On October 29, 2020, the Canadian Securities Administrators (CSA) issued Multilateral Staff Notice 51-361 for the fiscal years ended March 31, 2020, and 2019. The notice is part of the CSA's continuous disclosure review program which assesses whether issuers are complying with their continuous disclosure obligations.

The notice outlines common deficiencies in key areas of continuous disclosure obligations. The areas of disclosure where deficiencies were most pronounced were: (i) Financial Statements; (ii) Management Discussion and Analysis (MD&A); and (iii) Regulatory Disclosure Requirements, which includes overly promotional disclosure and material change reporting.

Given the impact of the COVID-19 pandemic on the Canadian and global economy and potential impact on issuer operating performance, financial position, liquidity and future prospects, the notice provides specific guidance on disclosure in the continuing context of COVID-19.

Financial Statements

The notice identifies deficiencies in issuers' Financial Statements as an ongoing issue, consistent with the previous CSA notices under the program. In particular, issuers tend to be deficient in their compliance with recognition, measurement and disclosure requirements in International Financial Reporting Standards (IFRS). The major deficiencies relate to impairment of non-financial assets (NFAs) along with recognition and measurement of intangible assets. The notice highlights that COVID-19 may require new judgments or estimates in going concern assessments, impairment assessments, fair value calculations, government assistance, revenue recognition and deferred tax recoverability.

1. Impairment of Non-Financial Assets

The CSA notes that some issuers test for impairment of NFAs annually, rather than assessing possible impairment at the end of each interim period. Issuers are advised to check for indicators of impairment at the end of each interim period rather than waiting until year-end. These indicators include: market value declines, poor economic conditions, adverse changes to law, net assets of the company higher than market capitalization, assets becoming idle, and poorer than expected performance.

Impairment tests for goodwill and intangible assets with an indefinite useful life are required annually and when there is an indicator of impairment. Other NFAs should be tested whenever there is an indicator of impairment. As a result, issuers must be cognizant of all impairment indicators and tailor their assessment frequency accordingly.

2. Intangible Assets: Recognition and Measurement

When an issuer acquires intangible assets as part of a business combination, the value of the intangible asset is its fair value on the acquisition date. Measurement of fair value must be done in accordance with IFRS 13 – Fair Value Measurement. The notice highlights that some issuers are failing to measure pursuant to the methods set out in IFRS 13. These failures often arise when the purchase price of a business or intangible asset is based on a fixed number of shares, and there is a subsequent fluctuation in share price between the agreement date and the date of closing. Issuers are often assigning the increased value of shares to the intangible assets without the use of proper valuation techniques. Measurement of intangible assets acquired as part of a business combination should be based on the fair value of the asset on the acquisition date. Fluctuations in the purchase price as a result of variations in the acquirer's stock price should not influence the valuation of the acquired intangible assets.


Deficiencies in MD&A climbed in 2020 compared to 2019. While this change should not be interpreted as a trend, the sharp increase serves as a reminder to all issuers of the importance of accurate and complete MD&A reporting. An overarching issue pervading the MD&A reports is the use of boilerplate language and discussion with no substantial qualitative or quantitative analysis.

1. Forward-Looking Information (FLI)

Along with using boilerplate disclosure of FLI, many issuers fail to identify: (i) information that is FLI; (ii) material risk factors that could cause a deviation from FLI; (iii) or any assumptions used in the development of the FLI itself. These deficiencies undermine the usefulness of any FLI that is disclosed. If investors cannot identify FLI, then it is of little use to them in making investment decisions.

The CSA reminds issuers that they must specifically identify any FLI and avoid boilerplate disclosure that does not discuss material factors or risks. It is imperative that issuers disclose material risk factors which could cause results to differ from projections, as well as disclose material differences between past FLI and the actual outcome. Finally, FLI must be disclosed in a manner that is easy for investors to read and understand. The publication of the FLI disclosure is meant to ensure investors understand the basis and assumptions involved in the initial statement.

Given the widespread impact and uncertainty of COVID-19, issuers should assess whether issued FLI is still reasonable and whether guidance and financial outlooks are still based on reasonable assumptions. If not, issuers should update or withdraw such FLI.

2. Liquidity and Capital Resources

Much like FLI reporting, many issuers provide boilerplate discussions of their Liquidity and Capital Resources. Issuers often repeat information verbatim from their financial statements without providing any context or analysis. For example, some issuers state their material risks but do not address how these risks impact their business or how they intended to manage the risks. This disclosure is insufficient for investors and greater detail is necessary.

Disclosure of Liquidity and Capital Resources is critical for an adequate assessment of an issuer's cash and funding requirements, along with trends, fluctuations and risks. Issuers are required to produce a long- and short-term analysis of their cash requirements. This analysis should include commitments, capital expenditures and working capital requirements considering both growth and sustaining capital. As for funding, issuers must discuss how they intend to fund their cash requirements. This discussion should include both available funding, as well as approved funding that has not been used. Issuers must make clear the type and status of funding, along with any conditions attached to it. Finally, issuers must discuss trends and fluctuations in their cash flows, as well as any associated risks and their plans to manage them.

In the COVID-19 era, it is imperative that any discussion of Liquidity and Capital Resources involve an assessment of the impacts, both past and expected, of the pandemic. Importantly, disclosure of the effects of COVID-19 must be made with respect to: (i) increased counterparty risk; (ii) delays in capital project plans; (iii) impact of cost cutting initiatives; and (iv) changes to the issuer's dividend policy. These changes should be quantified where possible to provide the most useful and complete disclosure possible to investors.

3. Non-GAAP Financial Measures (NGMs)

The notice outlines a trend of increasing use of NGMs in financial reporting. NGMs are based on profit or loss, but often omit or include other items in the analysis to paint a rosier picture of the entity's financial performance. A major concern with the proliferation of NGMs is they often lack an adequate indication that they are NGMs. Without proper labelling, investors can be misled by NGMs and the overly positive financial outlook they paint. NGMs may be useful for providing more insight, but often the stated purpose and usefulness of NGMs are unclear in MD&A reporting.

To prevent investors from being misled, use of any NGMs in disclosure must be accompanied by the most directly comparable GAAP measure with equal or greater prominence. Further, there must be a clear delineation of all factors included or omitted in the NGM to ensure transparency. While there is nothing inherently wrong with using NGMs, issuers cannot rely on them as their sole financial indicators.

Issuers are cautioned about adjustments or alternative profit measures defined as COVID-19 related. Not all COVID-19 impacts are short-term changes, and many will be recurring issues. It could be misleading to describe an adjustment as COVID-19 related if management does not explain how the adjustment directly related to COVID-19.

Regulatory Disclosure Requirements

Common regulatory disclosure deficiencies include overly promotional disclosure, insider reporting, early warning reporting and material change reporting.

1. Overly Promotional Disclosure

The CSA has expressed concerns with the disclosure by some issuers as being more promotional than informational. In some cases, the CSA has found the disclosure to be untrue or unbalanced so as to be misleading.

Issuers are prohibited from making false or misleading statements or omitting facts from a statement which are necessary to make that statement true. Disclosure helps guide and inform investors in their investment decisions. It should be balanced, providing the risks and contingencies associated with positive news to avoid misleading investors with an overly positive outlook. For example, issuers announcing pending favourable transactions should disclose all material conditions necessary to complete the transaction and update the market promptly if the conditions are not expected to be met. Issuers should also avoid publishing several news releases that disclose no new material facts.

2. Insider Reporting

Improper filing of insider reports is an ongoing issue. For example, reports related to securities issued under compensation agreements established by issuers are being filed late, incorrectly, or not at all.

Frequently, insider reports are filed with inaccurate information, with the most common error found in reports being incorrect transaction dates. The CSA continues to observe discrepancies between the number of securities held by reporting issuers in their continuous disclosure documents and the number of securities listed in their filings.

3. Early Warning Reporting

The CSA has observed many instances in which security holders have failed to fulfill their early warning reporting requirements.

The early warning reporting system provides transparency to the marketplace when a significant acquisition in the securities of an issuer occurs. This requirement warns the marketplace that a take-over bid could be imminent. It is imperative that investors are notified of these potentially large marketplace shifts so they can make informed investment decisions. The acquirer must disclose the details of the transaction, the percentage of securities held and the purpose for making the acquisition.

4. Material Change Reports

Many issuers either fail to issue material change reports or fail to issue them promptly. When a material change occurs issuers must:

  1. issue and file a news release authorized by an executive officer disclosing the nature and substance of the change, and
  2. as soon as practicable and within 10 days of the date the change occurs, file Form 51-102F3 – Material Change Report.

Issuers should pay special attention to the impacts of COVID-19. They must be cognizant of changes to the regulatory environment in response to COVID-19 that may be unique or more significant to them and their particular business. Material changes stemming from COVID-19 disruptions include: (i) significant disruptions to an issuer's workforce or operations; (ii) negative changes in markets, economy or laws; (iii) supply chain delays or disruptions critical to an issuer's business; (iv) changes in credit arrangements; (v) increased cost of goods or services; and (vi) suspension of exports. Whenever one of these material changes occur, an issuer must issue a news release and file a material change report.

Mineral Project Disclosure

In the notice, the CSA also provided the results of mineral industry reviews in 2018 and 2019. CSA Staff Notice 43-311 – Review of Mineral Resource Estimates in Technical Reports provided detailed commentary on the results on the results of the review and guidance on regulatory requirements and expectations. The main results of the review include: (i) mineral resource estimates; (ii) disclosure of estimates; (iii) compliance with Part 3 of NI 43-101.

1. Mineral Resource Estimates

Many Technical Reports do not include adequate disclosure of criteria used by the qualified person (QP) in determining resource mineral prospects and the economic viability of extraction. Further, many reports do not describe the specific procedures taken by the QP to verify data or provide the QP's opinion on the adequacy of the data used in their assessment. Finally, some reports include tables showing the sensitivity of the mineral resource estimate to changes in cut-off grade without clearly showing the base-case estimate, or showing unreasonable cut-off grades.

All Technical Reports require full and complete discussion of all assumptions, parameters and methods used to estimate mineral resources. A reasonably informed reader should be able to understand the basis for the estimate and how it was generated. A QP must disclose all steps taken to verify data used in a Technical Report and they cannot rely on data verification completed by another QP in previous reports for other issuers. Any data that was generated or collected before the activities of the current project operator must be verified by the QP to ensure integrity of the information. Tables showing the estimate's sensitivity to cut-off grade are valuable, but the QP must ensure such a table is not misleading. The actual mineral resource estimate being disclosed should be clearly marked. Grades at other cut-offs should be accompanied by indicators assessing reasonable prospects for eventual economic extraction.

2. Disclosure of Estimates

A common deficiency in routine disclosure of mineral project information is the failure to state both tonnage and grade of mineral resources or mineral reserved. Another deficiency is a failure to disclose whether mineral reserves are included in, or excluded from the mineral resource estimate.

Stand-alone disclosure of total contained metal or mineral amounts in a reserve is prohibited by NI 43-101. For example, disclosure of estimates cannot simply state 1,000 ounces of gold are present. Rather, tonnage and grade must be disclosed each time an estimate is cited. Because conventions on disclosure of mineral reserves are not uniform, when an issuer discloses mineral reserves, the disclosure must show, clearly and prominently, the convention the issuer is following. For example, whether the mineral resource includes mineral reserve, or is additional to the mineral reserve.

3. Compliance with Part 3 of NI 43-101

The CSA cautions against the use of hyperlinks in issuers' news releases and SEDAR filings to provide maps, sections, or table, rather than filing the actual information on SEDAR themselves. The use of hyperlinks is problematic as links may stop working and users may be unable to retrieve the required information. Instead, issuers should fully embed this information directly within the filed document. If information is important enough to be linked, it is important enough to be included in the issuer's permanent disclosure record on SEDAR.


The program is meant to ensure that issuers produce complete and meaningful disclosure that is useful for guiding investors in their decision-making. The notice sets out areas where adequate disclosure is lacking, and discusses methods for improving this disclosure. The CSA reminds issuers that disclosure should not be boilerplate, and where possible issuers must quantify and qualify their information for the benefit of investors. Issuers must remain vigilant in filing their insider, material change and early warning reports to provide as much information to investors as possible.