Investors need more detail on Covid-19 effects: CSA

By James Langton | February 25, 2021 | Last updated on February 25, 2021
2 min read
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A regulatory review of Canadian companies’ efforts to disclose the impact of Covid-19 on their businesses finds that firms are doing a decent job, but could offer more details.

The Canadian Securities Administrators (CSA) published the results of a review of approximately 90 issuers’ Covid-19 disclosures. The regulators said they were “encouraged by the quality” of disclosure from many issuers that have been significantly impacted by the pandemic.

“However, we noted certain areas where boiler-plate disclosure was provided regarding the current and expected impact of Covid-19 on an issuer’s business,” the CSA said, noting that it found insufficient detail of entity-specific risks, including “the nature and extent of credit risks and liquidity uncertainties.”

For instance, the report noted that approximately 20% of issuers didn’t provide insight into entity-specific factors for variances in their financial results, and more than 30% cited general impacts of Covid-19 without explaining pandemic-related risks specific to the company.

The CSA also reported that 25% of firms didn’t adequately disclose their ability to meet their working capital requirements, and 30% cited “material sources of measurement uncertainty” due to Covid-19 didn’t disclose the range of reasonably possible outcomes for the next financial year.

“It is important for issuers to tailor their disclosures to provide investors with an entity-specific level of insight to understand the operational challenges, financial impacts, risk profile and the issuer’s operational responses related to the Covid-19 pandemic,” the report said.

“Such information is necessary to meet securities requirements and to help foster investor confidence in the current environment.”

The report also noted that regulators found examples of “overly promotional” disclosure, and companies improperly using non-GAAP financial measures and forward-looking information.

The CSA’s reviews have not generated enforcement action. Instead, regulators have requested future disclosure improvements and are engaging with firms to resolve these issues.

The CSA’s report also provides guidance to issuers on dealing with Covid-19-related disclosure issues.

“It is important that issuers review this guidance closely so that they provide transparent and balanced disclosure,” said Louis Morisset, chair of the CSA and president and CEO of the Autorité des marchés financiers, in a release.

The CSA said that it will continue to “closely monitor issuers’ continuous disclosure filings in relation to the impact of the Covid-19 pandemic, as part of [its] ongoing continuous disclosure review program.”

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James Langton

James is a senior reporter for and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.