National Policy 51-201 Disclosure Standards
Part IV Materiality
Section 4.3

Examples of Potentially Material Information

The following are examples of the types of events or information which may be material. This list is not exhaustive and is not a substitute for companies exercising their own judgement in making materiality determinations.

Changes in Financial Results

  • a significant increase or decrease in near-term earnings prospects
  • unexpected changes in the financial results for any periods
  • shifts in financial circumstances, such as cash flow reductions, major asset writeoffs or write-downs
  • changes in the value or composition of the company’s assets
  • any material change in the company’s accounting policy


National Policy 51-201 Disclosure Standards
Part V Risks Associated With Certain Disclosures
Section 5.2

Analyst Reports

(1) It is not unusual for analysts to ask corporate officers to review earnings estimates that they are preparing. A company takes on a high degree of risk of violating securities legislation if it selectively confirms that an analyst’s estimate is “on target” or that an analyst’s estimate is “too high” or “too low”, whether directly or indirectly through implied “guidance”. [FN 34]

(2) Even when confirming information previously made public, a company needs to consider whether the selective confirmation itself communicates information above and beyond the initial forecast and whether the additional information is material. This will depend in large part on how much time has passed between the original statement and the company’s confirmation, as well as the timing of the two statements relative to the end of the company’s fiscal period. For example, a selective confirmation of expected earnings near the end of a quarter is likely to represent guidance (as it may well be based on how the company actually performed). Materiality of a confirmation may also depend on intervening events. [FN 35]

(3) One way companies can try to ensure that analyst’s estimates are in line with their own expectations is through the regular and timely public dissemination of qualitative and quantitative information. The better the marketplace is informed, the less likely it is that analysts’ estimates will deviate significantly from a company’s own expectations.

FN 34 This position follows the position adopted by the SEC in the adopting release to Regulation FD and the position taken by the Australian Securities & Investments Commission in its guidance note “Better Disclosure for Investors” (http://www.asic.gov.au).

FN 35 The guidance with respect to the materiality of confirming information previously made public is based on SEC Staff interpretive guidance on Regulation FD.


National Policy 51-201 Disclosure Standards
Part VI Best Disclosure Practices
Section 6.4

Board and Audit Committee Review of Certain Disclosure

(1) Have your board of directors or audit committee review the following disclosures in advance of their public release by the company:

You should also indicate at the time such information is publicly released whether your board or audit committee has reviewed the disclosure. Having your board or audit committee review such disclosure in advance of its public release acts as a good discipline on management and helps to increase the quality, credibility and objectivity of such disclosures. This review process also helps to force a critical examination of all issues related to the disclosure and reduces the risk of having to make subsequent adjustments or amendments to the information it contains.

(2) Where feasible, issue your earnings news release [FN 39] concurrently with the filing of your quarterly or annual financial statements. This will help to ensure that a complete financial picture is available to analysts and investors at the time the earnings release is provided. Coordinating the release of a company’s earnings information with the filing of its quarterly or annual financial statements will also facilitate review of these disclosures by the board or audit committee of the company. [FN 40]

FN 38 Some provinces require that annual financial statements be reviewed by a company’s audit committee (if the company has an audit committee) before board approval. A board of directors must also review interim financial statements before they are filed and distributed. In the case of interim financial statements, boards are permitted to delegate this review function to the audit committee (see for example, OSC Rule 52-501 Financial Statements). Where such a requirement exists at law, we believe that extracting information from financial statements that have not been reviewed by the board or audit committee and releasing that information to the marketplace in a news release is inconsistent with the prior review requirement.

FN 39 Companies often issue news releases announcing corporate earnings which highlight major items and may include pro forma results.

FN 40 Certain jurisdictions impose a requirement to concurrently deliver to shareholders financial statements that are filed. This may militate against the early filing of annual financial statements to avoid the cost of mailing them twice, once at the time of early filing and subsequently as part of the company’s annual report. The CSA is considering eliminating this concurrent delivery obligation in the context of harmonizing continuous disclosure requirements across the country.


National Policy 51-201 Disclosure Standards
Part VI Best Disclosure Practices
Section 6.6

Recommended Disclosure Model

(1) You should consider using the following disclosure model when making a planned disclosure of material corporate information, such as a scheduled earnings release:

(a) issue a news release containing the information (for example, your quarterly financial results) through a widely circulated news or wire service;

(b) provide advance public notice by news release of the date and time of a conference call to discuss the information, the subject matter of the call and the means for accessing it;

(c) hold the conference call in an open manner, permitting investors and others to listen either by telephone or through Internet webcasting; and

(d) provide dial-in and/or web replay or make transcripts of the call available for a reasonable period of time after the analyst conference call. [FN 42]

(2) The combination of news release disclosure of the material information and an open and accessible conference call to subsequently discuss the information should help to ensure that the information is disseminated in a manner calculated to effectively reach the marketplace and minimize the risk of an inadvertent selective disclosure during the follow-up call.

FN 42 This model disclosure policy was recommended by the SEC in the adopting release to Regulation FD.


National Policy 51-201 Disclosure Standards
Part VI Best Disclosure Practices
Section 6.9

Quiet Periods

Observe a quarterly quiet period, during which no earnings guidance or comments with respect to the current quarter’s operations or expected results will be provided to analysts, investors or other market professionals. The quiet period should run between the end of the quarter and the release of a quarterly earnings announcement although, in practice, quiet periods vary by company. [FN 43] Companies need not stop all communications with analysts or investors during the quiet period. However, communications should be limited to responding to inquiries concerning publicly available or non-material information.

FN 43 Some companies adopt a quiet period beginning at the start of the third month of the quarter, and ending upon issuance of the earnings release. Other companies wait until two weeks before the end of the quarter or even the first day of the month following the end of the quarter to start the quiet period.


National Policy 51-201 Disclosure Standards
Part VI Best Disclosure Practices
Section 6.10

Insider Trading Policies and Blackout Periods

Adopt an insider trading policy that provides for a senior officer to approve and monitor the trading activity of all your insiders, officers, and senior employees. Your insider trading policy should prohibit purchases and sales at any time by insiders and employees who are in possession of material nonpublic information. Your policy should also provide for trading “blackout periods” when trading by insiders, officers and employees may typically not take place (for example a blackout period which surrounds regularly scheduled earnings announcements). However, insiders, officers and employees should have the opportunity to apply to the company’s trading officer for approval to trade the company’s securities during the blackout period. A company’s blackout period may mirror the quiet period* described above.

*Lexata note: The quiet period is discussed in section 6.9 and relates to heightened confidentiality of company information when quarterly results are soon to be announced. Section 6.9, which will be added to Lexata’s database in the Continuous Disclosure module, states in part as follows: “Some companies adopt a quiet period beginning at the start of the third month of the quarter, and ending upon issuance of the earnings release. Other companies wait until two weeks before the end of the quarter or even the first day of the month following the end of the quarter to start the quiet period.”