On November 19, the Corporate Finance Branch (CFB) of the Ontario Securities Commission (OSC) published Staff Notice 51-731 Corporate Finance Branch 2020 Annual Report (Report). The Report provides insight into how the CFB has undertaken its operations throughout fiscal 2020 and is a resource to help issuers and their advisors comply with their reporting obligations. Due to the ongoing impact of the Covid-19 pandemic, the Report also provides issuers with guidance on additional considerations related to the impact of Covid-19. Issuers should review the Report to better understand CFB expectations related to their regulatory obligations, including continuous disclosure obligations with respect to Covid-19.
Key compliance trends noted in reviews included issues relating to MD&A disclosure, the use of non-GAAP financial measures, forward-looking information and executive compensation. In addition, the Report notes that in fiscal 2020, the CFB receipted approximately 400 prospectuses, representing a slight decrease from the prior year. Key issues noted by staff during prospectus reviews include issues relating to an issuer’s (in)sufficiency of proceeds and financial condition, as well as relating to audit committees in the context of an IPO. In addition, the Report provides an update on the progress made on reducing the regulatory burden for issuers. A key recommendation for burden reduction, which was completed in 2020, includes a program that allows issuers to file an entire prospectus confidentially for staff review prior to filing a preliminary prospectus publicly on SEDAR.
Issuers who utilize the offering memorandum prospectus exemption should take note of specific reminders in the Report relating to ongoing financial reporting to investors and the OSC, as well as relating to marketing materials. The Report notes that not only are such materials incorporated by reference into the offering memorandum, but they must be filed with the OSC, either together with the offering memorandum, or, if subsequently prepared, within 10 days after their first use.
December 11, 2020