Securities Law

51-102CP - Continuous Disclosure Obligations [CP Amendment Advance Notice - Lapsed]

Published Date: 2007-10-12
Effective Date: 2007-12-31
Document(s):

Concurrently Published:

  1. Companion Policy 51-102CP Continuous Disclosure Obligations is amended by this Instrument.
  2. Companion Policy 51-102CP Continuous Disclosure Obligations is amended by adding the following after section 4.2,

PART 4A - FORWARD-LOOKING INFORMATION

4A.1 Application

Section 4A.1 of the Instrument indicates that Part 4A applies to forward-looking information that is disclosed by a reporting issuer other than forward-looking information contained in oral statements.  Reporting issuers should consider broadly the various instances of forward-looking information made available to the public in considering the scope of forward-looking information that is disclosed.  This includes, but is not limited to:

  • Information that a reporting issuer files with securities regulators
  • Information contained in news releases issued by a reporting issuer
  • Information published on a reporting issuer's website
  • Information published in marketing materials or other similar materials prepared by a reporting issuer or distributed to the public by a reporting issuer.

4A.2 Reasonable Basis

Section 4A.2 of the Instrument requires a reporting issuer to have a reasonable basis for any forward-looking information it discloses.  When interpreting "reasonable basis", reporting issuers should consider:

                (a) the reasonableness of the assumptions underlying the forward-looking information; and

                (b) the process followed in preparing and reviewing forward-looking information.

4A.3 Material Forward-Looking Information

Section 4A.3 and section 5.8 of the Instrument require a reporting issuer to include specified disclosure in material forward-looking information it discloses.  Reporting issuers should exercise judgement when determining whether information is material.  If a reasonable investor's decision whether or not to buy, sell or hold securities of the reporting issuer would be influenced or changed if the information were omitted or misstated, then the information is likely material.  This concept of materiality is consistent with the one contained in the Handbook. 

Section 1.1 contains definitions of the terms "financial outlook" and "FOFI."  We consider FOFI and most financial outlooks to be material forward-looking information.  Examples of financial outlooks include expected revenues, net income, earnings per share and R&D spending.  A financial outlook relating to earnings is commonly referred to as "earnings guidance." 

An example of forward-looking information that is not a financial outlook or FOFI would be an estimate of future store openings by an issuer in the retail industry.  This type of information may or may not be material, depending on whether a reasonable investor's decision whether or not to buy, sell or hold securities of that issuer would be influenced or changed if the information were omitted or misstated.

4A.4 Location of Disclosure

Section 4A.3 of the Instrument requires that any material forward-looking information include specified disclosure.  This disclosure should be presented in a manner that allows an investor who reads the document or other material containing the forward-looking information to be able to readily:

        (a) understand that the forward-looking information is being provided in the document or other material;

        (b) identify the forward-looking information; and

        (c) inform himself or herself of the material assumptions underlying the forward-looking information and the material risk factors associated with th forward-looking information.

4A.5 Disclosure of Cautionary Language and Material Risk Factors

(1) Paragraph 4A.3(b) of the Instrument requires a reporting issuer to accompany any material forward-looking information with disclosure that cautions users that actual results may vary from the forward-looking information and identifies material risk factors that could cause material variation.  The material risk factors identified in the cautionary language should be relevant to the forward-looking information and the disclosure should not be boilerplate in nature.

(2) The cautionary statements required by paragraph 4A.3(b) of the Instrument should identify significant and reasonably foreseeable factors that could reasonably be expected to cause results to differ materially from those projected in the material forward-looking statement.  Reporting issuers should not interpret this as requiring a reporting issuer to anticipate and discuss everything that could conceivably cause results to differ. 

4A.6 Disclosure of Material Factors or Assumptions
Paragraph 4A.3(c) of the Instrument requires a reporting issuer to disclose the material factors or assumptions used to develop material forward-looking information.  The factors or assumptions should be relevant to the forward-looking information.  Disclosure of material factors or assumptions does not require an exhaustive statement of every factor or assumption applied - a materiality standard applies.

4A.7 Date of Assumptions
Management of a reporting issuer that discloses material forward-looking information should satisfy itself that the assumptions are appropriate as of the date management discloses the material forward-looking information even though the material forward-looking information may have been prepared at an earlier time, and may be based on information accumulated over a period of time. 

4A.8 Time Period

Paragraph 4B.2(2)(a) of the Instrument requires a reporting issuer to limit the period covered by FOFI or a financial outlook to a period for which the information can be reasonably estimated.  In many cases that time period will not go beyond the end of the reporting issuer's next fiscal year.  Some of the factors a reporting issuer should consider include the reporting issuer's ability to make appropriate assumptions, the nature of the reporting issuer's industry, and the reporting issuer's operating cycle. 

4A.9 FOFI

Section 4250 Future-Oriented Financial Information (Section 4250) of the CICA Handbook is relevant to reporting issuers who disclose FOFI.  If a reporting issuer determines that it has a reasonable basis for FOFI prepared using one or more hypotheses, as that term is defined in CICA Handbook Section 4250, the hypotheses should be consistent with the courses of action that the reporting issuer intends to adopt.


3. Part 5 is amended by adding the following after section 5.4:



5.5 Previously disclosed material forward-looking information

(1) Subsection 5.8(2) of the Instrument requires a reporting issuer to discuss certain events and circumstances that occurred during the period to which its MD&A relates.  The events to be discussed are those that are reasonably likely to cause actual results to differ materially from material forward-looking information for a period that is not yet complete.  This discussion is only required if the reporting issuer previously disclosed the forward-looking information to the public.  Subsection 5.8(2) also requires a reporting issuer to discuss the expected differences. 

For example, assume that a reporting issuer published FOFI for the current year assuming no change in the prime interest rate, but by the end of the second quarter the prime interest rate went up by 2%.  In its MD&A for the second quarter, the reporting issuer should discuss the interest rate increase and its expected effect on results compared to those indicated in the FOFI. 

A reporting issuer should consider whether the events and circumstances that trigger MD&A or MD&A supplement disclosure under subsection 5.8(2) of the Instrument might also trigger material change reporting requirements under Part 7 of the Instrument.

(2) Subsection 5.8(4) of the Instrument requires a reporting issuer to disclose and discuss material differences between actual results for the annual or interim period to which its MD&A or MD&A supplement relates and any FOFI or financial outlook for that period that the reporting issuer previously disclosed to the public.  A reporting issuer should disclose and discuss material differences for material individual items included in the FOFI or financial outlook, including assumptions. 

For example, if the actual dollar amount of revenue approximates forecasted revenue but the sales mix or sales volume differs materially from what the reporting issuer expected, the reporting issuer should explain the differences.

(3) Subsection 5.8(5) of the Instrument addresses a reporting issuer's decision to withdraw previously disclosed material forward-looking information.  The subsection requires the reporting issuer to disclose that decision and discuss the events and circumstances that led the reporting issuer to the decision to withdraw the material forward-looking information, including a discussion of the assumptions included in the material forward-looking information that are no longer valid.  A reporting issuer should consider whether the events and circumstances that trigger MD&A or MD&A supplement disclosure under subsection 5.8(5) of the Instrument might also trigger material change reporting requirements under Part 7 of the Instrument.  We encourage all reporting issuers to promptly communicate to the market a decision to withdraw material forward-looking information, even if the material change reporting requirements are not triggered.

4. These amendments come into force on December 31, 2007.