On November 23, 2007, the members of the Canadian Securities Administrators (CSA) issued a notice to inform market participants of a delay in the initiative to replace Multilateral Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Fillings (MI 52-109). Upon review and consideration of the comment letters received in response to the proposed officer certification instrument published on March 30, 2007 (withdrawn proposal), the CSA has decided to make significant revisions to certain aspects of the withdrawn proposal. We commented upon the proposed instrument in an earlier issue.

As a result, the CSA will publish for comment a revised officer certification instrument (revised proposal) and the implementation of changes to officer certification requirements will be delayed beyond the previously scheduled date of June 30, 2008. However, certain newly proposed changes to officer certification requirements for venture issuers are effective immediately.

Simplified Certificate for Venture Issuers Effective Immediately

Among the changes expected in the revised proposal is the elimination of the requirement that the CEO and CFO of a venture issuer certify that they have designed and evaluated the effectiveness of disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR).

Although the existing rule MI 52-109 remains in effect until a revised rule is adopted, certain jurisdictions have issued or intend to issue exemptive relief orders to permit a venture issuer to file a certificate for periods ending on or after December 31, 2007 in a form that reflects the proposed new requirements.

For example, the Ontario Securities Commission (OSC) issued a staff notice on November 23, 2007 announcing changes to its administrative practices in relation to annual and interim disclosure certification requirements applicable to venture issuers. Instead of the form of certificate required by the existing MI 52-109, the OSC will accept a new, simplified form of certificate (simplified certificate) from venture issuers for financial periods ending on or after December 31, 2007.

What Information Does the Simplified Certificate Include?

The CEO and CFO of a venture issuer, or officers performing similar functions (certifying officers), will be required to certify in the simplified certificate that:

  • the certifying officer has reviewed the annual or interim filings, as applicable (filings);
  • to the certifying officer’s knowledge, having exercised reasonable diligence, the filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, for the period covered by the filings; and
  • to the certifying officer’s knowledge, having exercised reasonable diligence, the filings fairly present in all material respects the financial condition, results of operations and cash flows of the issuer, as of the date of and for the periods presented in the filings.

The phrase "having exercised reasonable diligence" is new and can be expected to be added to the forms of certificates for non-venture issuers.

What Does the Simplified Certificate Not Include?

In contrast to the existing form of officer certificate, which continues to apply for non-venture issuers, under the revised officer certification requirements the certifying officers of a venture issuer are not required to make any representations relating to:

  • the establishment and maintenance of DC&P and ICFR;
  • the evaluation of and disclosure in the issuer’s Management Discussion and Analysis (MD&A) of conclusions regarding the effectiveness of DC&P; or
  • disclosure in MD&A of changes in the issuer’s ICFR.

However, the simplified certificate must provide an explanation of how it differs from the certificate required to be filed by reporting issuers other than venture issuers.

McCarthy Tétrault Notes:

The CSA is in the process of revising the withdrawn proposal. Once revised, it will again be published for public comment. While a timeline for publication was not included in the notice, the CSA will adjust the expected effective date of replacement of MI 52-109 once the revised proposal has been published.

In the interim, venture issuers should exercise caution when filing certificates required by MI 52-109. Before filing a simplified certificate in a jurisdiction other than Ontario, a venture issuer should ensure the securities regulator in that jurisdiction has issued an exemptive relief order or other form of accommodation with respect to the filing of certificates under MI 52-109.