Securities

SEC Commissioner's speech regarding ESG reporting

Jun 28, 2021

On June 28, 2021, SEC Commissioner Allison Herren Lee gave a keynote address at the 2021 Society for Corporate Governance National Conference entitled: Climate, ESG, and the Board of Directors: “You Cannot Direct the Wind, But You Can Adjust Your Sails”

Noting the increasing interest in climate change disclosures, Ms. Lee spoke to the following topics:

  • Putting ESG in context in the recent proxy season;
  • Understanding ESG and Board obligations; and
  • Mitigating ESG risks and maximizing ESG opportunities.

Re­view the full text of Ms. Lee’s speech on the SEC's web­site.

Canadian securities regulators adopt new nationally harmonized start-up crowdfunding rules

Jun 23, 2021

On June 23, 2021, the Cana­dian Se­cu­ri­ties Ad­min­is­tra­tors (CSA) adopted harmonized rules for securities crowdfunding. The new National Instrument 45-110, Start-up Crowdfunding Registration and Prospectus Exemptions, will introduce a single, uniform set of rules that replaces and enhances the requirements currently in effect in Alberta, British Columbia, Manitoba, New Brunswick, Nova Scotia, Ontario, Québec and Saskatchewan.

Following stakeholder consultation, the CSA made targeted amendments to improve the effectiveness of start-up crowdfunding as a capital-raising tool, including:

  • Increasing the maximum total amount that an issuer can raise under the crowdfunding prospectus exemption in a 12-month period to $1.5 million (from the current $500,000).
  • Increasing the maximum investment a purchaser can make in an offering to $2,500 (from the current $1,500), with a higher limit of $10,000 if a registered dealer advises that the investment is suitable for the purchaser.
  • Removing barriers preventing federal and provincial co-operatives or associations from using the start-up crowdfunding prospectus exemption.
  • Requiring funding portals relying on the registration exemption to certify on a semi-annual basis that they have sufficient financial resources to continue operations for the following six months.
  • Requiring issuers to have operations other than the acquisition of an unspecified business before using the start-up crowdfunding prospectus exemption.

Provided all necessary ministerial approvals are obtained, the Start-up Crowdfunding Rule (and the consequential amendments to NI 13-101 and NI 45-102) will come into force on September 21, 2021.

Re­view the press re­lease on the CSA’s web­site and the new National Instrument 45-110, Start-up Crowdfunding Registration and Prospectus Exemptions, on the OSC’s website.  

CSA 2020/2021 Enforcement Report highlights commitment of Canadian securities regulators during unprecedented times

Jun 22, 2021

On June 22, 2021, the Canadian Securities Administrators (CSA) released its fiscal year 2020/2021 Enforcement Report, which provides details on enforcement efforts and outlines how securities regulators are protecting investors and the integrity of Canada’s capital markets.

The report outlines how CSA members continued to strengthen their technical knowledge on critical and emerging topics, such as open-source intelligence and mobile forensics, and implement best practices and tools across the country to recognize and target fraudulent activity. 

The CSA also formally launched the Market Analysis Platform (MAP) in October 2020. MAP is a data repository and analytics system designed to help all CSA members identify and analyze market misconduct. The system has increased efficiency and speed in accessing and analyzing trading activity, which is critical as capital markets continue to evolve.

Re­view the press re­lease and re­port on the CSA’s web­site.

Can the SEC Make ESG Rules that are Sustainable?

Jun 22, 2021

On June 22, 2021, SEC Commissioner Elad L. Roisman made a speech at the Virtual Conference of the National Investor Relations Institute entitled, “Can the SEC Make ESG Rules that are Sustainable?”.

Noting that the Commission has increased its attention on ESG matters recently, and that the Chair of the Commission has expressed his intent to propose new disclosure requirements relating to climate change and human capital, Mr. Roisman focused on three questions during his speech:  

  • What precise items of “E,” “S,” and “G” information are investors not getting that are material to making informed investment decisions?
  • If the SEC were able to identify the information investors need, how would the SEC come up with “E” and “S” disclosure requirements—now, and on an ongoing basis? What expertise does the SEC need?
  • If the SEC were to incorporate the work of external standard-setters with respect to new ESG disclosure requirements: how would the agency oversee them—in terms of governance, funding, and substantive work product—on an ongoing basis? And what kind of new infrastructure would be required inside the SEC and at the standard-setters themselves?

Re­view the speech on the SEC's web­site.

OSFI consults on expectations to advance climate risk management

Jun 20, 2021

The Office of the Superintendent of Financial Institutions (OSFI) issued a draft version of Guideline B-15: Climate Risk Management. This guideline proposes a prudential framework that is more climate sensitive and recognizes the impact of climate change on managing risk. The draft Guideline sets the stage for OSFI’s expectations of federally regulated financial institutions.

Climate-related risks, including physical and transition risks, could have significant impacts on the safety and soundness of financial institutions, and the broader Canadian financial system. Building financial resilience against intensifying climate-related risks requires institutions to address vulnerabilities in their business model, their overall operations, and ultimately on their balance sheet.

OSFI is also introducing mandatory climate-related financial disclosures aligned with the international Task Force on Climate-related Financial Disclosures (TCFD) framework. These disclosures will incentivize improvements in the quality of the institutions’ governance and risk management practices related to climate. In doing so, this contributes to public confidence in the Canadian financial system by increasing transparency. This also aligns with a commitment made by the federal government to require financial institutions to publish climate disclosures starting in 2024.

Given the pace of change in climate risk management, OSFI intends to review and amend this Guideline as practices evolve and standards harmonize. OSFI welcomes public comments to draft Guideline B-15 before August 19, 2022.

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

Climate Change Disclosures and Private Companies

Jun 19, 2021

On June 19, 2021, Ann Lipton posted an item on the Law Professor Blogs Network regarding climate change disclosures and U.S. private companies.

Noting that the SEC recently called for public comment on the issue of mandatory climate reporting and that  comments are in the process of being posted on the SEC’s site, she observed that, in the original request for information, one of the questions that the SEC asked was as follows:

What climate-related information is available with respect to private companies, and how should the Commission’s rules address private companies’ climate disclosures, such as through exempt offerings, or its oversight of certain investment advisers and funds?

Not all commenters have responded to this question, but the blog posting by Ms. Ann Lipton highlights a number of interesting responses made by certain commentators to this question.

Re­view the blog posting for more details.

AMF 2020-2021 Enforcement Report published - Positive results amid the pandemic

Jun 17, 2021

On June 17, 2021, the Au­torité des marchés fi­nanciers (AMF) pub­lished its Enforcement Report for the 2020-2021 fiscal year. Despite the pandemic, the AMF reports that its inspection, investigation and prosecution teams were very proactive and able to maintain their operations remotely, achieving more-than satisfactory progress and results.

During the period, the AMF instituted a large number of prosecutions and obtained important rulings that sent deterrent messages. Throughout 2020-2021, the AMF also continued its offensive on the crypto asset front and initiated major proceedings when investigations found a number of offences being committed via virtual spaces in the crypto asset ecosystem.

The inspection team was very busy, particularly as it had to integrate mortgage brokerage into its inspection activities and oversee registrants’ management of the pandemic.

Fiscal 2020-2021 was also a landmark year with the rollout of major projects such as electronic evidence management (AÉP) and the Market Analysis Platform (MAP). These projects have now been completed, and the tools developed under them are being used daily by the AMF’s market surveillance specialists, intelligence analysts, data science experts, investigators, and prosecutors.

Re­view the press re­lease and re­port on the AMF's web­site.

IIRC publishes its latest Annual Report, ahead of its merger with the SASB

Jun 03, 2021

On June 3, 2021, the International Integrated Reporting Council (IIRC) published its latest Annual Report, entitled ‘Driving Cohesion‘, ahead of its merger with the Sustainability Accounting Standards Board (SASB) to form the Value Reporting Foundation.

The report was developed through a process of integrated thinking led by the IIRC Board and management. The process enabled a better understanding of the strategic big picture and external environment to build agreement that the merger with SASB is the most effective next step to achieve its focus of driving adoption of integrated thinking and reporting and simplifying the corporate reporting landscape.

The report takes stock of the long shadow cast by the COVID-19 pandemic and its daily reminder of the interconnectedness between our economy and society, as well as the shared challenges we face as an international community.

The report also highlights some of the positive responses, including an acceleration in digital innovation, rapid business model adaption and a renewed commitment from political, business and investment leaders to “build back better” – integrating sustainability considerations into all aspects of financial and business decision-making, creating a platform for sustainable prosperity.

Re­view the press re­lease and report on the IIRC’s website for more in­for­ma­tion.  

Canadian securities regulators publish final rule for non-GAAP and other financial measures

May 27, 2021

On May 27, 2021, the Canadian Securities Administrators (CSA) published disclosure requirements for issuers that disclose non-GAAP (generally accepted accounting principles) and other financial measures on a voluntary basis. The rule improves the quality of information provided to investors for various financial measures that commonly lack standardized meaning.

National Instrument 52-112 Non-GAAP and Other Financial Measures Disclosure will:

  • Apply to all reporting issuers, except investment funds and certain foreign issuers;
  • Apply to non-reporting issuers for certain offering documents and transactions;
  • Require specified disclosure for certain financial measures presented outside the financial statements, such as non-GAAP financial measures and supplementary financial measures, (as defined in the final rule); and
  • Apply to disclosures for a financial year ending on or after October 15, 2021 (for reporting issuers) and for certain offering documents or transactions filed after December 31, 2021 (for non-reporting issuers). 

The final rule incorporates feedback to clarify and streamline the application and disclosure requirements. Prior to adopting the final rule, issuers should continue to refer to Staff Notice 52-306 (Revised) Non-GAAP Financial Measures, which will be withdrawn when transition to the final rule is complete. The final rule will come into effect on August 25, 2021.

Review the press release on the CSA's website and National Instrument 52-112 on the OSC's website.

Accounting and Tax Considerations for Cryptocurrency

May 20, 2021

The Financial Education & Research Foundation (FERF) spoke with Deloitte experts about the accounting and tax considerations when a company invests in cryptocurrencies or chooses to use it in its business.

The questions covered included:

  • Given that different cryptocurrencies carry different risks, how do financial executives decide which ones we want to be associated with and which ones to avoid?
  • What are the key accounting and tax capabilities that their systems need to accommodate to account for crypto?
  • What are the key accounting and tax considerations when a company invests in cryptocurrencies or chooses to use it in its business?
  • How do we think about the decision to self-custody vs. Use a custodian?
  • What are the considerations as we select vendors to support key functions like custody?
  • Which risk factors should preparers consider disclosing in public filings?
  • Which areas of regulation and compliance should companies pay particular attention to?

Review the article on the FEI's website.

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