Ten Quick Tips On Minimizing Exposure To Secondary Market Civil Liability.

With a secondary market civil liability regime having come into force in Alberta, Manitoba and Ontario, and Saskatchewan and Newfoundland and Labrador moving ahead with legislation, it is a good time for issuers who have not recently done so to think about their disclosure policies and procedures. The following are 10 tips that might help issuers avoid exposure to a hefty damage award:

Ensure that disclosure policies and procedures are in place, and that everyone involved in the creation and release of information to the public is aware of and follows the policies and procedures. The procedures should capture all material information and make sure that it is accurate. The effectiveness of the policies and procedures should be evaluated from time to time based on the experience of those involved.

Implement an internal certification process where managers certify, with respect to their areas and expertise, to the CEO or CFO that disclosure controls and procedures are in place and that the effectiveness of such controls has been evaluated.

Establish definitive personal responsibility for verifying the accuracy and completeness of the various portions of disclosure documents based on subject matter expertise.

Assign specific responsibility for reviewing boilerplate language, risk factor disclosure and forward-looking statement disclosure in disclosure documents to a senior officer who has a firm understanding of the true risks of the business taken as a whole. Risk factors and forward-looking statement warnings should be reviewed and updated, where appropriate, quarterly.

Have a business person with first-hand knowledge of the subject matter draft all material change reports, and review any press releases prepared by investor relations persons or internal or external counsel.

Appoint a person responsible for keeping informed regarding developments in case law and securities commission enforcement proceedings affecting disclosure practices, as well as relevant notices, reports and policies/rules issued by the securities regulators. Reviewing the disclosure of competitors will likely be of interest as well, as it will assist in arriving at materiality judgments.

Appoint a person responsible for documenting the review process for each filing. One option would be to create a chronology specifying the names of individuals and dates they reviewed draft documents as well as a record of meetings of the committees involved in the preparation of the document. (This takes company resources and could become an unwieldy process if it is too detailed or covers too many documents.) The other option would be for the person to be actively responsible for maintaining the disclosure policy and ensuring that it is always followed, so that the person could verify that it would have been followed in the case of any particular document (even though he/she potentially had no recollection or notes of the precise actions taken).

Have documents reviewed by someone not involved in the preparation. The person would not be responsible for vetting but rather would identify areas of confusion or ambiguity and ask questions to ensure that those responsible for preparing the document have not overlooked something obvious because of their familiarity with the material.

Ensure that with respect to the disclosure of any forward-looking information, there is a reasonable basis for making the forecast or projection, and that it is accompanied by: (i) reasonable cautionary language; (ii) a statement identifying the forward-looking information as such; (iii) details of any material factors that could cause actual results to differ materially from the forecast or projection; and (iv) a discussion of material factors or assumptions that were applied in drawing a conclusion or making the forecast or projection.

Place strict controls on who may make public statements or otherwise act as a spokesperson for the issuer to ensure a consistent message. Whenever possible, script public oral statements and review them after delivery to identify and correct any misrepresentations or selective disclosure. Records of presentations and oral statements should be kept.

This list is by no means exhaustive. Issuers should consult their legal advisors about implementing policies and procedures that are tailored for their business and take into account the particular circumstances and resources of the issuer.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Mr Roger Chouinard

McCarthy Tetrault LLP

Suite 4700

Toronto Dominion Bank Tower

Toronto

Ontario

M5K 1E6

CANADA

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URL: www.mccarthy.ca

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