Information on legal and business topics from Canadian business lawyer Shane McLean

CSA Releases Report on Continuous Disclosure Review

Posted by Shane McLean on July 29, 2009

On July 24, 2009 the Canadian Securities Administrators (“CSA”) released a staff notice with the results of their continuous disclosure review program of public companies in Canada for the fiscal year ended March 31, 2009.   The CSA conducted a total of 1,094 continuous disclosure reviews out of approximately 4,300 issuers who are reporting issuers in Canada.  Of those, 465 were full reviews and 629 were issue oriented reviews.   These numbers are up from last year when the CSA reviewed only 854 issuers.

The results are a bit concerning in that a full 80% of issuers reviewed had some form of action required as a result of the review.  In other words, of the 1,094 companies reviewed only around 218 of them came out clean.  Here are some highlights:

  • 5% of reviewed companies  had critical disclosure deficiencies and were either referred to enforcement, cease traded or placed on a default list
  • 13% were required to amend or refile certain continuous disclosure documents
  • 14% were warned about certain disclosure enhancements that should be considered in their next filings
  • a full 48% were required to make changes or enhancements in their next filings as a result of  deficiencies identified

Even if we exclude the 14% who received  “warnings” to “consider” disclosure enhancements in their next filings, that leaves 66%, or about 722 issuers, who were actually not in compliance with the legal public disclosure requirements.   That’s over 16% of all reporting issuers in Canada!

This should be a wake up call to public  companies to ensure that adequate time and attention is given to public disclosure documents and requirements by both the company and its legal and accounting advisers.  Not only will this avoid future  heat from the CSA, but more importantly it will mean that the investing public will have access to the information they are supposed to receive by law.

Too often I hear from companies that we speak to that their existing lawyers and accountants do not dedicate enough time to prepare and review public disclosure documents and only turn their attention to the task when the filing deadline looms.  This kind of approach makes it more likely that there will be deficiencies in disclosure and should definitely be avoided.  As everyone knows, it’s far too easy to miss a detail when rushing through the materials at the last minute.

A final note to companies that don’t use their accountants and/or lawyers to review all continuous disclosure documents:  you should.   If the cost of review scares you, remember that an ounce of prevention is worth a pound of cure and if your advisers are too expensive relative to the service you are receiving, get new advisers that are more reasonably priced.


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