Canadian Securities Administrators Report on Results of Continuous Disclosure Review Program

The Canadian Securities Administrators recently published a report on the results of their continuous disclosure review program. The report, titled Staff Notice 51-344 Continuous Disclosure Review Program Activities for the fiscal year ended March 31, 2015, includes detailed examples of common deficiencies identified by securities commissions during their review of financial statements, MD&A and other disclosure. It also provides reporting issuers with practical guidance and suggestions for improving their disclosure.

Some examples of the deficiencies described in the report include:

  1. MD&A- Liquidity and Capital Resources: The report identified failure to provide sufficient analysis of the issuer’s liquidity and capital resources as a common deficiency.
  2. MD&A- Related Party Transactions: The report found that issuers tend to be too generic in disclosure of related party transactions in their MD&A. Frequently, disclosure of the nature of the transaction and description of the relationship with the related party is omitted. The report notes that, while many of the MD&A requirements for related party transactions in Form 51-102F1 Management’s Discussion and Analysis are similar to the requirements under IAS 24 Related Party Disclosures, unlike IAS 24, Form 51-102F1 specifically requires an issuer to identify the related person or entity, as well as to discuss the business purpose of the transaction.
  3. Forward Looking Information (FLI) and Non-GAAP Measures (NGM): The report found that issuer’s frequently use FLI and NGM in MD&A, news releases, websites, marketing materials and other documents without clearly identifying them as such or including the appropriate disclosures.
  4. Filing of Material Contracts: The report found that issuers are failing to file material contracts, and specifically notes that subsection 12.2(2) of NI 51-102 provides a list of contracts required to be filed on SEDAR even if entered into in the ordinary course of business. These may include a financing or credit agreement with terms that have a direct correlation with anticipated cash distributions or a contract on which the issuer’s business is substantially dependent.
  5. Material Change Reports: The report specifically notes that unfavourable news must be disclosed just as promptly and completely as favourable news.

The full report can be found here.