A small minority of Ontario’s issuers have serious disclosure problems, according to the results of the Ontario Securities Commission’s Continuous Disclosure Review program.

In the August 2003 Corporate Finance Review Program Report, the regulator said that, between April 1, 2002 and March 31, 2003, the OSC’s Corporate Finance Branch completed 217 reviews of preliminary prospectuses, 85 of which included an element of CD review. The branch also completed 194 CD reviews that were not related to a prospectus.

Fifty-four per cent of the prospectus reviews and 39% of the CD reviews resulted in no significant changes. However, in 9% of reviews, the branch staff identified filings that were so deficient that the issuers were required to refile continuous disclosure materials, or to file materials that had not previously been filed.

Many of the refilings related to issues identified in interim financial statements, such as a failure to disclose notes to the interim financial statements and/or the correct comparative periods for the income and cash flow statements, it reports. “We are disappointed that even though the OSC’s rules and the Canadian Institute of Chartered Accountants’s standard on interim financial statements have been in place for over two years, we continue to identify basic errors and omissions in this area,” said the OSC in the report.

In 10% of reviews, a change was required to some aspect of the issuer’s accounting. The changes included areas such as revenue recognition, deferring expenditures that should have been expensed as incurred, and making improper pro forma adjustments, among other things.

Another 42% of issuers pledged to enhance some aspect of their disclosure in future filings. A significant number of these commitments related to executive compensation and non-GAAP earnings measures.

In reviewing the TSX 100 issuers, branch staff noted that almost all the companies reviewed disclosed their approach to corporate governance in a manner consistent with TSX listing requirements.

As for their accounting and disclosure, one firm had to refile financials; and, two files remain in progress. The majority of changes were enhancements to disclosure, with 50% of the companies reviewed agreeing to modify some aspect of their disclosure on a prospective basis. The majority of these enhancements relate to revenue recognition.