Securities

SEC Proposes Rules on Cybersecurity Risk Management, Strategy, Governance, and Incident Disclosure by Public Companies

Mar 09, 2022

On March 9, 2022, the Securities and Exchange Commission (SEC) proposed amendments to its rules to enhance and standardize disclosures regarding cybersecurity risk management, strategy, governance, and incident reporting by public companies.

The proposed amendments would require, among other things, current reporting about material cybersecurity incidents and periodic reporting to provide updates about previously reported cybersecurity incidents. The proposal also would require periodic reporting about a registrant’s policies and procedures to identify and manage cybersecurity risks; the registrant’s board of directors' oversight of cybersecurity risk; and management’s role and expertise in assessing and managing cybersecurity risk and implementing cybersecurity policies and procedures. The proposal further would require annual reporting or certain proxy disclosure about the board of directors’ cybersecurity expertise, if any.

The proposed amendments are intended to better inform investors about a registrant's risk management, strategy, and governance and to provide timely notification to investors of material cybersecurity incidents.

Review the press release and proposed rule on the SEC's website.

Canadian securities regulators provide updated guidance on virtual shareholder meetings

Feb 25, 2022

On February 25, 2022, staff of the Canadian Securities Administrators provided issuers with their guidance on holding virtual shareholder meetings. Given the emergence of the COVID-19 pandemic, many reporting issuers have adopted a virtual format for their shareholder meetings. These meetings are typically conducted either entirely virtually, in place of an in-person meeting, or through a “hybrid” format held in-person while also permitting participation via electronic means. Accordingly, the CSA staff felt it appropriate to issue this new release with their recommendations for such meetings.

Re­view the No­tice on the CSA's Web Site.

Canadian securities regulators seek comment on the proposed modernization of the prospectus filings model for investment funds

Jan 27, 2022

On January 27, 2022, the Canadian Securities Administrators (CSA) published for comment a two-staged proposal to modernize the prospectus filing model for investment funds. In keeping with current requirements, investor access to continuous disclosure documents as well as delivery of the Fund Facts and the ETF Facts – which are renewed annually and provide key information in a simple, accessible and comparable format – remains unchanged. Investors will still be able to request the prospectus or access it online.

Of the two stages, the first consists of proposed amendments that would allow investment funds in continuous distribution to file a new prospectus every two years instead of on an annual basis as they currently do. The requirement to file a final prospectus no more than 90 days after the issuance of a receipt for a preliminary prospectus for all investment funds would also be repealed.

As part of the second stage, the CSA is seeking stakeholder comments on a consultation paper introducing a new shelf prospectus filing model which could apply to all investment funds in continuous distribution. The conceptual framework for this model is based on an adaptation of the current shelf prospectus system.

Proposed amendments to National Instrument 41-101 General Prospectus Requirements and National Instrument 81-101 Mutual Fund Prospectus Disclosure, and proposed changes to Companion Policy 41-101 General Prospectus Requirements and Companion Policy 81-101 Mutual Fund Prospectus Disclosure have been published for a 90-day comment period.

Review the press release and proposal.

Canadian securities regulators publish detailed data for seventh annual review of representation of women on boards in Canada

Jan 20, 2022

On January 20, 2022, the securities regulatory authorities in Manitoba, New Brunswick, Nova Scotia, Ontario, Québec and Saskatchewan (the participating jurisdictions) published the underlying data used to prepare the seventh year review of women on boards and in executive officer positions.

This was the seventh 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 599 non-venture issuers who were included in the review sample. These issuers had year-ends between December 31, 2020 and March 31, 2021, and filed information circulars or annual information forms by July 31, 2021.

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

Canadian securities regulators publish guidance on ESG-related investment fund disclosure

Jan 19, 2022

On January 19, 2022, the Canadian Securities Administrators (CSA) published guidance for investment funds on their disclosure practices that relate to environmental, social and governance (ESG) considerations, particularly funds whose investment objectives reference ESG factors and other funds that use ESG strategies (ESG-Related Funds).

The guidance is based on existing regulatory requirements and addresses areas of disclosure, including investment objectives, fund names, investment strategies, risk disclosure, continuous disclosure and sales communications.

As the investment fund industry creates new funds and incorporates ESG considerations into existing funds to meet demand, there is an increased potential for “greenwashing” – where a fund’s disclosure or marketing intentionally or inadvertently misleads investors about the ESG-related aspects of the fund.

This guidance is intended to help investment funds and their fund managers enhance the ESG-related aspects of the funds’ regulatory disclosure documents and ensure that sales communications of ESG-Related Funds are not untrue or misleading and are consistent with the funds’ regulatory offering documents.

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

Canadian securities regulators adopt changes to auditor oversight rules

Jan 13, 2022

On January 13, 2022, the Canadian Securities Administrators (CSA) published final amendments intended to assist the Canadian Public Accountability Board (CPAB) with inspecting audit work performed in foreign jurisdictions.

The amendments respond to challenges CPAB has faced in accessing audit work performed by firms that are not subject to the regulator’s oversight, but complete a significant portion of the work for the audit of a Canadian reporting issuer. Audit firms performing such work are referred to as significant component auditors.

Once the changes take effect, if a significant component auditor does not provide access to CPAB voluntarily, and CPAB requests to inspect the work it performed, the significant component auditor will be requested to enter into an access agreement with CPAB to facilitate inspection of its work. Failure to do so will render that auditor ineligible to be a significant component auditor for future audit work.

Provided all necessary ministerial approvals are obtained, the amendments will come into force on March 30, 2022.

Review the following information:

 

OSC issues Order to provide Exemption for Federal Financial Institutions from Non-GAAP Disclosure Requirements

Dec 31, 2021

On De­cem­ber 2, 2021, the Ontario Securities Commission (OSC) made an Order to exempt reporting issuers that fall under the definition of "federal financial institution" under the Bank Act from the application of National Instrument 52-112, “Non-GAAP and Other Financial Measures Disclosure” (NI 52-112) under certain circumstances. Securities regulators in British Columbia, Alberta, Manitoba, Saskatchewan, Nova Scotia, Newfoundland & Labrador, and Prince Edward Island have also made similar orders.

Under the OSC's Order, eligible issuers are exempt from NI 52-112 in respect of a disclosure of a specified financial measure pursuant to an OSFI Guideline where: (i) the OSFI Guideline specifies the composition of the measure and the measure was determined in compliance with that OSFI Guideline; and (ii) in proximity to the measure, the eligible issuer discloses the OSFI Guideline under which the measure is disclosed. "Eligible issuer" in the Order is defined to mean a reporting issuer that "is, or that has a subsidiary or an affiliate that is, a federal financial institution subject to OSFI Guidelines". A "federal financial institution" is defined in reference to the Bank Act (Canada), and generally includes banks, cooperative credit associations, trust companies and insurance companies.

The conditions for the exemption mirror the existing exception under section 4(1)(e) NI 52-112 in respect of disclosure of a specified financial measure that is required under law or by an SRO of which the issuer is a member. According to the OSC, the Order is intended to reduce the burden for eligible issuers subject to OSFI Guidelines "since sufficient disclosure exists surrounding these measures."

The Order came into effect on December 2, 2021 and expires on the earlier of June 2, 2023 and the effective date of rules that include an exception to the application of NI 52-112 based on disclosure of a specified financial measure pursuant to an OSFI Guideline.

Re­view the related article by Stikeman Elloitt on the Mondaq web­site.

SEC proposes new share repurchase disclosure rules

Dec 20, 2021

The Securities and Exchange Commission (SEC) proposed amendments to its rules regarding disclosure about an issuer’s repurchases of its equity securities, often referred to as buybacks.

The proposed rules would require an issuer to provide a new Form SR before the end of the first business day following the day the issuer executes a share repurchase. Form SR would require disclosure identifying the class of securities purchased, the total amount purchased, the average price paid, as well as the aggregate total amount purchased on the open market in reliance on the safe harbor in Exchange Act Rule 10b-18 or pursuant to a plan that is intended to satisfy the affirmative defense conditions of Exchange Act Rule 10b5-1(c).

Review the press release on the SEC's website.

OSC announces temporary changes to service commitments

Dec 20, 2021

The Ontario Securities Commission (OSC) announced temporary changes to its service commitments in response to a significant and persistent increase in the volume and complexity of certain applications and filings. The changes extend timelines related to reviews of certain offering documents, compliance reviews, applications and other registration materials for which the OSC is principal regulator. The extended timelines will remain in effect from December 7, 2021 to June 30, 2022.

While the temporary changes to its service commitments are in place, OSC staff will not review pre-files for draft preliminary base shelf prospectuses or non-offering prospectuses under its confidential pre-file program. The temporary changes do not impact urgent and time-sensitive prospectus pre-filings, such as those involving bought deals and overnight marketed offerings.

As part of its annual review, the OSC will conduct a comprehensive evaluation of all its service commitments, including the applications and filings included in the temporary changes. The OSC will publish any further changes to its service commitments as a result of this evaluation at the end of Q1 2022 (June 30, 2022). All preliminary prospectuses and exemptive relief applications filed after December 7, 2021 will be processed under the temporary service commitments.

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

Study of the CFA Institute on the influence of ESG disclosures on investment decisions

Dec 13, 2021

On December 13, 2021, CFA Institute announced the results of a recent new, global member survey on environmental, social, and governance (ESG) issues. The survey of CFA Institute members asked these professional analysts and investors about the duty of investment managers to integrate ESG factors into their investment analysis and decision-making, as well as their views on the need for formal, government-backed standards for how public companies report on ESG matters.

Regarding the integration of ESG factors by investment managers, most respondents think:

  • customers and their investment managers should decide on ESG integration, not regulators;
  • regulators should not mandate ESG integration;
  • financial materiality should be the primary focus of investment managers who do integrate ESG issues into their investment performance; and
  • greenwashing should be addressed with clear and consistent rules on marketing and measuring adherence to ESG product claims.

On public company reporting on ESG matters, most respondents think:

  • formal, government-backed standards for public company reporting on ESG should be established;
  • mandatory public company reporting on ESG should be delayed until after formal reporting standards are enacted;
  • a baseline of globally consistent standards for ESG reporting is preferred to many regional approaches;
  • voluntary ESG reporting pursuant to private reporting frameworks is not favored; and
  • auditor assurance of ESG reporting should wait until government-backed standards for ESG reporting are in place and mandatory for public companies.

Re­view the press release and the full re­port on the CFA In­sti­tute's web­site.

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