Venture issuers get some early relief as Canadian Securities Administrators (CSA) work towards a final proposal to incorporate certifications as to effectiveness of internal controls.

Multilateral Instrument 52-109 Certification of Disclosure of Issuer’s Annual and Interim Filings (Certification Rule) finds itself again subject to a further amendment proposal. As of the first year-end following June 30, 2006, most issuers have been required to file the full form of interim and annual certificates. These certificates have required the CFO and CEO to provide certifications with respect to (i) annual filings (which means the AIF, annual financial statements and annual MD&A, and anything incorporated by reference into the AIF); (ii) the establishment, maintenance and design of disclosure controls and procedures (DCP) and internal control over financial reporting (ICFR); (iii) the effectiveness of DCP; and (iv) disclosure of conclusions regarding effectiveness of DCP and any changes in ICFR in the MD&A.

Certification of effectiveness of internal controls delayed

As set out in our February, 2007 Securities Law Update (link), the status of the Certification Rule has been in a state of flux since it was first proposed in 2003. On March 30, 2007, the CSA published another round of proposals to amend the Certification Rule: this time to incorporate certification of the effectiveness of ICFR and disclosure of conclusions about such effectiveness, along with the process used to evaluate such effectiveness, in the MD&A. These proposals published in March, 2007 were initially expected to be implemented by June 30, 2008. However, on November 23, 2007, the CSA announced in CSA Staff Notice 52-319 that on account of the comments received in response to the March, 2007 proposal, further amendments will be published for comment and changes will not come into force on June, 2008, as earlier expected.

Relief for Venture Issuers

Along with announcing this further delay, the CSA have also advised that further proposals to amend the Certification Rule will no longer require venture issuers to certify as to the design and evaluation of DCP or ICFR. While the current requirements remain in force until these amendments are finalized, CSA members will be providing exemptive relief to venture issuers in respect of the year ended December 31, 2007 (and related interim periods) to allow venture issuers to file a much shorter form of certificate. This shorter form of certificate requires the CEO or CFO (or other certifying officer) to provide a certification that they have reviewed the annual filings, that the annual filings fairly represent the financial condition, results of operation and cash flows of the venture issuer and that the annual filings do not contain any misrepresentations. This new form of certificate also contains a notice or warning that the venture issuer certificate does not include any representations relating to DCP or ICFR and that the inherent limitations or inability of venture issuers to provide such certifications may represent some additional risks.