Library Magazine Articles Making sense of consents
Making sense of consents
Greg Gosson and Deborah McCombe - May 2007
Under Canadian Securities law, qualified persons (QPs) are called upon to provide their written consent to the scientific and technical content in disclosure documents being filed by public mining and exploration companies. Most often the consent is provided by the qualified persons that prepared a technical report under NI 43-101 Standards of Disclosure for Mineral Projects. In this article, we explain the different triggers for consents under securities law, the timing for filing, and the required content of the consent.
We also provide our views on the purpose of requiring mining companies to obtain a QP’s consent to their disclosure, and the importance of written consents under the civil liability provisions of securities law.
When a technical report is filed with the Canadian Securities Commissions, the written consent of each qualified person responsible for preparing the technical report must be filed as required by section 8.3 of NI 43-101. It is the company’s responsibility to obtain the consent from each QP and file it with each of the Canadian Securities Commissions. The NI 43-101 consent requires the QP to:
- consent to the public filing (on SEDAR) of their technical report;
- consent to extracts from, or a summary of, their technical report in a specific disclosure document filed by the company;
- confirm that the QP has read that particular document; and
- confirm that the document fairly and accurately represents the information in the technical report that supports the disclosure.
A consent filed with a technical report supporting a news release disclosing, for example, a new mineral resource estimate, should reference the news release that triggered the technical report. The QP must consent to the scientific and technical information in the news release that is extracted or summarized from their technical report. The QP must confirm that they read the news release and that it fairly and accurately represents the information in their technical report. To avoid problems with obtaining the QP’s consent, the company should involve the QP in the drafting of the content of the news release that is based on their technical report.
In the case of a prospectus, it is the preliminary prospectus that triggers the technical report and the QP must consent to the scientific and technical information in the preliminary prospectus that is supported by their technical report. CSA Staff Notice 43-306 clarified that NI 43-101 requires the technical report, certificates of QPs, and the consents of the QPs to be filed on SEDAR at the same time as the preliminary prospectus.
In the case of the filing of a final prospectus, a different consent is required from the QPs. Both the Long Form and Short Form prospectus rules require consents of experts with the filing of the final prospectus. The required statements from the experts are different from the NI 43-101 consents. For the final prospectus, the QPs must:
- consent to being named in the prospectus;
- state the name and date of their report;
- consent to the use of their report in the prospectus;
- confirm that they have read the prospectus; and
- confirm that they have no reason to believe that there are any misrepresentations in the information in the prospectus that are derived from their technical report.
QPs should be careful when confirming the last bullet. A misrepresentation can be the omission of a material fact that must be stated to make the information not misleading. QPs should perform their due diligence to ensure there has been no material change on the property since they completed their technical report. They may be correct in confirming in the NI 43-101 consent that the prospectus fairly and accurately represents the information in the technical report. However, if there has been significant new work on the property since they completed their technical report, the omission of the new scientific and technical information, in itself, could be a misrepresentation.
Canadian securities law encourages officers and directors of public companies to have experts prepare information for public disclosure. It does this by providing a defence to management and the company against civil liability if there is a misrepresentation in the disclosure based on the report or opinion of the expert. However, one of the requirements for the defence to be available is that the expert’s written consent to the disclosure was obtained.
QPs providing written consents should be aware that Canadian securities law provides a statutory right of action to investors if there has been a misrepresentation in certain disclosure documents and they have suffered damages. Under certain circumstances, investors have a right of action for damages against an expert who has provided their written consent to the content of disclosure documents. There are checks and balances in the civil liability regime, and securities law provides defences against civil liability for the expert as well. For example, the expert has a defence if they conducted a reasonable investigation to provide reasonable grounds for a belief that there had been no misrepresentation in their report or opinion.
There are also written consent requirements for Canadian mining companies that file forms with the United State Securities and Exchange Commission (SEC). For example, the SEC may require the written consent of engineering companies and QPs that are referenced in a Form 40F (annual report by Canadian incorporated companies). The consent requirement is under General Instruction D (9) to Form 40F, which requires the QP and their engineering firm to consent to being named, and to the use of their report in the registration statement.
Finally, the TSX Venture Exchange requires written confirmation from mining companies that the QP responsible for the information read and approved the scientific and technical disclosure (Section 5.2 of Appendix 3F – Mining Standards Guidelines).
Securities regulators have recognized the importance of having QPs review and consent to scientific and technical disclosure before it is disseminated to the public. In this way, QPs will apply their professional standards and ethical responsibilities when determining whether they can consent to the disclosure by mining and exploration companies. This should improve the quality of the scientific and technical disclosure and credibility of the capital markets serving the mining industry.
About the Authors
Greg Gosson is technical director of geology and geostatistics, AMEC Americas Ltd., and Deborah McCombe is chief mining consultant of the Ontario Securities Commission.