custody and verification of assets, price determination, market surveillance, systems and business continuity planning, conflicts of interest, crypto-asset insurance, and clearing and settlement. The CSA and IIROC continue to engage with international regulators about their approach to platforms, and welcome input on a variety of regulatory approaches that exist in this area.

Review the press release and consultation paper on the CSA members' website.

Canadian securities regulators release detailed data from review of women on boards and in executive officer positions

Feb 26, 2019

On February 26, 2019, the securities regulatory authorities in Manitoba, New Brunswick, Newfoundland and Labrador, Northwest Territories, Nova Scotia, Nunavut, Ontario, Québec, Saskatchewan and Yukon (the participating jurisdictions) published the underlying data used to prepare CSA Multilateral Staff Notice 58-310 "Report on Fourth Staff Review of Disclosure regarding Women on Boards and in Executive Officer Positions", which was published on September 27, 2018.

This was the fourth consecutive annual review of disclosure related to women on boards and in executive officer positions conducted by the participating jurisdictions.

The data was compiled from public documents filed on SEDAR and includes the name, industry and year-end of the 648 non-venture issuers who were included in the review sample. These issuers had year-ends between December 31, 2017 and March 31, 2018, and filed information circulars or annual information forms by July 31, 2018.

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

Technology and Cyber Security Incident Reporting

Jan 30, 2019

In January 2019, the Office of the Superintendent of Financial Institutions (OSFI) released the advisory "Technology and Cyber Security Incident Reporting", which sets out OSFI’s expectations for federally regulated financial institutions (FRFIs) with respect to the reporting of technology and cyber security incidents affecting FRFI operations.

The advisory describes characteristics of incidents that should be reported to OSFI, in addition to initial notification and subsequent reporting requirements.

The advisory comes into effect on March 31, 2019.  In the meantime, FRFIs are expected to continue reporting any major incidents according to previous instructions communicated by their Lead Supervisors. Effective March 31, 2019, this Advisory supersedes any prior instructions for technology and cyber security incident reporting.

Review the press release and advisory on the OSFI's website.

Correction list for hyphenation

These words serve as exceptions. Once entered, they are only hyphenated at the specified hyphenation points. Each word should be on a separate line.