Ontario

Abstract

The Commission issued a notice of proposed changes to proposed National Instrument 43-101 ("Standards of Disclosure for Mineral Projects"), proposed Form 43-101 F1 Technical Reports, and proposed Companion Policy 43-101 CP. The proposed National Instrument originated with the reformulation of National Policy Statement No. 2-A ("Guide for Engineers, Geologists and Prospectors Submitting Reports on Mining Properties to Canadian Provincial Securities Administrators") and National Policy Statement No. 22 ("Use of Information and Opinion Re Mining and Oil Properties by Registrants and Others"). The proposed National Instrument consolidates and expands significantly on the current disclosure and reporting requirements. The purpose of the proposed National Instrument is to enhance the accuracy and integrity of public disclosure in the mining sector by establishing standards for all oral statements and written disclosure made by an issuer concerning mineral projects that is reasonably likely to be made available to the public. All disclosure concerning mineral projects, including oral statements and written disclosure in news releases, prospectuses and annual reports, is to be based on information prepared by, or under the supervision of, a qualified person. Disclosure of mineral resources and mineral reserves is to be made in accordance with standard definitions set out in the proposed National Instrument.

Securities Regulations Amended

The Securities Act Regulations have been amended by Ontario Regulation 133/00, which revoked sections 197 and 199. These amendments came into force on March 15, 2000 and have been incorporated into Volume 3 of the Canadian Securities Law Reporter starting at [Symbol Not Transcribed]452-278.

Proposed Rule 51-501 and Companion Policy Issued

OSC Policy Statement No. 5.10, "Annual Information Form and Management's Discussion and Analysis of Financial Condition and Results of Operations", was introduced by the Commission on November 10, 1989, to enhance investors' understanding of an issuer's business by providing supplemental analysis and background material to allow a fuller understanding of the nature of the issuer and its operations and known prospects for the future. Policy 5.10 was designed to address the uneven quality and considerable variation in the presentation of discussion and analysis of annual financial statements by creating a uniform framework within which issuers could provide a meaningful discussion and analysis of past corporate performance and future prospects.

Proposed Rule 51-501 reformulates Policy 5.10 and also introduces a requirement for MD&A to be provided in relation to interim financial statements. Unlike Policy 5.10, the proposed Rule does not prescribe in full the contents of an AIF and MD&A, other than interim MD&A. Instead, it cross-references proposed Form 44-101F1 AIF, which sets out the contents of an AIF, including annual MD&A. Proposed Form 44-101F1 reformulates Appendix A to National Policy Statement No. 47 and contains revisions.

The purpose of proposed Companion Policy 51-501CP is to provide additional guidance to assist reporting issuers in complying with their obligations under the proposed Rule.

For further information, please refer to the March 10, 2000 OSC Bulletin.

Proposed Rule 52-501 and Companion Policy Issued

The Commission has issued Proposed Rule 52-501 ("Financial Statements") which reformulates sections 7 to 11 of the Regulations to the Securities Act by setting out the contents of interim and annual financial statements. The proposed Rule adds certain requirements, including a requirement for issuers to: (i) prepare an interim balance sheet; (ii) prepare an interim statement of retained earnings; (iii) prepare an income statement and cash flow statement for each three-month period of its financial year, other than the last three-month period of the year; (iv) prepare notes to the interim financial statements; and (v) present certain line items in their annual and interim balance sheets. This last requirement was added to ensure a consistent minimum level of disclosure in both the annual and interim balance sheets. The proposed Rule requires that the annual financial statements be reviewed by the audit committee, if any, and approved by the board of directors, and also requires that the board of directors and audit committee review the interim financial statements prior to filing and delivery to securityholders.

The Commission also intends to continue to consider additional steps that might be taken to enhance the quality and reliability of financial reporting by reporting issuers, including: requiring all reporting issuers to have an audit committee; developing rules relating to the qualifications required of audit committee members; specifying certain minimum duties and responsibilities to be discharged by the audit committee; requiring that approval by the board of directors of interim financial statements be evidenced in the same manner as is now required for annual financial statements; and mandating review of an issuer's interim financial statements by its external auditors prior to filing and distribution to shareholders.

While issuers are not required to comply with the new requirements of the proposed Rule until such time as the proposed Rule comes into force, the Commission encourages issuers, as a matter of relevant financial disclosure, to begin preparing financial statements in accordance with the proposed Rule before the adoption of the proposed Rule. The proposed Rule should be read in conjunction with the CICA Accounting Standards Board's Exposure Draft, Interim Financial Reporting, which proposes to significantly enhance current requirements under generally accepted accounting principles relating to the content of interim financial statements. This Exposure Draft can be found at http://www.cica.ca. For further information, please refer to the March 10, 2000 OSC Bulletin.

Proposed Rule 54-501

The Commission has published a notice of proposed Rule 54-501, ("Prospectus Disclosure in Certain Information Circulars") which requires information circulars sent to holders of voting securities of a reporting issuer in respect of certain transactions under which securities are to be issued, to contain prospectus disclosure. This includes the financial statements and other dislosure that is required to be included in a prospectus if the transaction results in the acquisition of a business. For further information, please refer to the March 17, 2000 OSC Bulletin.

Proposed Rule 43-101, Forms and Companion Policy Issued

The Commission issued a notice of proposed changes to proposed National Instrument 43-101 ("Standards of Disclosure for Mineral Projects"), proposed Form 43-101 F1 Technical Reports, and proposed Companion Policy 43-101 CP. The proposed National Instrument originated with the reformulation of National Policy Statement No. 2-A ("Guide for Engineers, Geologists and Prospectors Submitting Reports on Mining Properties to Canadian Provincial Securities Administrators") and National Policy Statement No. 22 ("Use of Information and Opinion Re Mining and Oil Properties by Registrants and Others"). The proposed National Instrument consolidates and expands significantly on the current disclosure and reporting requirements. The purpose of the proposed National Instrument is to enhance the accuracy and integrity of public disclosure in the mining sector by establishing standards for all oral statements and written disclosure made by an issuer concerning mineral projects that is reasonably likely to be made available to the public. All disclosure concerning mineral projects, including oral statements and written disclosure in news releases, prospectuses and annual reports, is to be based on information prepared by, or under the supervision of, a qualified person. Disclosure of mineral resources and mineral reserves is to be made in accordance with standard definitions set out in the proposed National Instrument.

A summary of the changes to proposed National Instrument 43-101 and Companion Policy 43-101CP may be found in the March 24, 2000 OSC Bulletin. The proposed National Instrument is expected to be adopted as a Rule in British Columbia, Alberta, Manitoba, Ontario, Nova Scotia and Newfoundland, as a Commission regulation in Saskatchewan, and as a policy in all other jurisdictions represented by the CSA.