December 13, 2010

Introduction

The Canadian Securities Administrators (CSA) Staff reported a moderate improvement in the level of issuers' compliance with National Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings (NI 52-109) in comparison to last year.  However, CSA Staff believe that issuers can further improve their compliance with the certification form requirements and related management's discussion and analysis (MD&A) disclosure in future filings.

CSA Staff conducted a review of 2009 annual MD&A and the annual certificates of 195 reporting issuers for compliance with NI 52-109.  The results of the review are summarized in CSA Staff Notice 52-327 Certification Compliance Update (CSA Staff Notice).  The review was a follow up review to evaluate the level of improvement in reporting issuers' compliance and to raise awareness and educate issuers in their certificate disclosure obligations. This bulletin highlights the deficiencies identified in the CSA Staff Notice.

Common Deficiencies

The deficiencies identified in the CSA Staff Notice include:

• Failure of non-venture issuers to fully and clearly disclose in their MD&A the certifying officer's conclusions about the effectiveness of internal control over financial reporting (ICFR) and disclosure controls and procedures (DC&P);
• Inconsistency between the representations contained in the certificate and the disclosure contained in the related MD&A;
• Failure to file certificates in the exact wording prescribed by the required form, including:
  • deleting paragraphs 5.2, 5.3 and 6(b)(ii) of Form 52-109F1 rather than inserting N/A where the paragraphs were not applicable;
  • failing to date certificates the same date certificates were filed;
  • failing to file certificates concurrently with the filing of an AIF, when the AIF was filed after the filing of the financial statements and MD&A; and
  • failing to insert the correct date in paragraph 7 of Form 52-109F1, i.e., the date immediately following the end of the period covered by the issuer's most recent interim filing;
• Deficient disclosure of material weaknesses in the conclusions about the effectiveness of ICFR and DC&P and in the disclosure of material changes to ICFR that were made to remediate a material weakness in circumstances where the issuer had restated and re-filed financial statements;
• Failure to disclose the change made to the issuer's ICFR to remediate a material weakness in circumstances where the issuer had remediated the material weakness; and
• Failure to discuss the impact of the transition to International Financial Reporting Standards on ICFR and DC&P in MD&A disclosure.

Conclusion

CSA Staff believe that compliance with NI 52-109 will enhance investor's confidence in the quality, reliability and transparency of the annual filings, interim filings and other materials that reporting issuers file or submit under securities legislation.  CSA Staff also believe that reporting issuers can further improve their compliance with the certification requirements and the related MD&A disclosure.  CSA Staff will continue to review compliance with the certification requirements and take action when deficiencies are identified.