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Securities

IFRS 17 Transition and Progress Report Requirements for Federally Regulated Insurers

May 04, 2018

On May 4, 2018, the Office of the Superintendent of Financial Institutions (OSFI) issued an advisory addressing the transition to IFRS 17.

The Insurance Companies Act stipulates in the case of federally regulated insurers (FRIs) that “financial statements shall, except as otherwise specified by the Superintendent, be prepared in accordance with generally accepted accounting principles, the primary source of which is the Handbook of the Canadian Institute of Chartered Accountants.”

Generally Accepted Accounting Principles for FRIs is effectively International Financial Reporting Standards as issued by the IASB. OSFI may specify additional accounting guidance or disclosure requirements, or require FRIs to use a specific option within an applicable accounting standard. OSFI makes these specifications in situations where there is a prudential need for additional accounting guidance.

To support FRIs in their transition to IFRS 17, OSFI issued an advisory regarding:

  • the option to early adopt IFRS 17;
  • accounting for financial guarantee contracts; and
  • semi-annual progress reporting to OSFI.

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

IOSCO issues a consultation report on good practices for audit committees in supporting audit quality

Apr 24, 2018

On April 24, 2018, the International Organisation of Securities Commissions (IOSCO) issued a consultation report inviting stakeholder feedback on its proposals for good practices for audit committees of issuers of listed securities in supporting external audit quality.

The report proposes features that an audit committee should have to be more effective in promoting and supporting audit quality. These features include the qualifications and experience of audit committee members, their level of knowledge in the field of financial reporting and audit, whether they have questioning minds and appropriately challenge management and auditors and whether the audit committee has adequate capacity and resources.

The report also includes a number of good practices that audit committees may consider when:

  • recommending the appointment of an auditor to members/shareholders;
  • assessing potential and continuing auditors;
  • assessing audit fees;
  • facilitating the audit process;
  • communicating with the auditor;
  • assessing auditor independence; and
  • assessing audit quality.

Comments are requested by July 24, 2018.

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

CSA outlines disclosure expectations for real estate reporting issuers

Apr 12, 2018

On April 12, 2018, the Canadian Securities Administrators (CSA) published CSA Staff Notice 52-329 "Distribution Disclosures and Non-GAAP Financial Measures in the Real Estate Industry". The notice details findings of a recent review and provides additional guidance on disclosure expectations relating to distributions and non-GAAP financial measures for real estate reporting issuers.

The CSA reviewed distribution disclosures relative to National Policy 41-201 Income Trusts and Other Indirect Offerings and non-GAAP financial measure disclosures relative to CSA Staff Notice 52-306 (Revised) Non-GAAP Financial Measures. The findings of the review indicate that the quality of disclosure pertaining to distributions and non-GAAP financial measures in the real estate industry needs improvement. 

Key findings from the review included the following items. For distributions, staff found opportunities for better disclosure when distributions exceed operating cash flows. For non-GAAP financial measures, staff identified a lack of transparency about various adjustments made in arriving at non-GAAP financial measures, particularly those relating to maintenance capital expenditures and working capital. Staff also noted instances where non-GAAP financial measures were presented with greater prominence than the most directly comparable measure specified under the issuer’s GAAP.

Non-GAAP financial measures and distribution disclosures continue to remain areas of focus for the CSA, and real estate reporting issuers are encouraged to refer to the guidance published.

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

CSA reports on climate change-related disclosure project

Apr 05, 2018

On April 5, 2018, the Canadian Securities Administrators (CSA) published CSA Staff Notice 51-354 "Report on Climate change-related Disclosure Project". The report summarizes the findings of the CSA’s previously announced project to review the disclosure by reporting issuers of risks and financial impacts associated with climate change, and outlines its plans for future work.

The CSA intends to develop new guidance and initiatives to educate issuers about the disclosure of climate change-related risks, opportunities and financial impacts. The CSA also intends to consider new disclosure requirements regarding non-venture issuers’ corporate governance practices in relation to material business risks including, for example, emerging or evolving risks and opportunities arising from climate change, potential barriers to free trade, cybersecurity and disruptive technologies. As a general rule, materiality is the determining factor in considering whether information must be disclosed to investors. 

In addition to these initiatives, the CSA will continue to monitor the quality of issuers’ climate change-related disclosures, best practices in this area and developments in reporting frameworks. The CSA will also continue to assess whether investors require additional types of information, such as disclosure of certain categories of greenhouse gas emissions, to make investment and voting decisions.

The report reflects the CSA’s consideration of key research findings, a review of the disclosure of large TSX-listed issuers, a survey of TSX-listed issuers and extensive consultation with investors, issuers and other stakeholders. The CSA also reviewed how current Canadian securities disclosure requirements differ from or are consistent with international climate change-related disclosure requirements and voluntary frameworks.

Review the press release and a backgrounder with additional details on the CSA's website and the Notice on the CSA members’ websites.

Canadian securities administrators adopt amendments related to reselling securities of foreign issuers

Mar 29, 2018

On March 29, 2018, the Canadian Securities Administrators (CSA) published amendments to National Instrument 45-102 Resale of Securities and changes to Companion Policy 45-102CP to National Instrument 45-102 Resale of Securities.

The amendments introduce a new prospectus exemption for the resale of securities (and underlying securities) of a foreign issuer if the issuer is not a reporting issuer in any jurisdiction of Canada, and the resale is on an exchange or a market outside of Canada or to a person or company outside of Canada.

A foreign issuer is an issuer that is not incorporated or organized under the laws in Canada unless the issuer has a head office in Canada or the majority of its directors or executive officers ordinarily reside in Canada.

Provided all necessary regulatory and ministerial approvals are obtained, these will come into force on June 12, 2018.

Review the announcement on the CSA's website and the Notice on the OSC's website.

How to meet SEC demand for cybersecurity disclosures

Mar 27, 2018

On March 27 2018, Accounting Today published an article on the SEC’s 2018 Guidance on Public Company Cybersecurity Disclosures and the elements that companies need to consider.

The SEC guidance released  includes two new areas: cybersecurity policies and procedures, and insider trading prohibitions.

The guidance spells out the rules of disclosure, stresses the importance of materiality when preparing disclosures and lists five elements of materiality to consider.

Experts from Deloitte are recommending public companies also consider taking an additional five steps:

  1. Assess current policies and procedures related to cyber risks and incidents.
  2. Align cyber risk with operational risk framework, and develop shared understanding on materiality considerations.
  3. Understand disclosure obligations under federal and state laws, and establish and maintain appropriate and effective disclosure controls for cybersecurity risks and incidents.
  4. Examine and update insider trading policies and procedures.
  5. Raise C-suite and board awareness on SEC guidance and company obligations, and assess and test incident management processes, including through cyber war gaming.

Review the article on Accounting Today's website and the guidance on the SEC's website.

CSA announces policy projects aiming to reduce regulatory burden in public markets

Mar 27, 2018

On March 27, 2018, the Canadian Securities Administrators (CSA) published CSA Staff Notice 51-353 "Update on CSA Consultation Paper 51-404 Considerations for Reducing Regulatory Burden for Non-Investment Fund Reporting Issuers", which outlines the CSA’s plan to pursue policy projects to examine specific prospectus requirements,  revisit certain continuous disclosure requirements, and enhance electronic delivery of documents.

Specific initiatives the CSA intends to pursue include:

  • removing or modifying the criteria for reporting issuers to file a business acquisition report;
  • facilitating at-the-market offerings;
  • revisiting the primary business requirements to provide greater clarity to issuers preparing an IPO prospectus;
  • considering a potential alternative prospectus model;
  • reducing or streamlining certain continuous disclosure requirements; and
  • enhancing electronic document distribution for investors.

Selection of these projects follows a consultation initiated by the CSA in 2017 on reducing regulatory burden in the public markets. Subsequently, CSA staff received a number of comment letters and certain jurisdictions held in-person consultations on the topic. The chosen initiatives reflect input from a diverse range of stakeholders, including reporting issuers, investor advocates, and industry groups. Certain projects may require longer timeframes than others to complete.

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

TSX Company Manual

Mar 22, 2018

On March 22, 2018, the Toronto Stock Exchange (TSX) provided guidance with respect to representations made by an issuer in a prospectus or advertising that it has applied to list its securities on TSX.

Pursuant to Section 346 of the TSX Company Manual (the "Manual"), an issuer may not make any representation, oral or written, that its securities will be listed on TSX or that application has been or will be made to list its securities on TSX except with the written permission of the Director of the Ontario Securities Commission, unless:

  1. application has been made to list the securities and securities of the same issuer are already listed on TSX; or
  2. TSX has granted approval to the listing, conditional or otherwise, or has consented to or indicated that it does not object to the representation. Furthermore, such representation may not be made in a preliminary prospectus, draft prospectus or other offering document, unless otherwise consented to by TSX.

Review the announcement on the TSX's website.

OSC Clarifies Expectations Regarding Corrective Disclosure

Mar 08, 2018

On March 8, 2018, the Ontario Securities Commission (OSC) released revised OSC Staff Notice 51-711 (Revised) "Refilings and Corrections of Errors" to clarify and expand on its expectations with respect to amendments to an issuer’s continuous disclosure record, website or social media to comply with continuous disclosure requirements.

These types of amendments are generally referred to as “corrective disclosure” and include the following:

  • Restatement and refiling of financial statements;
  • Amending and refiling previously filed continuous disclosure documents;
  • Filing documents that were to have been previously filed; and
  • Clarifying or removing website or social media content.

Review the Staff Notice on the OSC's website and a summary on Stikeman Elliott's website.

Demystifying Crypto in Canada: Will 2018 Be the Year of Blockchain?

Mar 07, 2018

On March 7, 2018, Davies published an article on how the year 2017 was one of tremendous growth for blockchain, as the technology underlying Bitcoin gained attention from mainstream media outlets, financial institutions, investment funds and securities regulators across the globe.

Blockchain’s rise to prominence was led by an interest in blockchain-based token sales, commonly referred to as initial coin offerings (ICOs), which raised almost US$4 billion in 2017 alone. Yet despite blockchain’s impressive growth, many commentators believe we have just scratched the surface, labelling 2018 the “Year of Blockchain.”

Review the full article on Davies' website.

Correction list for hyphenation

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