On July 27, 2017, the Canadian Securities Administrators (CSA) announced in CSA Staff Notice 51-351 Continuous Disclosure Review Program Activities for the fiscal year ended March 31, 2017 that a CSA Staff Notice detailing the results of the continuous disclosure review program (CD Review Program) will be published every two years instead of annually. As a result, there will be no CSA Staff Notice related to the CD Review Program for the fiscal year ended March 31, 2017 and instead the next CSA Staff Notice will be for the fiscal year ended March 31, 2018.
CSA Staff Notices regarding the results of the CD Review Program are aimed at providing an overview of common continuous disclosure deficiencies. Further details regarding the CD Review Program can be found in CSA Staff Notice 51-312 (revised) Harmonized Continuous Disclosure Review Program and have been summarized below.
In 2004, the CSA established the CD Review Program. The goal of the CD Review Program is to improve the completeness, quality and timeliness of continuous disclosure by reporting issuers in Canada. The CD Review Program educates issuers during continuous disclosure reviews and identifies material disclosure deficiencies and questionable transactions that affect the reliability and accuracy of an issuer’s disclosure record.
Under the CD Review program, the principal regulator is responsible for reviewing the issuer’s continuous disclosure record and taking further steps related to continuous disclosure compliance. The CSA uses a risk-based approach to select issuers to review and to determine the type of reviews to conduct, which can either be a “full” review or an “issue-oriented” review. Staff review the overall quality of the issuer’s disclosure, and in particular, assess whether there is sufficient information for the reader to understand the issuer’s financial performance, financial position, business risks and future prospects. Issues identified during the review are typically communicated to the issuer through a comment letter, which then invites the issuer to provide a written response.
Issuers are expected to correct material deficiencies or errors that are identified during the review process by restating and re-filing the applicable document. Pursuant to section 11.5 of Continuous Disclosure Obligations (NI 51-102), if a reporting issuer decides it will (a) re-file a document filed under NI 51-102 or (b) re-state financial information for comparative periods in financial statements for reasons other than retrospective application of a change in an accounting standard or policy or a new accounting standard, and the information in the re-filed document, or re-stated financial information, will differ materially from the information originally filed, the issuer must immediately issue and file a news release authorized by an executive officer disclosing the nature and substance of the change or proposed changes.
The issuer may be placed on the default lists or be issued a cease-trade order if a material deficiency or error is identified during the review process. In some cases the regulators may consider recommending enforcement action against the issuer.
In light of the shift from an annual to a biennial publication, reporting issuers in Canada should continue to apply the guidance provided in CSA Staff Notice 51-346 Continuous Disclosure Review Program Activities for the fiscal year ended March 31, 2016.