On November 20, 2009, the Canadian Securities Administrators (CSA) published CSA Staff Notice 51-330 Guidance Regarding the Application of Forward-Looking Information Requirements under NI 51-102 (the Staff Notice). The purpose of the Staff Notice is to outline results of the CSA’s continuous disclosure reviews conducted on compliance with the forward-looking information (FLI) requirements in National Instrument 51-102 Continuous Disclosure Obligations (NI 51-102). These FLI requirements under NI 51-102 came into effect on December 31, 2007, replacing the previous requirements under NP 48. A wide range of documents were reviewed for the purposes of the continuous disclosure review (including AIFs and MD&A), and while a number of improvements were requested by staff in future filings, the reviews did not result in any issuers having to re-file any documents in order to correct identified deficiencies.
The Staff Notice highlights deficiencies noted by staff as well as areas where, in staff’s view, disclosure can be enhanced. The areas covered by the Staff Notice include the following:
Identification of FLI
The Staff Notice highlights that issuers have taken different approaches to identification of FLI (as required by section 4A.3 of NI 51-102), including that many issuers identified material FLI solely through a cautionary paragraph at the beginning or end of the disclosure document. Where issuers do identify material FLI in such manner, the CSA have encouraged issuers to give readers an indication of the nature of the material FLI covered in the document, which, in staff's view, would allow an investor to more readily identify material FLI in the document in question.
Disclosure regarding material risk factors and material factors or assumptions
In respect of the requirement to identify material risk factors and material factors or assumptions, (as required under section 4A.3 of NI 51-102) staff note that various issuers have either neglected to discuss the underlying factors or assumptions or stated that there were factors or assumptions without identifying them: disclosure which, in their view, does not satisfy the requirements of NI 51-102. With respect to the issue of incorporating relevant material risk factors and material factors or assumptions by reference, the Staff Notice states that while NI 51-102 does not preclude this, issuers should consider whether incorporation by reference enables a reader to readily inform himself or herself of the material risk factors, and material factors or assumptions, associated with the material FLI. The Staff Notice also cautions that issuers should avoid “boilerplate” disclosure, and strive to disclose material risk factors and material factors and assumptions that are relevant to the FLI being presented. Finally, staff are also encouraging issuers to consider using more user-friendly formats for disclosing FLI, such as tables or other methods that allow readers to clearly link specific material risk factors and material factors and assumptions to the particular FLI.
Disclosure of goals or targets, purpose of FLI and updating requirement
With respect to the disclosure of goals or targets, the purpose of FLI and the requirement to update FLI, the Staff Notice advises that:
- in certain circumstances, disclosure of a goal or target can constitute FLI (namely, where the achievement of the target or goal would be "possible" based on assumptions about future economic conditions and courses of action) and that in such circumstances, the disclosure should comply with the requirements of NI 51-102;
- the requirement (under section 4B.3(b) of NI 51-102) to disclose the purpose of the FLI and caution readers that the information may not be appropriate for other purposes is in addition to the material risk factors and material factors or assumptions disclosure generally required by section 4A.3, and that disclosure of material risk factors and material factors or assumptions contained in a cautionary paragraph at the beginning or end of a document generally will not satisfy this requirement; and
- that section 5.8(2) of NI 51-102 requires issuers to update previously disclosed FLI in certain circumstances, as such, issuers should ensure their policies comply with these requirements and should not be making statements to the effect that the issuer does not assume any obligation to update FLI.
Finally, the Staff Notice reminds issuers that future-oriented financial information (FOFI) or a financial outlook must be based on the accounting policies that the reporting issuer expects to use to prepare its historical financial statements for the period covered. As reporting issuers will be required to transition to international financial reporting standards (IFRS) for fiscal years beginning on or after January 1, 2011, this means that issuers should ensure that FOFI and financial outlooks that cover their 2011 fiscal year are based upon IFRS.