November 30, 2007
CSA Staff Notice 52-319 Could Be More Transparent
The main intent of the notice as evidenced by the majority of the subject matter was to indicate that the regulators had decided that Venture Issuers could file a basic certificate rather than the Form 52-109F1 form that TSX issuers must file. Further, the Venture issuers could file this certificate for this year if in fact their fiscal year ends after November 23, 2007 - basically either November 30 or December 31.
While some may think this is good news, it is a bit disconcerting when this type of notice comes out almost at the end of fiscal years. So many Venture issuers have done extensive work on their 52-109 documentation and some have made such disclosures in their MD&A.
This provides a very late notice with certificates with terms such as:
- "reasonable diligence" and
- "The issuer's certifying officers are responsible for ensuring that processes are in place to provide them with sufficient knowledge to support the representations they are making in this certificate"
No doubt these certifications require a level of documentation of controls in place in order to be able to make these certifications. But how different are the requirements?
The other point in this late breaking news is that for awhile Venture Issuers were closer to same status as TSX issuers, with the same disclosures. No doubt the benefits were there for lowering the perceived investment risk. This is an important factor when considering how difficult it is to get analyst coverage and their higher cost of capital, thus lowering their overall liquidity.
The area that has really caused a lot of discussion and many different interpretations is some other wording in the notice:
"The comment period expired on June 28, 2007. We received 53 comment letters. After extensive review and consideration of the comments received, we have decided to make significant revisions to certain aspects of the proposal. As a result, we will publish an amended version of the Proposed Materials for comment and we will not implement the Proposed Materials in final form on June 30, 2008. When we publish an amended version of the Proposed Materials for comment, we will include information relating to the expected effective date."
With 13 regulators, there have been so many rumours flying all around Canada on what this means. The concern with this type of wording is that is vague and leads everyone to reach their own conclusions. A concern for regulators who have an interest in making sure that issuers move forward with the requirements.
But issuers, on the other hand, need to be careful not to read into this announcement what they "wish to hear". The public information in the CSA staff notice is just saying the final comments will not be in final form on June 30, 2008 NOT that issuers are off the hook for proper ICFR and disclosure controls and the certifications of design/implement and effectiveness.
