The Canadian Securities Administrators today announced the establishment of a committee to focus regulators’ responses to global credit and liquidity issues.

The CSA has initiated targeted reviews of continuous disclosure by reporting issuers identified as holders of non-bank sponsored asset-backed commercial paper (ABCP). It estimates that fewer than 100 public companies hold significant amounts of non-bank sponsored ABCP.

The reviews are focusing on the reasonableness of assessments of the fair value of ABCP holdings as well as disclosure and presentation in financial statements and management’s discussion and analysis. Areas of importance include: how issuers are accounting for these investments; whether issuers have taken valuation write-downs when required; appropriate classification of these assets on balance sheets; and, the adequacy of MD&A disclosure.

If continuous disclosure filings are materially deficient or fail to meet relevant accounting and disclosure requirements, reporting issuers will be expected to restate and re-file their disclosure documents, the regulator note. Staff of the Canadian Accounting Standards Board issued a commentary in October on how certain aspects of GAAP apply to non-bank sponsored ABCP held by investors, and CSA rules require compliance with GAAP.

Additionally, members of the CSA sent questionnaires to managers of investment funds (including mutual funds, exchange traded funds, labour sponsored funds, scholarship plans and closed-end funds) requesting data regarding investments in ABCP; focusing on valuation and disclosure of those investments. The CSA is conducting targeted reviews of investment funds’ ABCP disclosure in their financial statements.

Along with the CSA’s efforts, the Investment Dealers Association of Canada is investigating whether proper standards of registrant behaviour were followed in the distribution of ABCP to retail clients.

The CSA also continues to work closely with the international community, including participating in the task forces established by the International Organization of Securities Commissions, which are examining the role of credit rating agencies, as well as broader issues such as transparency of underlying assets. Both task forces are expected to have developed proposals and action plans early in the new year.

“This issue has affected financial markets around the globe simultaneously,” said Jean St-Gelais, chair of the CSA and president and CEO of the Autorité des marchés financiers. “None of us is immune to its impact. That is why it is crucial that there be a co-ordinated effort both internationally and here at home to review the issues and evaluate the policy implications.”