May, 2008

Financial statements: to send or not to send

Every Canadian publicly traded issuer is required to file both interim (quarterly) and annual financial statements with regulatory authorities and to make these documents available to its investors.  

Until 2001, it was common practice to mail all financial statements to a company's investors to satisfy disclosure requirements. In recent years, regulators have modified the rules so that companies now are required to send financial statements only to investors who specifically request these documents. This change was made because:

• Financial statements can be published electronically on issuer websites or the System for Electronic Document Analysis and Retrieval (SEDAR) much faster than they can be printed and delivered by mail
• Sending financial statements by paper involves financial and environmental costs that are arguably unnecessary, especially given that many investors do not keep these materials

Nonetheless, investors do have the right to receive paper materials if they want. Therefore, issuers must always be aware of their obligations under National Instruments 51-102 or 81-106, which govern the distribution of financial statements to shareholders and trust unit holders, respectively. Both regulations essentially require issuers to ask their investors annually whether they wish to receive interim or, for non-registered investors, annual financial statements for the next year. 

For registered investors, the Canada Business Corporations Act and the provincial counterparts (except Ontario, which modified the OBCA in July 2007 to match the provisions of NI 51-102) specify that annual financial statements must be sent out unless an investor explicitly declines. Requests to not receive annual financial statements remain effective until the shareholders change their minds.

Usually when issuers send out annual meeting materials, the package includes a financial statement solicitation form. The form requires that investors complete and return the paper form or submit an electronic version of the request form on CIBC Mellon's website. If an issuer does not solicit financial statement requests, it must send interim and annual financial statements to all registered and non-registered investors.

Over the years, CIBC Mellon has developed a thorough understanding of best practices when it comes to issuers’ financial statement obligations. With this knowledge and experience, we have developed various tools to reduce the cost of compliance in areas such as:

• Solicitation of investor responses
• Receipt of investor responses
• Subsequent distribution of interim or annual financial statements

If you are either unfamiliar with the requirements for distribution of financial statements to investors or unclear as to how to go about dealing with your responsibilities under National Instrument 51-102 or 81-106, consult with your CIBC Mellon client service manager. We can ensure that you are in compliance with the instruments, and even explore opportunities to reduce your costs.

By James Hinnecke, director, product management

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Inform® is provided for general information purposes only and CIBC Mellon Trust Company, CIBC Mellon Global Securities Services Company, CIBC, The Bank of New York Mellon Corporation and their affiliates make no representations or warranties as to its accuracy or completeness. Readers should be aware the content of this publication should not be regarded as legal, tax, accounting, investment, financial or other professional advice nor is it intended for such use.