Canadian securities regulators are stepping up action to combat poor corporate disclosure, according to a new report published Thursday.
A Canadian Securities Administrators (CSA) staff notice sets out the results of their latest round of continuous disclosure reviews, which examines the adequacy of issuers’ financial reporting.
According to the report, the CSA took more definitive action in response to the continued shortcomings uncovered in its reviews for fiscal 2018. The CSA’s fiscal year ends March 31.
The proportion of cases referred to enforcement, or cease traded, rose to 8% in fiscal 2018 from 6% in fiscal 2017. The CSA also required 18% of issuers to refile their disclosure, up from 13% in fiscal 2017. Additionally, one-quarter of issuers were required to make changes in future disclosure filings. Overall, 51% of issuers were required to take some sort of action, up from 43% in fiscal 2017.
While the regulators increased the number of cases where they took action, they also sent fewer letters to issuers alerting them to concerns with their disclosure. Just 10% of issuers received letters in fiscal 2018, down from 24% in fiscal 2017.
This heightened regulatory activity comes amid persistent disclosure failings, including: improper use of non-GAAP financial metrics; providing selective, early disclosure on social media; providing insufficient disclosure when using forward looking information; making inadequate climate change disclosure; failure to comply with mining project disclosure requirements; and other ongoing reporting deficiencies.
“Among other issues, we continue to see deficiencies in issuers’ use of non-GAAP financial measures, and this remains an area of focus for the CSA,” says Louis Morisset, chairman of the CSA and chair and CEO of the Autorité des marchés financiers. “We strongly encourage issuers to use this report as a guide to make improvements, as disclosure requirements are at the core of our investor protection regime.”