The Quebec Securities Commission says that it has completed the first phase of its program to review the continuous disclosure of major Quebec issuers.

The goal of the program is to lead issuers to improve the quality of the financial statements that they publish and to show greater transparency, so as to help restore investor confidence.

Phase I, which ended in June 2003, analysed the financial disclosure of 203 issuers, representing 45% of all reporting issuers based in Quebec. Of this number, 150 issuers were selected from the “Indice Québec 150” while 53 others were chosen at random.

The review noted over over 1,000 prospective changes to issuers’ annual and quarterly financial statements.

The QSC concluded that, in general, the quality of disclosure is relatively acceptable. The concerns raised were mainly attributable to financial information being missing or incomplete, and not false or misleading.

The changes most often required by the commission concerned financial and derivative instruments (106 changes required) and quarterly financial statements (101 changes required).

The QSC says that it believes that it is imperative that improvements be made in the short-term to enhance the quality and transparency of the information provided in continuous disclosure documents. It notes that issuers were open to the requests for changes and committed to making the necessary adjustments in their next financial statements.

Administrative penalties were imposed on two issuers for not having answered observation letters in the required time limit. As well, four files have been transferred to the QSC Inspections and Inquiries Department.

During Phase II of the program, which the QSC launched in July 2003, the regulator will analyze the continuous disclosure documents of approximately 250 issuers not yet subject to the program.

Two new aspects have been added to the review process in this phase: the quarterly financial statements of a predetermined group of issuers will be monitored more closely to ensure that events that occurred during the period are reflected in the financial statements; and, a number of specific elements relating to regulatory standards or new accounting standards will be examined.