Reducing reporting burden for eligible venture issuers

The Canadian Securities Administrators (CSA) have proposed a multi-year pilot initiative to allow eligible venture issuers to voluntarily adopt semi-annual financial reporting. To be eligible, among other criteria, a venture issuer must have annual revenue of no more than C$10 million.

Who Is Eligible: Junior mining companies are expected to constitute the majority of eligible venture issuers. According to estimates by the Ontario Securities Commission (OSC), approximately 1,461 reporting issuers in Ontario have annual revenues of less than C$10 million, which represents approximately 89% of all venture issuers reporting in the province. The majority of these issuers are in the materials sector (i.e., chemicals, packaging, metals, mining and paper products), with issuers in the sector having an average market capitalization of just over C$54 million.

Why It Is Being Piloted: As part of the CSA’s announcement, the OSC outlined its analysis of the proposed pilot in light of the elements of its mandate¹,  reflecting an overall balancing of burden reduction against maintaining investor protection and confidence in capital markets:

• Eligible issuers will be able to reallocate money from financial reporting to their core operations, more efficiently allocating capital and thereby benefiting investors.
• Investors will have less timely financial information, coupled with the increased likelihood of selective disclosure – though this is mitigated somewhat by prohibitions against selective disclosure and insider trading, and a requirement to report material changes.
• Investors may have less comparability within a peer group of issuers if some are reporting semi-annually and others quarterly.
• Issuers that participate in the pilot may suffer less trading activity and reduced market liquidity as a result of the reporting frequency.
• The voluntary nature of the pilot will allow issuers to continue to report quarterly if their investors expect it, or if the foregoing risks outweigh the benefits.

Key Legal Considerations Before Adopting Semi-Annual Reporting

• Eligible venture issuers that participate in the pilot will need to scrutinize their news releases closely. These issuers remain subject to civil liability for secondary market disclosure if news releases and other disclosures contain a misrepresentation; this includes an omission to state a material fact that is necessary to make a statement not misleading in the light of the circumstances in which it was made. Absent the baseline disclosure of quarterly financial reporting, eligible venture issuers will need to consider carefully whether to include more comprehensive updates in their news releases to avoid a misrepresentation by omission. For example, issuers will not be able to rely on the fact that the market has a quarterly update of its cash position and cash burn; the market’s information may be six months old. If an issuer experienced excessive cash burn in completing drilling results, it may need to highlight in a news release the cash burn and the impact on its plans alongside the favourable drilling results.
• Eligible venture issuers may choose to refrain from participating in the pilot if they expect to raise capital by way of prospectus rather than private placement. If otherwise eligible venture issuers wish to complete a prospectus offering, they will nonetheless be required to prepare quarterly financial statements and related management’s discussion and analysis, including the comparative periods in the previous year. This may be sufficient to dissuade such issuers from participating in the pilot.

Our Take: The CSA is seeking to balance burden reduction, investor protection and rumblings from the United States about semi-annual reporting (promising to “monitor international developments”). We commend the regulators for their thoughtful and cautious approach in studying the issues with a limited pilot for a class of issuers that would most benefit from the burden reduction.

The CSA has requested comments on the proposed pilot by December 22, 2025.