CSA Announces Results of Continuous Disclosure Review for Fiscal Years 2021 and 2022 Emphasizing Challenges of Disclosure During Economic Uncertainty

The Canadian Securities Administrators (CSA) recently published Staff Notice 51-364 (the “Staff Notice”), summarizing the results of its Continuous Disclosure Review Program for fiscal years ending March 31, 2021 and March 31, 2022. The Staff Notice included guidance on reporting the impact of evolving economic factors on operating performance, financial position, liquidity and future prospects. Key economic factors to consider include supply chain issues, COVID-19, labour shortages, high energy costs, inflationary pressures, rising interest rates, the global financial climate and the conflict in Ukraine.

The CSA acknowledged that current economic conditions and uncertainty pose challenges for issuers in preparing high-quality disclosure. Nonetheless, issuers are encouraged to carefully evaluate and explain how economic uncertainty and changes in assumptions affect their operations and the amounts reported in financial statements. The impact of economic uncertainty should also be reflected in management’s discussion and analysis (MD&A) and other disclosure documents, and diligently reviewed by audit committees.

During fiscal years 2022 and 2021, the CSA reviewed a total of 1,038 issuers. Sixty-one percent and fifty-one percent of these issuers, respectively, were either required to take some type of remedial action (including refiling historical documents or improving disclosure on a prospective basis) or were referred to enforcement, cease traded or placed on the default list.

The CSA categorized the primary areas of deficiencies as relating to: (i) financial statements; (ii) MD&A; and (iii) “other regulatory requirements”.

Many of the deficiencies identified in the Staff Notice were identified as areas of concern in previous CSA continuous disclosure reviews. Common deficiencies observed are summarized below.

Financial Statements

Common financial statement deficiencies included compliance with the recognition, measurement, presentation, classification and disclosure requirements in IFRS, including revenue recognition from customer contracts with variable consideration and disclosure of credit risk, business combinations and reportable segments.


Forward-Looking Information; Future-oriented Financial Information & Financial Outlooks. The CSA expressed continued concern with issuers providing overly optimistic forward-looking information (FLI) without a reasonable basis for the FLI, and with a lack of disclosure regarding material underlying assumptions and relevant risk factors. The CSA also reminded issuers of the requirement to update previously disclosed FLI in their MD&A to assist readers with understanding how an issuer is progressing towards achieving its disclosed targets and objectives and to understand how actual results differ materially from previously disclosed FLI. The CSA noted that issuers have flexibility to disclose the updated information in a news release before filing the MD&A so long as the MD&A refers to the news release. Where it is clear that an issuer will not meet financial projections in previously disclosed FLI, the issuer should: (i) disclose the events and circumstances that are reasonably likely to cause actual results to differ materially from the previously disclosed FLI; (ii) disclose the expected differences between actual results and previously disclosed FLI; (iii) update the quantified data that relate to factors and assumptions that may impact future performance; and (iv) discuss how and why these changes may impact future performance.

Non-GAAP and Other Financial Measures. The CSA noted that many issuers are failing to include the required quantitative reconciliations of non-GAAP financial measures in their earnings releases (a cross-reference to the MD&A is not permitted). The CSA also noted non-compliance with the requirements relating to “equal prominence”, forward-looking non-GAAP financial measures, identifying “total of segments” measures and labelling of supplementary financial measures. Finally, the CSA cautioned issuers against incorporating information by reference into investor presentations where the incorporated information is missing or incomplete. Issuers should not treat their non-GAAP financial measures disclosure as “boilerplate” and ensure it gets updated in each disclosure document.

Venture Issuers and Early-Stage / Development-Stage Issuers. The CSA noted that some venture issuers continue to announce significant projects without sufficient information to allow a reader to understand the project. Further, where venture issuers have not yet generated significant revenue from operations, they must disclose details regarding costs incurred in operations, exploration and R&D.

Other Regulatory Disclosure Deficiencies

Business Acquisitions. The CSA noted that some issuers did not file a business acquisition report for a “significant acquisition”, which is defined broadly by applicable securities laws. The CSA also found examples of issuers filing a business acquisition report where the transaction or series of transactions met the definition of a “restructuring transaction”, which triggers more comprehensive disclosure requirements.

Inconsistencies and Outdated Information in Disclosure Documents. The CSA observed several instances of inconsistent disclosure between documents that are required to be filed under securities legislation and voluntary disclosures, such as investor presentations, sustainability reports and public surveys. Including material information in voluntary disclosure but omitting it from core continuous disclosure documents such as MD&A may indicate that the issuer has failed to meet its legal obligations. The CSA also reminded issuers of the need to generally provide timely, balanced and accurate disclosure.

Audit Committees. The CSA expressed concern with issuers that inappropriately rely on certain exemptions to appoint less than three members to an audit committee. Non-venture issuers must maintain audit committees with a minimum of three members, each of whom must be a director of the issuer and, except in very limited circumstances, be financially literate and independent. The CSA also advised that audit committee members should carefully consider the responsibilities involved in acting as a director and member of an audit committee before taking on an appointment.

Overly Promotional ESG Disclosure (Greenwashing). The CSA expressed concern with a recent increase in potentially misleading, unsubstantiated or otherwise incomplete claims surrounding ESG, commonly known as “greenwashing”. ESG disclosure, including commissioned reports and public surveys, should include specific information on how this disclosure is being measured and evaluated. When describing ESG-related activities, issuers must be careful not to mislead investors with overly promotional language.

Mineral Project Disclosure. The CSA noted concerns with potentially misleading disclosure in technical reports and news releases that disclose exploration results, and reminded issuers of the requirement for “qualified persons” to complete personal inspections of mineral projects.

To discuss the CSA’s report on continuous disclosure review or for any further information, please contact any member of our Capital Markets Group.