OSC Provides its Interpretation of the Forward-Looking Information Defence to Secondary Market Civil Liability
Proposed OSC Policy 51-604 provides guidance on how the OSC interprets the defence to misrepresentations in forward-looking information under the newly enacted civil liability provisions of the Securities Act (Ontario).
Amendments to the Securities Act (Ontario) (the "Securities Act") that came into force December 31, 2005 (the "Bill 198 Amendments") now allow secondary market purchasers to assert a new statutory cause of action for misrepresentations contained in public documents and public oral statements. Along with these newly created causes of action, the Bill 198 Amendments also make available certain statutory defences, including a defence for misrepresentations contained in forward-looking information (the "forward-looking information defence") included in either a document or a public oral statement.
The purpose of proposed OSC Policy 51-604 Defence for Misrepresentations in Forward-Looking Information (the "Draft Policy") is to express the views of the Ontario Securities Commission (the "OSC") on the policy considerations underlying the forward-looking information defence and to explain how the OSC interprets certain aspects of this defence. It includes guidance on satisfying the requirement to present cautionary language "proximate" to the forward-looking information which it qualifies and on application of the materiality thresholds that qualify the risk factors and assumptions that are to be disclosed. While issuers may have hoped for more detailed direction on how the technical elements of the defence are to be applied, the Draft Policy does provide valuable insight into the underlying objectives of the defence and is welcome guidance for all those dealing with disclosure compliance under Ontario's new secondary market liability regime. The Draft Policy is open for comments until August 2, 2006.
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