Canada: Highlights Of OSC Corporate Finance Branch 2016-2017 Annual Report


The Ontario Securities Commission (OSC) recently published OSC Staff Notice 51-728 Corporate Finance Branch 2016-2017 Annual Report (the "Report"). The Report – which summarizes key issues raised by the Corporate Finance Branch's annual continuous disclosure review program and its ongoing review of prospectuses, private placement offerings and exemptive relief applications – provides guidance that can be helpful in navigating the securities regulatory regime in Ontario and avoiding pitfalls that can delay (or worse) capital markets transactions and/or have adverse reputational consequences for companies, their directors and officers and their advisors.

Highlights of the Report

On an annual basis, the OSC conducts both full reviews of companies' public disclosure records, as well as targeted reviews focused on specific issues. The outcomes of the OSC's reviews include education and awareness, prospective disclosure enhancements, refilings, and other outcomes, such as enforcement actions. Much of the key guidance in the Report builds on issues that the OSC has focused on in recent years, and includes:

  • MD&A Generally. The Report notes that many issuers continue to struggle with providing meaningful disclosure in their MD&A, especially with respect to changes in accounting policies, results of operations, risks and uncertainties and capital resources. Issuers are reminded that MD&A disclosure must be transparent and clear to be informative, and that issuers should avoid boilerplate disclosure that simply repeats information from the financial statements.
  • Non-GAAP Financial Measures. The Report highlights the OSC's continued concern with the way some companies (particularly those in the mining, real estate, technology and biotechnology industries) present non-GAAP financial measures, such as EBITDA and adjusted earnings per share (among others). The OSC's most significant concerns are the greater prominence being given to non-GAAP financial measures than GAAP financial measures, lack of clarity regarding the manner in which the measures are calculated, and consistency of presentation in companies' public disclosure materials. The Report cautions issuers that the OSC may take regulatory action in response to these concerns. Companies that routinely access the public markets for financing should also be cautious about the potential implications of these issues in the context of prospectus reviews by the OSC and other securities regulators. The Report confirms that the OSC intends to continue actively reviewing the use of non-GAAP financial measures over the next year.
  • Forward Looking Information. Another area the OSC has focused significant attention on in recent years is forward-looking information and, in particular, disclosure of the assumptions and risks associated with such information, as well as the requirement to update previously disclosed forward-looking information. Of particular concern in the Report are the time period covered by forward-looking information (which must be limited to a period that can reasonably be estimated) and the lack of quantitative descriptions of assumptions used to prepare that information. These issues could require amendments to companies' historical public disclosure, not only as a result of a continuous disclosure review but potentially in the course of a "live" prospectus offering. As with non-GAAP financial measures, inadequate disclosure in a company's public record could materially impact the company's ability to execute on time-sensitive public equity financings. IPO issuers – that often include financial outlooks extending beyond the end of the next financial year – should also ensure that the assumptions upon which such information is based are clearly disclosed and be prepared to justify the reasonableness of those assumptions to the OSC.
  • Social Media Disclosure. Social media has become a mainstream platform for many public companies to communicate with their investors and other stakeholders. It is critical that companies approach social media disclosure with the same care as they would any other written disclosure, including protecting against incomplete, misleading or selective disclosure. Over the past year, the OSC specifically focused on social media disclosure as one of its issue-oriented reviews and concluded that Canadian public companies generally need to improve the quality of their social media disclosure (see our March 10, 2017 Update, CSA Provides Disclosure Expectations for Reporting Issuers Using Social Media). The Report also strongly encourages adoption of a formal social media policy, which may be an effective tool in fostering a culture of prudence when using social media.
  • Cyber Security Risks and Incidents. During 2016 – 2017, the OSC also conducted an issue-oriented review of companies' disclosure of cyber security risks. The results of that review are summarized in our January 24, 2017 Update, CSA Provides Guidance on Disclosure of Cyber Security Risks. The Report reiterates the need to provide detailed and entity-specific risk disclosure if cyber security risk is a material risk, as well as the need to evaluate whether cyber security incidents are material facts and/or material changes that require timely disclosure. Recent high profile cyber security incidents in Canada and abroad highlight the substantial reputational risks companies face if a cyber security incident occurs, which can be significantly exacerbated by inadequate or delayed disclosure of such incidents.
  • Financial Statement Disclosure for Significant Acquisitions. In the Report, the OSC indicates that when an issuer is filing a prospectus to raise proceeds for an acquisition that will either make up a material portion of its business or is larger than its current business, the issuer may need to provide more disclosure than what is normally required in a prospectus for a "significant acquisition", including additional audited financial statements. It is not clear from the Report what the threshold is for additional disclosure, or how much additional disclosure would be required. Under the current rules, somewhat anomalously, companies making a significant acquisition may be required to provide more disclosure about the business to be acquired in an information circular if buy-side shareholder approval is required (because the buyer is issuing 25% or more of its outstanding shares to the sellers) than they are if they issue the same number of shares under a prospectus. However, in light of the OSC's statements in the Report, it may be advisable for companies to more frequently engage in pre-filing discussions with the OSC to ensure that the prospectus contains adequate disclosure and avoid delays later in the offering process.
  • Primary Business in an IPO. The Report confirms the OSC will continue to generally require a full set (three years) of historical financial statements for every business acquired by the company within the past three years (two years in the case of a venture issuer) – regardless of its significance – if it is part of the company's "primary business". Historically, exceptions to this rule have been limited to de minimis acquisitions (a very low threshold in practice) or acquisitions that have been reflected in a sufficient portion of the company's own historical financial statements. The Report also confirms the OSC's view that a prospectus must include full financial statements for any business that represents more than half of the issuer's overall businesses – even if it is not part of the "primary business" of the issuer. It is vital that companies considering an IPO – particularly those with a recent acquisition history – be aware of these requirements and engage with the OSC very early in the IPO process if any relief from these requirements will be sought.
  • Exempt Market Review. The OSC is actively reviewing the use of a number of new prospectus exemptions that have been introduced in recent years, including the new offering memorandum exemption that came into force in Ontario in January of 2016. The OSC has identified a number of concerns with issuers' use of that exemption, including failure to comply with disclosure requirements (including financial statement disclosure), failure to file marketing materials as required, insufficient disclosure regarding the company's business and disclosure that is out of date. The Report indicates the OSC will continue to focus on companies' use of this exemption and compliance with its ongoing requirements.
  • Business Acquisition Reports. The Report provides additional guidance about the often challenging question of whether an acquisition constitutes the acquisition of a "business" for the purpose of the requirement to file a business acquisition report (BAR). The Report also discusses applications for exemptive relief from the BAR requirements and reiterates the view expressed in existing guidance that the cost of complying with the BAR requirements is not a relevant consideration. In our experience, the cost of preparing carve-out financial statements for assets that regulators deem to be a "business" can often be impossible or prohibitively expensive. The BAR requirements are an area that Canadian securities regulators are focused on in their review of ways to reduce the regulatory burden on Canadian (non-investment fund) public companies while maintaining appropriate investor safeguards. See our April 20, 2017 Update, Canadian Securities Regulators Considering How To Reduce Regulatory Burden on Canadian Public Companies.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions