Mr. Huston Loke reports

OSC RELEASES RESULTS OF RELATED PARTY TRANSACTION DISCLOSURE REVIEW

The Ontario Securities Commission has published OSC staff notice 51-723, a report on staff's review of related-party transaction disclosure and guidance on best practices, following a review of reporting by 100 Ontario-based issuers. The notice provides guidance into areas where issuers should focus to improve their related-party disclosure.

A related-party transaction (RPT) is a normal feature of business, and occurs between an issuer and a related party of the issuer at the time of the transaction. In Canada, there are disclosure requirements relating to RPTs to ensure the fair treatment of all securityholders. Almost all of the issuers in the review had some form of RPT disclosed in their financial statements or their MD&A (management's discussion and analysis).

In conducting the review, OSC staff assessed the RPT disclosure of 100 Ontario-based issuers selected at random across all industries. Nearly half of the issuers reviewed received comments from staff requesting prospective changes to the MD&A in order to improve clarity. In addition, 20 per cent of the issuers referred to having a code of conduct, but the code was not accessible to investors. At staff's request, the code was filed on SEDAR.

"Investors are entitled to clear and meaningful disclosure of RPTs to help inform their investment decisions," said Huston Loke, director of corporate finance. "The disclosure should highlight the purpose of the RPT, the parties involved and the corporate governance practices surrounding the approval of RPTs. We encourage issuers and their advisers to refer to our guidance, as they prepare their annual and interim filings."

OSC staff notice 51-723 can be found on the OSC's website.