Originally published in Blakes Bulletin on Securities
Regulation, October 2008
The Ontario Securities Commission (OSC) has finalized its policy
which outlines the Commission's views on some of the policy
considerations underlying the defence for misrepresentations in
forward-looking information. Ontario's laws on statutory civil
liability for secondary market disclosure, which came into force in
2005, include specific defences against claims and
misrepresentations in forward-looking information (FLI).
OSC Policy 51-604 – Defence for Misrepresentations
in Forward-Looking Information (the Policy) was initially
published for comment in June 2006. Since the proposed Policy was
published for comment, two related developments have occurred. The
first was the decision of the Supreme Court of Canada in the
Danier case, which involved an allegation of
misrepresentation in a forecast contained in a prospectus. The
second was the adoption of amendments to National Instrument 51-102
– Continuous Disclosure Obligations that deal
with the disclosure of forward-looking information. None of these
developments resulted in any changes in the proposed Policy, and
the OSC made no substantive changes to the Policy as a result of
any comments received.
In its summary of comments received, the OSC noted that several
of the comments dealt with suggested changes to the Securities
Act (Ontario) or with differences between the Ontario defences
and the similar U.S. "safe harbour" defences. However,
the OSC responded that the Policy cannot change the requirements of
the Securities Act nor state that such requirements are
intended to be consistent with the U.S. safe harbour requirements.
While those seeking greater guidance in the Policy may be
disappointed, there are some useful elements and some clarifying
The Defence for FLI
Written FLI is protected from statutory civil liability if:
(a) The document contains:
(i) reasonable cautionary language identifying the FLI as
(ii) reasonable cautionary language identifying material factors
that could cause actual results to differ materially from a
conclusion, forecast or projection in the FLI; and
(iii) a statement of the material factors or assumptions that
were applied in drawing a conclusion or in making a forecast or
projection set out in the FLI;
(b) the foregoing language and statements appear proximate to
the forward-looking information; and
(c) the person or company had a reasonable basis for drawing the
conclusions or making the forecast or projection.
Material Factors or Assumptions
The OSC declined to provide definitions of a material factor or
material assumption or otherwise to establish a standard of
materiality in the Policy, saying that this raises issues that fall
outside its scope. The OSC believes that issuers should make
reasonable judgments with respect to these matters in the context
of the particular circumstances.
However, the OSC did confirm that there is no requirement that
the cautionary language include an express statement that the
issuer believes the assumptions are reasonable, nor must every
factor or assumption applied be listed.
The final Policy includes a new statement that failure to
include disclosure of a particular assumption that in fact
ultimately causes the FLI not to materialize as predicted should
not necessarily mean that the defence is not available.
The OSC emphasized that issuers must disclose the assumptions or
factors it applies which are relevant and
material to the conclusion, forecast or projection (their
The OSC had been asked to confirm whether it was possible to
incorporate by reference more lengthy discussion of material risk
factors into shorter documents, such as press releases. The OSC
declined to provide more specific statutory interpretation, but did
state that it believes as a policy matter that in appropriate
circumstances, an issuer "ought to be able" to
incorporate by reference into a document a more lengthy discussion
of material risk factors and assumptions.
Overall, the OSC's responses to the comments indicate that
the OSC recognizes that the Policy will not supercede statutory
interpretation and cannot create defences or guidance beyond the
legislation. It remains to be seen how the legislation will be
applied by the courts. As with the Danier case, future
court actions that will involve these defences will need to be
followed closely to gain further guidance.
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 Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
Please join members of the Blakes Commercial Real Estate group as they discuss five key provisions of a commercial real estate purchase agreement that are often the subject of much negotiation but are sometimes misunderstood.
Emotional culture is influenced in great part by the mindset and actions of leadership, although employees also play more of a role than they may realize in creating the culture that exists in the group.
The session will be led by Dr. Robert Brooks, an award-winning author and psychologist. In his presentation, Dr. Brooks will describe the mindset and realistic practices of leaders and staff that help to nurture and sustain a culture characterized by positive emotions, satisfying, respectful relationships, a sense of meaning and ownership for one’s work, and enhanced job performance. Examples will be offered to illustrate strategies for developing a positive emotional culture in an organization.
Join leading lawyers from the Blakes Pensions, Benefits & Executive Compensation group as they discuss recent updates and legal developments in pension and employee benefits law as well as strategies to identify and minimize common risks.
The Canadian Office of the Superintendent of Financial Institutions ("OSFI") recently ruled that a bank cannot promote comprehensive credit insurance ("CCI") within its Canadian branches under the Insurance Business (Banks and Bank Holdings Companies) Regulations (the "Regulations").
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).