Effective December 31, 2007, new rules apply to forward-looking information ("FLI") disclosed by an issuer, other than FLI contained in oral statements. Among other things, the new rules apply to:
- information filed with securities regulators,
- an issuer's news releases; and
- an issuer's website and marketing materials.
An issuer that discloses material FLI must include disclosure that:
- identifies the FLI as such;
- cautions users that actual results may vary from the FLI and identify material risk factors that could cause actual results to differ materially from the FLI;
- states the material factors or assumptions used to develop the FLI; and
- describes the issuer's policy for updating FLI if it includes procedures in addition to those prescribed in applicable securities laws.
An issuer may not disclose FLI without a "reasonable basis" for the FLI. In Kerr v. Danier Leather Inc., 2007 SCC 44, the Supreme Court of Canada recently decided that the test for the reasonableness of assumptions is an objective test based on information available at the time.
FOFI and Financial Outlooks
FOFI (Future Oriented Financial Information) and financial outlooks are each subsets of FLI and, in addition to the requirements set out above, in preparing FOFI or a financial outlook an issuer must:
- use assumptions that are "reasonable and appropriate in the circumstances";
- limit the period covered by the FOFI or financial outlook to a period for which the information in the FOFI or financial outlook can be reasonably estimated;
- use the accounting policies the reporting issuer expects to use to prepare its historical financial statements for the period covered by the FOFI or the financial outlook;
- state the date management approved the FOFI or financial outlook if the document containing such disclosure is undated; and
- explain the purpose of the FOFI or financial outlook and caution readers that the information may not be appropriate for other purposes.
The new rules require an issuer to discuss in its Management's Discussion & Analysis (MD&A) or MD&A supplement, disclosure relating to updates, comparison to actual results, and withdrawal of material FLI. Exceptions are available from the inclusion of such information in certain circumstances where the prescribed disclosure has already been included in a news release. The new rules do not apply to disclosure that is subject to the requirements of National Instrument 51-101—Standards of Disclosure for Oil and Gas Activities or National Instrument 43-101—Standards of Disclosure for Mineral Projects.