On November 20, 2009, the Canadian Securities Administrators
(CSA) released CSA Staff Notice 51-330, which provides guidance on
the forward-looking information (FLI) requirements contained in
National Instrument 51-102 Continuous Disclosure
Obligations (the Rule). The guidance results from recent
continuous disclosure reviews conducted by the CSA. The Staff
Notice addresses the identification of FLI; disclosure regarding
material risk factors and material factors or assumptions; updating
practices; explanation of purpose of, and cautionary language
related to, financial outlook or future-oriented financial
information (FOFI); disclosure regarding goals or targets; and
impact of the transition to International Financial Reporting
Standards (IFRS) on FOFI or financial outlooks.
The CSA noted that many issuers identified material FLI solely
though a cautionary paragraph at the beginning or end of a
disclosure document. Although the Rule does not prescribe the
manner in which reporting issuers must identify FLI, the Companion
Policy to the Rule provides guidance that the disclosure should be
presented in a manner that allows an investor to be able to readily
identify the material FLI. According to the CSA, when identifying
FLI, reporting issuers should avoid: (i) indicating that
forward-looking statements are often, but not always, identified by
words such as "believes," "may,"
"likely" and "plans"; (ii) indicating that all
statements, other than statements of historical fact, are
forward-looking statements; and (iii) stating that a document
contains FLI when, to the reporting issuer's knowledge, it does
not. Instead, the CSA encourages reporting issuers to specifically
identify the nature of the material FLI included in the
The Rule requires reporting issuers that disclose material FLI
to include disclosure that identifies material risk factors that
could cause actual results to differ materially from the FLI. The
CSA advises that while reporting issuers are not precluded from
incorporating by reference material risk factors and material
factors or assumptions contained in other documents, when doing so,
they should consider whether it enables the reader to readily
identify the material risk factors and material factors or
assumptions associated with the material FLI. Reporting issuers
should avoid "boilerplate" disclosure and should present
the disclosure in a user-friendly manner. In addition to the
disclosure of material risk factors and material factors or
assumptions, when disclosing FOFI or a financial outlook, reporting
issuers should disclose the purpose of the information and caution
readers that the information may not be appropriate for other
The Staff Notice reminds reporting issuers that they are
required to update previously disclosed FLI in certain
circumstances and that they should ensure that their policy for
updating FLI is in compliance with the Rule. In addition, reporting
issuers are generally expected to disclose a target or goal only if
it is "possible" to achieve. Finally, since the Rule
requires that FOFI or financial outlooks be based on the accounting
policies that the issuer expects to use to prepare its historical
financial statements for the period covered by the FOFI or the
financial outlook, reporting issuers are reminded of the potential
impact of the transition to IFRS.
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.
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