TSE committee to probe corporate disclosure

The Toronto Stock Exchange has established a committee on corporate disclosure in Canada.

The committee will examine possible changes to the securities legislation governing continuous disclosure by public companies. In particular, the committee will consider whether the Securities Acts should provide for civil liability of a company to investors if it makes false or misleading statements in continuous disclosure announcements.

If enacted, civil liability would enable investors to sue for damages caused by inaccurate disclosure.

The TSE’s establishment of the committee follows the final recommendation of the draft report of the TSE’s Committee on Corporate Governance in Canada. That report stated that Canadian securities administrators should examine the imposition of civil liability upon boards of directors for the accuracy of corporate disclosure, providing that the committee’s other concerns about personal liability are also addressed.

The new committee will be chaired by Thomas Allen, a partner in the law firm of Davies, Ward & Beck until mid-1989, following which he was a partner and vice-chairman of brokerage house Gordon Capital until earlier this year. Issues that the committee will consider include the following: Is the current regulatory regime adequate? Do investors have confidence in the quality of disclosure by reporting issuers? Should civil liability for continuous disclosure be mandated and, if so, what should the liability entail and should there be any limits on the extent of liability? What standards of care should be placed on reporting issuers for continuous disclosure? If civil liability for continuous disclosure were mandated, what would be the implications for the securities regulatory regime?

The committee expects to issue a report early next year.