Alberta Securities Commission Publishes 2024 Corporate Finance Disclosure Report

Each year, the Alberta Securities Commission (ASC) publishes its Corporate Finance Disclosure Report, which offers important insights into the ASC’s areas of focus and provides practical guidance to reporting issuers in complying with their continuous disclosure obligations. The ASC recently released its 2024 Corporate Finance Disclosure Report (the Report), which, among other things, highlights key issues identified in the ASC’s continuous disclosure reviews, provides guidance on the disclosure requirements applicable to annual information forms, and includes updates on the Canadian Securities Administrators’ (CSA) major regulatory initiatives. The following summarizes the key takeaways from the Report.

Notable Continuous Disclosure Review Observations

1. Mergers and Acquisitions: The Report discusses the ASC’s observations with respect to disclosure regarding M&A activity. In addition to highlighting specific areas of concern (including inadequate disclosure concerning related party transactions, forward-looking information and non-GAAP measures), the ASC emphasized the importance of providing balanced disclosure regarding M&A transactions. In particular, it noted that the expected benefits or synergies of a proposed transaction should be balanced with discussion of the transaction’s potential risks. The ASC also stated its expectation that to avoid selective disclosure, any material information included in an investor presentation should also be found within the reporting issuer’s core disclosure documents or a press release.
2. Selective Disclosure: Under Canadian securities laws, material information must be “generally disclosed,” which means that it must be communicated in a way that “effectively reach[es] the marketplace” and gives investors a “reasonable amount of time to analyze the information.” While securities legislation does not mandate a specific method for disseminating material information, given the guidance in National Policy 51-201 – Disclosure Standards, “generally disclosed” is typically regarded as being synonymous with dissemination by way of a widely distributed news release that is subsequently filed on SEDAR+. However, the ASC has observed instances of reporting issuers disclosing material information through blogs, newsletters, corporate presentations and social media platforms prior to issuing a press release. The ASC advises that if reporting issuers intend to disclose material information other than by way of a news release (or a core disclosure document), they should be prepared to demonstrate to regulators that such information has been “generally disclosed.”
3. Balanced Disclosure: A consistent theme across prior Corporate Finance Disclosure Reports is the need to ensure that issuers are providing balanced disclosure. In the Report, the ASC reiterated that issuers should avoid overly promotional statements and ensure that both positive and negative aspects of their business are disclosed. The Report provides examples of unbalanced disclosure, such as unsubstantiated statements about products and services, failure to disclose the conditional nature of contracts and the failure to disclose adverse changes to previously announced events. While not explicitly referenced in the Report, the reference to “unsubstantiated statements about products and services” should be considered in light of the CSA’s comments regarding “AI washing” and “greenwashing” in its recent Staff Notice 51-365, as summarized in our recent Blakes Bulletin.
4. Valuations: The ASC noted having identified several instances of issuers applying inappropriate methodology, inputs and/or assumptions in their measurement of the fair value of an asset or liability and reminded reporting issuers of the requirements of IFRS 13 – Fair Value Measurement. The ASC also discussed cases where issuers relied on independent valuation reports that were unsuitable to their circumstances. The Report includes guidance on the various types of valuation reports and advises reporting issuers that the appropriate type of report for a particular circumstance is a matter of judgment to be agreed on by the valuator and the reporting issuer.
5. Early Warning Reporting: In response to instances of non-compliance with respect to the early warning reporting requirements of Canadian securities laws, as well as questions from reporting issuers regarding these requirements, the Report includes a high-level summary of the thresholds and events that give rise to reporting obligations under Canadian securities laws.

Annual Information Form

The ASC devoted a full section of the Report to discussing common concerns identified in its review of reporting issuers’ annual information forms (AIFs). This section includes several notable observations.

1. Corporate Structure: Issuers are required to include in their AIF a summary of material amendments to their articles or other constating documents. The ASC advised that issuers often include overly detailed and lengthy disclosure regarding such amendments and encouraged issuers to focus only on material amendments necessary to understand their current corporate structure to ensure that other important information is not obscured or lost in excessive detail.
2. Development of the Business: The ASC noted that issuers often include excessive detail in the “Three-Year History” section of their AIF. The ASC reminded issuers that the primary focus of the AIF should be the most recently completed financial year and that best practice involves providing concise disclosure that highlights only material developments necessary to understand the reporting issuer’s current operations.
3. Risk Factors: The Report discusses the distinction between risk factor disclosure in a reporting issuer’s AIF and its management’s discussion and analysis (MD&A). The ASC advised that while general risks related to a reporting issuer’s business should be disclosed in its AIF, risks that could reasonably impact future performance, including cash flows, and have liquidity implications should be disclosed in the AIF and MD&A.
4. Cybersecurity: In its comments regarding risk factor disclosure, the ASC specifically noted cybersecurity (including the cost and risk associated with a cybersecurity incident) as an area for consideration by reporting issuers and included a non-exhaustive list of the types of cybersecurity risks to which reporting issuers may be exposed.
5. Technical Disclosure: With respect to reporting issuers engaged in oil and gas or mining activities, the ASC advised that the required technical disclosure is often either incomplete or inconsistent with other disclosure and included a summary of the key disclosure requirements applicable to such issuers. Reporting issuers engaging in oil and gas activities should also consider the ASC’s comments in its 2024 Energy Matters Report.
6. Material Contracts: As discussed in a recent Blakes Bulletin, reporting issuers are generally required to file material contracts on SEDAR+ within the prescribed time period. There is, however, an exemption from this requirement for material contracts entered into in the “ordinary course of business.” In the Report, the ASC advises that such exemption is often inappropriately applied, specifically in instances involving contracts to buy or sell the majority of a reporting issuer’s products, services or raw materials, financing or credit agreements with terms that have a direct correlation with anticipated cash distributions, and contracts on which the reporting issuer’s business is substantially dependent. Accordingly, reporting issuers should be mindful that the “ordinary course of business” exemption should be relied upon judiciously.

Regulatory Update

As in prior years, the Report includes an update on the status of key proposed changes to Canadian securities law, including the following.

1. Proposed National Instrument 51-107 - Disclosure of Climate-Related Matters (NI 51-107): As discussed in our Blakes Bulletin, NI 51-107 would introduce specific disclosure requirements regarding climate-related matters for most public companies in Canada. However, the proposed instrument has remained in draft form since its initial publication for comment in October 2021. In the Report, the ASC indicated that it was continuing to monitor developments in the Canadian sustainability reporting landscape, most notably the finalization of the Canadian Sustainability Standards Board’s Canadian Sustainability Disclosure Standards (which were subsequently published on December 18, 2024, as discussed in our recent Blakes Bulletin), as well as the ongoing development of sustainability-related reporting standards in other jurisdictions, particularly the United States. The ASC also noted that ongoing efforts to finalize NI 51-107 would require balancing “the requests by institutional investors for specific information, feedback from reporting issuers respecting their resources and capabilities, liability issues associated with climate-related disclosure and the competitiveness of our capital market.”
2. Proposed Amendments to Corporate Governance Disclosure Requirements: The Report provides a limited update with respect to the CSA’s ongoing efforts to mandate broader diversity-related disclosure (as summarized in our Blakes Bulletin), noting only that the CSA has “reviewed the public comments received from various market participants and is continuing to work towards a harmonized national disclosure framework.”
3. Development of Permanent Regime for Well-Known Seasoned Issuers (WKSI): With respect to the CSA’s proposal to establish a permanent expedited shelf prospectus regime for WKSIs (as summarized in our Blakes Bulletin), the Report provides only a general update, indicating that the CSA is continuing to refine the proposed amendments to address the comments received following the expiration in December 2023 of the applicable comment period.
4. IFRS 18: The Report includes helpful guidance for issuers considering the early adoption of IFRS 18 - Presentation and Disclosure in Financial Statements (IFRS 18). IFRS 18, which was issued in April 2024 and is effective for annual reporting periods beginning on or after January 1, 2027, introduces the concept of management-defined performance measures (MPMs), which are subtotals of income and expenses, requiring such financial measures to be disclosed in a note to the financial statements. In the Report, the ASC notes that, prior to the introduction of IFRS 18, such measures have traditionally been considered non-GAAP financial measures (NGMs) and that the CSA anticipates implementing amendments to National Instrument 52-112 - Non-GAAP and Other Financial Measures Disclosure to ensure MPMs continue to be regulated under NI 52-112 and treated as NGMs when disclosed outside the financial statements. In the meantime, the ASC advises issuers considering the early adoption of IFRS 18 to continue to apply NI 52-112 to MPMs when they are disclosed outside the financial statements. We are closely monitoring this matter and have engaged with the ASC regarding its potential implications. We will provide timely updates as further information becomes available.
5. Annual Disclosure Statement: In May 2021, the CSA published for comment certain amendments to Canadian securities laws intended to streamline annual and interim disclosure requirements for reporting issuers by, among other things, combining an issuer’s MD&A, financial statements and, for non-venture issuers, AIF into a single document, the “annual disclosure statement.” See our Blakes Bulletin for more information on the proposed amendments. As a parallel workstream, the CSA has been working to implement an “access equals delivery” model for non-investment fund reporting issuers’ continuous disclosure documents. As detailed in our recent Blakes Bulletin, on November 19, 2024, the CSA re-published for comment proposed amendments to implement such an access model. In the Report, the ASC indicates that until such model is finalized, it will not be in a position to introduce the annual disclosure statement. However, it advises that the CSA will ensure reporting issuers are provided with “sufficient time” to transition to any new forms and requirements.

Looking Ahead

The ASC will be hosting its 2025 Corporate Finance Disclosure Information Session on January 16, 2025, to discuss the Report, at which further details regarding the above guidance may be provided. Details on how to attend the Information Session are included on the ASC’s website.

For further information, please contact the authors or any other member of our Capital Markets group.