CSA Proposed Amendments to NI 51-102 Continuous Disclosure Obligations and Other Amendments and Changes Relating to Annual and Interim Filings of Non-Investment Fund Reporting Issuers and Seeking Feedback on a Proposed Framework for Semi-Annual Reporting – Venture Issuers on a Voluntary Basis

September 21, 2021

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CSA – Notice and Request for Comment – Proposed Amendments and Proposed Changes to Implement an Access-Based Model for Investment Fund Reporting Issuers

Letter Summary:

The CSA is proposing amendments to NI 51-102 in order to streamline and clarify continuous disclosure requirements for reporting issuers other than investment funds. The proposed amendments would include consolidating the MD&A form with the AIF form and financial statements into new annual and interim disclosure statements. It is noted that the SEC Form 10-K similarly presents that information in one document. The proposed amendments will eliminate some disclosure requirements that have been deemed duplicative or redundant, such as the current MD&A requirement to disclosure summary information for the last 8 quarters as the information can be located in previous filings. A few new requirements will be added to address perceived gaps in disclosure, such as a requirement for venture issuers to describe their businesses in their MD&A. The final amendments are expected to be effective December 15, 2023 and various transition provisions have been proposed. The CSA expects the amendments will streamline reporting and increase reporting efficiency for reporting issuers while increasing the quality of the disclosure for investors. Consequential amendments to other instruments and rules will be required.

The CSA has also requested comments on a framework for venture issuers that would allow them to report semi-annually on a voluntary basis if they are not SEC issuers, and provide alternative disclosure for interim (quarterly) periods where financial statements and MD&A are not being filed.

Overview of the Council’s Comments:

We are supportive of the CSA’s intent to streamline and reduce duplicative disclosure. The focus of our comments includes some concerns and additional guidance requested with respect to some of the information proposed to be deleted from disclosure requirements, express our concerns with the potential semi-annual reporting framework, and outline some other areas relating to continuous disclosure that we believe should also be a regulatory focus.

As it relates to removing duplicative disclosure, we reiterate our view that the existing SEDAR systems’ accessibility and (lack of) ease of use and machine readability represent impediments to investor access.

We support new disclosure statements that will generally remove certain materiality qualifiers and have all disclosure requirements subject to the qualification that issuers must focus on material information as set out in the instructions; but would appreciate confirmation that any such change would conform with the understanding of and thresholds relating to materiality in Canadian accounting standards and under IFRS.

We remain concerned, with respect to the potential framework for semi-annual reporting for certain venture issuers, as discussed in more detail in our responses to the specific consultation questions below.

Finally, given the current global policy and regulatory focus on ESG-related disclosure and standards, particularly those relating to issuer disclosure, we were surprised that additional annotations and amendments were not provided with respect to the future integration of ESG reporting which will become an essential part of a reporting issuer’s continuous disclosure. Any such mandated disclosure should be an integrated part of annual disclosure statements and not be contained in a stand-alone document for ease of investor access and reference.

Additionally, we note that the forms will continue to require certain information with respect to an issuer’s credit rating, while removing the requirements for much of this information that can be found by investors elsewhere. Going forward, we suspect some issuers may also wish to include information with respect to their ESG or sustainability rating(s), which may cause some investor confusion if not contextualized as being presented without assurance and properly representing these ratings’ assignment by and redistribution from third parties, with appropriate links to respective ratings frameworks and methodologies.

Some technical key points are noted below: