The Canadian Securities Administrators (“CSA”) recently announced a multi-year pilot project that would allow eligible venture issuers to voluntarily adopt semi-annual financial reporting (the “Pilot”). The Pilot would provide an exemption for certain issuers listed on the TSX Venture Exchange Inc. (“TSXV”) or the CNSX Markets Inc. (“CSE”) from the requirement to file first and third quarter financial reports.
Background
Canadian reporting issuers are currently required to file interim financial reports and accompanying management’s discussion and analysis (“MD&A”) on a quarterly basis. Certain market participants believe that smaller venture issuers face a disproportionate burden through ongoing quarterly reporting and that the cost of preparing such financial statements and MD&A outweighs the benefit that such information provides to investors. As we discussed in a previous post, the CSA have explored introducing semi-annual reporting in the past and highlighted this initiative in their 2025-2028 business plan.
Blanket Order
The Pilot would be implemented through proposed Coordinated Blanket Order 51-933 Exemptions to Permit Semi-Annual Reporting for Certain Venture Issuers (the “Blanket Order”). Eligible issuers must satisfy the following conditions:
- the issuer has been a reporting issuer in at least one jurisdiction of Canada for at least 12 months;
- the issuer is a venture issuer (i.e., a reporting issuer that is not a CSE senior tier issuer and does not have any of its securities listed or quoted on any of the Toronto Stock Exchange, Cboe Canada Inc., a U.S. marketplace, or a marketplace outside of Canada and the United States of America other than the Alternative Investment Market of the London Stock Exchange or the AQSE Growth Market operated by Aquis Stock Exchange Limited);
- the issuer’s securities are listed on the TSXV or CSE;
- the issuer has annual revenue of no more than C$10 million;
- the issuer has filed all periodic and timely disclosure documents that it is required to have filed;
- during the preceding 12 months, the issuer: (i) was not the subject of a penalty or sanction imposed by a court relating to securities legislation or by a securities regulator, other than an administrative monetary penalty for late filings; (ii) was not the subject of a cease trade or other similar order that was not revoked within 30 days of its issuance; and (iii) did not stop relying on the Blanket Order; and
- the issuer has issued and filed a news release that specifies the initial interim period for which the issuer does not intend to file an interim financial report and related MD&A in reliance on the Blanket Order.
Issuers would be prevented from relying on the Blanket Order if they change their financial year end or file a base shelf prospectus. Issuers that file a short form prospectus must not rely on the Blanket Order during the period of distribution.
The Blanket Order also does not extend to financial disclosure requirements in a short form prospectus, information circular, take-over bid circular or issuer bid circular.
What’s Next?
The CSA will accept comments on the Blanket Order until December 22, 2025, and anticipate that the Pilot will be in force before the end of March 2026. The CSA have indicated that they intend to engage in a broader rule-making project relating to voluntary semi-annual reporting and that the results of the Pilot will inform that initiative.
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