Canada’s largest provincial securities regulator says it wants publicly traded companies to be more specific when making their “forward-looking information” disclosures.
The Ontario Securities Commission says its study of 60 reporting issuers found too many of the required disclosures were generic “boilerplate” statements that had little or no company-specific information.
The OSC is issuing new guidelines that address common shortcomings in several areas, saying that investors require more detail about what factors may affect future performance.
It says it expects “prompt corrective action where necessary.”
The OSC’s jurisdiction includes companies and other entities listed on the Toronto Stock Exchange, Canada’s largest public market.
The commission has issued a 24-page set of guidelines and examples to illustrate the kinds of changes it expects from reporting issuers under a national guideline known as “National Instrument 51-102 Continuous Disclosure Obligations.”
“Investors want transparent and clear disclosure about present and future corporate operations and performance,” the report says.
“Disclosure should include the most relevant information in a format that investors can understand.”
It says that its review of rules that have been in effect since December, 2007 found that there was room for improvement in four areas, including disclosure of more company-specific information, better updates of previously disclosed information and more explanation of the relevant factors or assumptions.
For example, it says, a company should do more than say it expects total sales are expected to rise by 5 to 6 per cent in a year. It should also explain, for instance, that the increase is expected because of new brands, the key performance measures it will use to measure the brands’ success and the potential impact of changes from other factors such as higher interest rates.
“General risk factors and assumptions provide investors with limited information and do not provide insight on how they relate to and impact the FLI (forward looking information) being disclosed,” it says.
The OSC said it will be up to boards and their audit committees to ensure the disclosures meet the commission’s requirements.
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