meaning of securities laws. An issuer may not disclose FLI unless certain requirements are met, including that the issuer has a reasonable basis for the information and identifies the material risk factors that could cause actual results to differ materially from the FLI.
CLOSER SCRUTINY
Given strong market interest in AI, Canadian securities regulators are expected to monitor continuous disclosure in this area and engage with issuers as concerns are identified. Issuers that use or develop AI technologies should proactively review their disclosure to address potential regulatory concerns of AI washing. Boards should also expect increased scrutiny by regulators and proxy advisory firms on the way they oversee and manage the use and development of AI systems and the risks arising therefrom.
Greenwashing
COMPETITION ACT UPDATES
Of the many significant changes to the Competition Act that came into force in June 2024, the new “greenwashing” provisions are particularly noteworthy. These provisions prohibit representations to the public that (i) are statements, warranties or guarantees “of a product’s benefits for protecting or restoring the environment or mitigating the environmental, social and ecological causes or effects of climate change” that are not based on an adequate and proper test; and (ii) relate to the “benefits of a business or business activity for protecting or restoring the environment or mitigating the environmental and ecological causes or effects of climate change,” unless such claims are based on “adequate and proper substantiation in accordance with internationally recognized methodology.” Violation of these provisions can lead to a penalty that is the greater of (i) C$10 million (C$15 million for repeat conduct), and (ii) three times the value of the benefit derived from the deceptive conduct, or, if that amount cannot be reasonably determined, 3% of worldwide gross revenues. The scope of these provisions and the significant penalties available generated controversy and concern in the business community. Among other concerns, the concept of “internationally recognized methodology” is not defined in the legislation and raises questions about how this standard can be met. In December 2024, the Bureau released draft guidelines which are now open for public consultation until February 28, 2025. The draft guidance clarifies that the Bureau’s enforcement focus is on representations made in marketing and promotional representations, “rather than representations made exclusively for a different purpose, such as to investors and shareholders in the context of securities filings.” That said, the guidance also notes that if representations made in securities filings are repeated in promotional materials, they will be considered marketing representations.
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Governance Insights 2025
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