Changes to the Membership of the Board or Senior Management

Document Properties

  • Type of Publication: Draft Advisory
  • Subject: Changes to the Membership of the Board or Senior Management
  • Category: Sound Business and Financial Practices
  • Date: January 2014
  • To: Banks/BHC/T&L/Co-ops/Life/P&C/IHC

I. Introduction

The purpose of this Advisory is to outline the process for notifying OSFI of potential changes to the membership of the Board or Senior Management of a federally-regulated financial institution (FRFI).  As such, this Advisory complements OSFI’s Corporate Governance Guideline (CGG), published in January 2013.

In particular, the CGG states that “FRFIs should notify OSFI of any potential changes to the membership of the FRFI Board and Senior Management,Footnote 1 and any circumstances that may adversely affect the suitability of Board members and Senior Management.”

OSFI recognizes the importance of FRFIs’ ability to make independent decisions, including decisions on the appointment of Senior Management or nomination of Directors, in the course of conducting their day-to-day business.  To the extent that OSFI may have any specific concerns regarding the appropriateness of a candidate, OSFI will inform the Board of the FRFI, as appropriate, prior to the candidate’s appointment or nomination for election.

II. Early Notification to OSFI

Early notification of a candidate’s appointment or nomination for election should be provided to the FRFI’s OSFI Relationship Manager, in writing, in the following manner:

  • Senior Management Positions: Early notification should occur at least thirty (30) days before the candidate would be officially appointed.Footnote 2
  • Director Positions: Early notification to OSFI should occur as soon as the preferred nominee for election or appointment is identified. 

As part of the written notification, the FRFI should provide to OSFI:

  • The curriculum vitae of the candidate, which should demonstrate that the candidate has the qualifications and experience appropriate for the position to which it is proposed they be appointed;
  • The rationale for the candidate’s selection; and
  • The effective date of the proposed appointment.

FRFIs should also provide the following to OSFI, once available:

Independent of the above early notification, FRFIs must still complete all other required returns and file all other required information, within the specified parameters and in accordance with the associated filing instructions.  Failure to do so may result in the imposition of a late filing penalty.

III. Introductory Meeting with OSFI

For large, complex FRFIs,Footnote 4 OSFI may request an introductory meeting with the Board or Senior Management member following their appointment.  These meetings are part of OSFI’s ongoing supervisory process and are intended to facilitate open communication between OSFI and the FRFI Board and Senior Management which, in turn, promotes mutual trust and confidence.  Introductory meetings will generally occur within four months, and no later than six months following the appointment or election of a candidate.

The meeting will be conducted with the Deputy Superintendent of Financial Institutions, Supervision Sector; the Managing Director, Corporate Governance Division; and the FRFI’s Relationship Manager.  These officials may appoint a delegate to attend in their place. 

The purpose of the introductory meeting will be for OSFI to:

  • Become acquainted with the new Director or Senior Manager;
  • Apprise the appointee of his/her duties under applicable FRFI statutesFootnote 5 and OSFI’s expectations under the CGG (e.g., a Board’s duty to inform OSFI of substantive issues affecting the FRFI);
  • Discuss various points of interaction between OSFI and the FRFI; and
  • Summarize OSFI’s supervisory activity in respect of the FRFI.

The introductory meeting, in broader terms, contributes to OSFI’s overall assessment of the corporate governance practices of FRFIs, with the ultimate objective of promoting safety and soundness.

As part of its supervisory assessment, OSFI will pursue a variety of approaches, including discussions with Boards, Board committees, Senior Management and oversight functions on a range of topics (e.g., Board renewal and succession planning), as appropriate.

IV. Relevant Legislative Provisions

The statutes governing FRFIs stipulate that FRFIs shall provide the Superintendent with such information, at such times and in such form as the Superintendent may require.Footnote 6  Further, under certain prescribed circumstances, the Superintendent may order the disqualification or removal of Directors or Senior Officers of a FRFI.Footnote 7

Footnotes

Footnote 1

The composition of a FRFI’s Senior Management, as defined in the CGG, will vary from institution to institution. Senior Management is composed of the Chief Executive Officer (CEO) and individuals who are directly accountable to the CEO. In addition to the CEO’s direct reports, such as the heads of major business platforms or units, Senior Management may also include the executives responsible for the oversight functions, such as the Chief Financial Officer (CFO), Chief Risk Officer (CRO), Chief Compliance Officer (CCO), Chief Internal Auditor, and Chief Actuary (CA).

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Footnote 2

Under exceptional circumstances (e.g., emergencies), where a timely appointment is deemed necessary for the purpose of a FRFI’s operational requirements, pre-notification to OSFI may occur in a shorter timeframe but as early as possible.

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Footnote 3

Guideline E-17 states that only one assessment is necessary in respect of Responsible Persons identified as being a Responsible Person in more than one FRE of the same corporate group. The Board may choose not to apply the provisions of Guideline E-17 to individuals in an FRE subsidiary of a larger FRE in a corporate group where the management of the FRE subsidiary is directed by Responsible Persons of the larger FRE in the control chain.

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Footnote 4

This includes, but is not limited to, domestic systemically-important banks (“D-SIBs”).

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Footnote 5

FRFI statutes consist of the Bank Act (BA), Insurance Companies Act (ICA), Trust and Loan Companies Act (TLCA) and Cooperative Credit Associations Act (CCAA).

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Footnote 6

Section 628 Bank Act (BA); section 664 of the Insurance Companies Act;(ICA); section 495 of the Trust and Loan Companies Act (TLCA); and section 431 of the Cooperative Credit Associations Act (CCAA).

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Footnote 7

Sections 647-647.1 of the BA; sections 678.1-678.2 of the ICA; sections 509.1-509.2 of the TLCA; and sections 441.1-441.2 of the CCAA.

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