Regulators roll out new rules, proposals

(January 16, 2004) Canada’s securities regulators have announced new rules aimed at shoring up investor confidence. The rules will bring Canadian regulations in line with the U.S. Sarbanes-Oxley Act, which governs corporate governance.

“We received very thoughtful feedback from market participants through the public comment period as well as through independent research done by several jurisdictions,” said Stephen Sibold, chair of the Canadian Securities Administrators (CSA) and the Alberta Securities Commission. “With this input, we are moving forward with a made-in-Canada response to further improve investor confidence in our capital markets.”

National Instrument 52-108 Auditor Oversight will require reporting issuers to hire auditors who are members of the Canadian Public Accountability Board (CPAB).

Multilateral Instrument 52-109 Certification of Issuers’ Annual and Interim Filings will require CEOs and CFOs of reporting issuers to certify their company’s annual information form, audited financial statements, and management’s discussion and analysis.

Multilateral Instrument 52-110 Audit Committees will mandate independent and financially audit committees with prescribed duties.

The two multilateral instruments have been adopted by every jurisdiction except British Columbia. The new rules will take effect March 30, 2004, pending ministerial approval.

Companies which are listed on U.S. stock exchanges will be exempted from these rules, where they overlap with the Sarbanes-Oxley Act. Venture issuers may also exempt from some rules.

In another move to foster better corporate governance, the Ontario Securities Commission (OSC) has published a set of proposed best practices, which includes the requirement for reporting issuers to make disclosure relating to their adherence to best practices.

“We propose to require issuers to disclose the corporate governance practices they adopt,” said OSC chair David Brown. “However, because we appreciate that many smaller issuers may have less formal procedures in place to ensure effective corporate governance, our proposal provides for lesser disclosure for venture issuers.”

The proposals are being considered in every jurisdiction except B.C. and Quebec. To avoid overlap, the TSX will revoke its own guidelines related to disclosure once the new OSC proposals take effect.

The proposal calls for a code of business ethics which will apply to all employees, including directors and officers. Management is called upon to “create a culture of integrity throughout the organization.” These codes of ethics would be filed with regulators.

The various securities commissions are calling for public comment by April 15, 2004, on proposed Multilateral Policy 58-201 Effective Corporate Governance and proposed Multilateral Instrument 58-101 Disclosure of Corporate Governance Practices.

Filed by Steven Lamb, Advisor.ca, steven.lamb@advisor.rogers.com