Securities regulators’ report sheds light on common deficiencies in continuous disclosure reviews

The Canadian Securities Administrators’ biennial report on its continuous disclosure review program sheds light on recurrent deficiencies, the focus areas of issue-oriented reviews and the review outcomes for fiscal years 2019-2020.

In fiscal year 2020 there were 583 continuous disclosure reviews in total, with full or issue-oriented reviews making up 73 per cent of that total, up from 70 per cent for fiscal year 2019, stated the report published on Oct. 29.

The report provided statistics for the focus areas of the issue-oriented reviews. In fiscal year 2020, 32 per cent (up from 22 per cent in fiscal year 2019) fell under the “other” category, which included but was not limited to reviews of emerging industries like cryptocurrencies and cannabis and change-of-auditor notices, while 25 per cent (down from 43 per cent in fiscal year 2019) fell under the Technical: Mining and Oil & Gas category. Twenty-two per cent were classified under Financial Statements/MD&A (management discussion and analysis), 13 per cent under News Releases, and eight per cent under Material Change Reports.

The report discussed the common deficiencies in continuous disclosure reviews for fiscal years 2019-2020. Among financial statements, there were deficiencies in adhering to recognition, measurement and disclosure requirements under the International Financial Reporting Standards. For management’s discussion and analysis, common deficiencies included fulfilling the requirements relating to forward-looking information, liquidity and capital resources and transactions between related parties. Other deficiencies pertained to complying with the regulatory requirements in connection with insider reporting, early warning reporting and material change reporting.

Appendix A of the report provided more detail regarding these common deficiencies, listed examples to assist issuers in dealing with these deficiencies, and provided guidance on how to report the impact of the COVID-19 pandemic.

The continuous disclosure review program of the Canadian Securities Administrators aims to assist reporting issuers in making more complete and timely disclosures and in comprehending and fulfilling their obligations under the continuous disclosure rules. It also seeks to help investors receive high-quality disclosures which will enable them to make more informed decisions regarding their investments.

“The report will assist these issuers when preparing their financial statements and MD&A, including information about operating performance, financial position, liquidity and future prospects,” said Louis Morisset, chairman of the Canadian Securities Administrators and president and chief executive officer of the Autorité des marchés financiers, in the news release.