David Brown, chair of the Ontario Securities Commission, promoted the efforts of regulators to produce made-in-Canada reforms to boost investor confidence at a conference in Banff, Alta. on Friday.
On June 27, the OSC will introduce three new rules for comment, dealing with:
- CEO and CFO certification of annual and interim disclosures;
- the role and composition of audit committees; and
- support for the work of the Canadian Public Accountability Board in its oversight of auditors of public companies.
Speaking at the FEI Canada Peak Performance Conference, Brown said, “The rules are as robust as Sarbanes-Oxley, but address unique Canadian concerns.”
“They are made in Canada and right for the Canadian market. They have near-unanimous national support, with 12 of our 13 provincial and territorial securities regulators joining in support of them,” he added.
Brown also addressed the issue of the cost-benefit analysis of the new rules. He has promised a rigorous analysis of the new rules.
In his speech, Brown noted that some commentators have attributed recent increases in Directors’ and Officers’ insurance to Sarbanes-Oxley. “While there may be some cost implications that can be traced to the legislation, what we have heard from the insurance industry is that those insurance costs have risen because of other factors, most importantly losses that the insurance industry suffered in the wake of Enron, Worldcom and others, as well as arising from September 11 claims,” he said.
He addedd that the research carried out by the OSC’s chief economist’s office will show that even the high-end of the range of potential costs is significantly lower than the low-end of the range of potential benefits. “Even taking into account just a partial list of benefits, we believe that the benefits realized can be expected to be greater than the sum of the costs.”
Brown also noted that the OSC’s research found studies that examined companies in aggregate over long time-horizons “demonstrate overwhelming evidence that independent, financially literate audit committees produce positive benefits on companies’ performances. This suggests that one good way for a company to seek out better performance is to ensure the independence and financial literacy of its audit committee.”
Brown expressed his support for the reforms announced yesterday by the federal Justice and Finance ministries. “I am pleased at the collaboration that is already well established between OSC enforcement staff, federal officials and the RCMP — this collaboration will now only grow.”
He reminded his audience that the federal government is also considering amendments to the Canada Business Corporations Act to impose higher corporate governance standards on CBCA companies.