Written by Will Osler, Chris Doucet and Alyssa Marshall
On May 20, 2021, the Canadian Securities Administrators (CSA) issued a notice requesting comments on proposed amendments to National Instrument 51-102 Continuous Disclosure Obligations (NI 51-102) and other changes relating to annual and interim filings of non-investment fund reporting issuers. The CSA is also seeking feedback on a proposed framework for semi-annual reporting for venture issuers, on a voluntary basis.
The 120-day comment period expires on September 17, 2021.
Proposed Amendments to National Instrument 51-102
The proposed amendments to NI 51-102 are informed by comments received in response to CSA Consultation Paper 51-404 Considerations for Reducing Regulatory Burden for Non-Investment Fund Reporting Issuers (CP 51-404) originally issued in early 2017, as well as other stakeholder feedback concerning disclosure requirements for reporting issuers in annual and interim filings. The proposed amendments are meant to reduce the burden of disclosure on reporting issuers, while enhancing the usefulness and understandability of the disclosure for investors.
The main proposed amendments would:
- consolidate and clarify certain disclosure form requirements in management’s discussion and analysis (MD&A) and annual information forms (AIFs) for non-investment fund reporting issuers and eliminate certain form requirements that are redundant or no longer applicable;
- permit combination of financial statements, MD&A and, where applicable, an AIF into one reporting document—–for annual reporting purposes, the Annual Disclosure Statement, and for interim reporting purposes, the Interim Disclosure Statement; and
- address gaps in disclosure with a small number of new requirements.
Other proposed changes include:
- consolidation of myriad qualifiers of importance such as "material", "significant", "critical", "major" and "fundamental" into a core standard requiring reporting issuers to focus on material information in completion of all form requirements, which is set out in general instructions to Form 51-102F1 Annual Disclosure Statement and Form 51-102F2 Interim Disclosure Statement; and
- application of a delivery requirement to the Annual and Interim Disclosure Statements, but on a similar protocol to the "notice and access" protocol available for the delivery of shareholder meeting materials under NI 51-102 and National Instrument 54-101–Communication with Beneficial Owners of Securities of a Reporting Issuer such that a reporting issuer may deliver such disclosure documents by providing electronic access and delivering only a related notice that the document is available.
With these proposed amendments, the CSA continues to reiterate its commitment to the principles of disclosure burden reduction originally set out in CP 51-404 and restate its belief in the importance of proposing changes rather than maintaining the status quo.
The final amendments are expected to be published in September 2023 and be effective on December 15, 2023. The CSA proposes to include aligned transition provisions in the amending instruments for NI 51-102 and for certain other amended rules.
Proposed Framework for Semi-Annual Reporting
CP 51-404 solicited general feedback in response to broad questions concerning whether a semi-annual reporting option should be offered to reporting issuers and, if so, under what circumstances. Though the CSA is not proposing amendments to introduce semi-annual reporting for reporting issuers at this time, it is seeking feedback on a new proposed framework for semi-annual reporting on a limited basis would allow venture issuers that are not SEC issuers the choice of reporting on a semi-annual rather than a quarterly basis. Alternative disclosure would be required for interim periods where financial statements and MD&A would not be filed.
The proposed framework is intended to lower financial reporting costs, provide streamlined disclosure for Q1 and Q3 periods, and provide choice for participating venture issuers based on their available resources and the expectations of their investors.
The CSA acknowledges that the proposed framework poses certain risks: less timely financial statements for participating venture issues, availability of semi-annual reporting to large venture issuers and the possibility of selective disclosure under a semi-annual reporting model. However, the CSA also acknowledges that semi-annual reporting under a different structure has worked successfully in some foreign jurisdictions (including Australia, the United Kingdom, and certain European Union countries).
Other Topics for Comments
In addition to comments on the proposed amendments and proposed framework, the CSA also invites comments on certain topics related to:
- additional disclosure for venture issuers without significant revenue;
- risk factors;
- the requirement to name authors of technical reports;
- the impact of refiling on auditing requirements;
- proposed amendments to Form 41-101F1 Information Required in a Prospectus and Form 44-101F1 Short Form Prospectus;
- semi-annual reporting for certain venture issuers on a voluntary basis; and
- transition provisions.
Any comments should be submitted in writing on or before September 17, 2021.
Any comments received will be distributed to all participating CSA jurisdictions and will be publicly available on the Alberta Securities Commission, the Autorité des marchés financiers, and the Ontario Securities Commission websites.
Bennett Jones would be pleased to provide assistance in crafting comments and feedback on the proposed amendments.