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OSC Provides Guidance on Forward-Looking Information Disclosure


Lawyer Jonathan Feldman
Area Corporate Finance and Securities


On June 13, 2013, the Ontario Securities Commission (OSC) published Staff Notice 51-721 - Forward-Looking Information Disclosure (the “Notice”).  The Notice summarizes the results of the OSC’s review of reporting issuer compliance with forward-looking information (FLI) disclosure requirements.  The Notice provides guidance and assists reporting issuers in preparing FLI.

FLI is disclosure about possible events, conditions or financial performance that is based on assumptions about future economic conditions and courses of action.  FLI also typically includes: (i) key performance indicators (e.g., customer retention, capital expenditures, and same store sales), (ii) future oriented financial information, and (iii) financial outlook.  When prepared properly, FLI helps to enhance transparency and increases investors’ understanding of a reporting issuer’s business and future prospects.

Requirements for Disclosure

Disclosure of FLI is not mandatory.  However, many reporting issuers include FLI in continuous disclosure documents, news releases and on their websites.  Since FLI is  based on management’s best judgment on how future trends will impact business, it is likely to be less reliable than historical information.  Consequently, FLI must be clearly identified as such so that investors understand its limitations. National Instrument 51-102 Continuous Disclosure Obligations (“NI 51-102”) governs the disclosure of FLI. These rules apply irrespective of the type of document in which FLI is disclosed.

Review of Ontario Reporting Issuers

The OSC reviewed the compliance with FLI disclosure requirements of 60 Ontario reporting issuers, and identified four common areas for improvement: (i) clear identification of FLI, (ii) disclosure of material factors and assumptions, (iii) disclosure of updates to previously disclosed FLI, and (iv) comparisons of actual results with previously disclosed FLI.

Identification of FLI

NI 51-102 requires reporting issuers to clearly identify material FLI. Of the 60 reporting issuers reviewed, all but one included cautionary language identifying the use of FLI in their financial reporting.  However, only 47% of the reporting issuers clearly identified entity-specific FLI, which points out the specific area of the document and manner in which FLI is being used.

Material Factors and Assumptions

For investors to understand how actual results may vary from FLI, reporting issuers must disclose relevant material factors or underlying assumptions forming the basis of FLI.  Material factors and assumptions must be reasonable, supportable, entity-specific, tied to the FLI, and disclosed.  Disclosing, for example, that “total sales are expected to increase by 5.0%” without any background to the projection, denies investors the opportunity to evaluate the likelihood of the company achieving the forecasted result.  Of the issuers reviewed, 69% did not provide all assumptions in specific detail, and 24% provided no assumptions at all.

Updating Previously Disclosed FLI

Reporting issuers are required under NI 51-102 to disclose events and circumstances that are reasonably likely to cause actual results to differ materially from previously disclosed FLI.  These events and circumstances could include economic and market changes, additional hiring, and changes in capital expenditures.  Issuers must also disclose the details of the expected differences in the results.  Of the 60 reporting issuers reviewed, only 36% provided a quantified discussion of events and circumstances that are reasonably likely to cause actual results to differ materially from previously reported FLI.

Comparing Actual Results to Previously Disclosed FLI

The comparison of actual results to previously disclosed FLI is important for investors to assess the effectiveness of management and the current and future performance of the issuer.  Under NI 51-102, reporting issuers must provide this comparison in the MD&A if actual amounts differ materially from previously disclosed forward-looking financial projections.  Only 33% of the reporting issuers reviewed provided this comparison.

Practice Points

The Notice provides a list of practice points to assist issuers and their advisors in promoting clear, transparent disclosure for FLI. Included in the list are:

  • Timely Updating of Ongoing Progress:  In their ongoing progress updates, issuers should provide comparisons to past projections so investors could more accurately assess the issuers’ performance.
  • Separate Presentation:  Separating FLI from historical information within a document allows investors to easily identify information that constitutes material FLI.
  • Review by Audit Committee and Board of Directors:  The audit committee and board of directors of a reporting issuer should review and approve all FLI disclosure before it is publicly disclosed, including the assumptions used to develop the FLI.


The Notice confirms that Ontario reporting issuers need to improve the quality of the FLI they disclose.  The OSC stated that it will continue to help Ontario issuers improve and will take corrective action against reporting issuers that do not comply with FLI disclosure requirements.

For further information on the Notice and how you can take actions to enhance the quality of your FLI disclosure, please contact any member of our Corporate Securities Group.