Enterprise Risk Management (Preview)

40 Part 1 – Concepts and Methods APPENDIX 1A - CANADIAN REGULATIONS The Canadian Securities Administrators (CSA) is the umbrella organization responsible for improving, coordinating and harmonizing the regulation of capital markets in Canada. 51 It is formed by membership of the provincial and territorial securities regulators that operate across Canada, such as the Ontario Securities Commission and the Autorité des Marchés Financiers in Québec. The CSA leads the development of regulations that are adopted by its members. The provincial and territorial regulators have authorities compa- rable to those of the SEC in the United States, with respect to the companies that are registered with them. In response to the Sarbanes-Oxley Act, the CSA introduced national policies and regulations known as national instruments and multilateral instruments. These policies and regulations closely align with the requirements of Sarbanes-Oxley, and the regulations, rules and guidelines established by the SEC and the NYSE. 52 The CSA National Instrument 51-102 titled Continuous Disclosure Obligations includes requirements relating to risk information and risk management practices. Companies must disclose risk factors in their annual reports, namely important trends and risks that affect their financial results, and risks that are likely to affect them in the future. These risk factors may relate to political or economic conditions, environmental or health risks, regulatory constraints, reliance on external parties, etc. In addition, companies need to disclose the nature and extent of their board involvement in the oversight of risk and risk management activities of the company, including the oversight of compensation policies and practices. 53 Canadian stock market exchanges such as the Toronto Stock Exchange (TSX) also have their own disclosure rules that meet or exceed CSA standards. Under the CSA National Instrument 58-108, Corporate Governance Guidelines , all companies traded publicly in Canada have to separate the role of board chair from the role of chief executive officer. In addition, companies are subject to executive compensation disclo- sures. Compensation recovery policies are not mandatory, however recovery conditions may be included in the employment contract of executives. 54 With respect to whistleblowing arrangements, the Criminal Code of Canada was amended in 2004, to make it criminal for employers to intimidate or retaliate against employees that report securities violations to enforcement authorities. 55 In October 2015, the Ontario Securities Commission (OSC) issued a draft whistleblower policy for public comment. The OSC expects the policy to come into force in 2016. The Office of the Superintendent of Financial Institutions (OSFI) is responsible for regula- ting and supervising financial services organizations that operate in Canada. As part of its activities, OSFI assesses organizational risks and the quality of governance and risk management practices. 56 Financial services organizations operating in Canada are subject to equity capital regulations. Stress tests are conducted to assess the capacity of organiza- tions to absorb financial and economic shocks. Large financial services organizations are expected to have a board risk committee with relevant expertise for the oversight of risks and risk management practices. Otherwise, the full board must ensure that it has the right skills and expertise to perform the necessary oversight functions. 57