On July 16, 2015 the Canadian Securities Administrators (CSA) released CSA Staff Notice 51-344 Continuous Disclosure Review Program Activities for the fiscal year ended March 31, 2015 summarizing the results of their Continuous Disclosure Review Program (Program). The purpose of the Program is to monitor the compliance of continuous disclosure documents prepared by reporting issuers (issuers) and to help issuers understand and comply with their obligations under the continuous disclosure rules.
In fiscal 2015, there was a total of 1058 Continuous Disclosure Reviews, 280 of those being full reviews while 778 were issue oriented reviews focused on a specific accounting, legal or regulatory issue. Highlights of the continuous disclosure reviews in fiscal 2015 are as follows:
- 8% resulted in enforcement, cease trade orders or issuers being placed on a defaulting issuer list (compared to 9% in fiscal 2014);
- 21% resulted in a requirement to amend and refile the applicable continuous disclosure document (compared to 14% in fiscal 2014);
- 30% resulted in changes or enhancements required in the issuer’s next filing of the applicable continuous disclosure document (compared to 37% in fiscal 2014);
- 9% resulted in a letter to the issuer, designed to educate or make the issuer aware of certain disclosure enhancements, best practices and expectations (compared to 16% in fiscal 2014); and
- 32% resulted in no action being required (compared to 24% in fiscal 2014).
To help issuers better understand their continuous disclosure obligations the CSA also highlighted areas where deficiencies were commonly found and provided some best practice examples on how to address the deficiencies. Regarding MD&A, the CSA noted several issues, including:
- failing to provide sufficient analysis of liquidity and capital resources;
- providing inadequate results of operations disclosure;
- including forward looking information and non-GAAP measures without clearly identifying them as such or including the appropriate disclosures; and
- providing inadequate disclosure regarding related party transactions.
Interestingly, the CSA also noted that in some instances issuers are failing to file certain disclosure documents all together, the most common of those being material contracts and material change reports.
Of special interest to mining issuers, the CSA noted that mining issuer disclosure must comply with NI 43-101 Standard of Disclosure for Mineral Projects (NI 43-101), including written disclosure contained on an issuer’s website including investor presentations, media articles and links to third party content. Regarding investor presentations of mining issuers, the CSA noted several areas where mining issuers need to improve to better comply with NI 43-101, including:
- naming the qualified person who approved technical information and explaining their relationship to the issuer;
- providing required cautionary statements so that investors can understand the limitations of study results;
- including clear statements on whether mineral resources include or exclude mineral reserves;
- for exploration targets, expressing potential quantity and grade as a range and including the required statements outlining the target limitations; and
- avoiding overly promotional terms, such as “world class” and “spectacular and exceptional results”.
The CSA stressed the importance of the mining sector in Canadian capital markets and noted that they will continue to review mining issuers’ website disclosure as part of the Program.