Changes to the Membership of the Board or Senior Management

Document Properties

  • Type of Publication: Advisory
  • Category: Sound Business and Financial Practices
  • Date: May 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 informing the Office of the Superintendent of Financial Institutions (OSFI) of potential changes to the membership of the Board or Senior Management of a federally regulated financial institution (FRFI) in order to provide OSFI with the opportunity to convey concerns or comments, if any, to a FRFI’s Board before such an appointment or nomination occurs. Consistent with its prudential mandate, OSFI is focused on a potential candidate’s record and suitability in respect of risk awareness and sensitivity to a FRFI’s safety and soundness.

In addition, this Advisory outlines the process for post-appointment/election introductory meetings that OSFI may request with new Senior Management and Board appointees of large, complex FRFIs. In broad terms, the purpose of these meetings is to facilitate an exchange on OSFI’s expectations and points of interaction with the appointee’s FRFI.

Senior Management and Board appointees of large, complex institutions are in positions of considerable trust and responsibility. Introductory meetings with OSFI are, therefore, an important supervisory tool for open communication, information-sharing and ongoing assessment of the corporate governance practices of a FRFI. In conjunction with these meetings, OSFI pursues a variety of other supervisory approaches on corporate governance, including discussions with Boards, Board committees, and Senior Management and Oversight Functions of FRFIs on a range of topics (e.g., Board renewal and succession planning), as appropriate.

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 or comments regarding the appropriateness of a candidate, OSFI will inform the Board of the FRFI prior to the candidate’s appointment or nomination for election.

II. Early Notification to OSFI

FRFIs should provide early written notice to their OSFI Relationship Manager of their preferred candidate for all appointments and elections to Senior Management and Director positions. This notice should be provided as early as possible in the FRFI’s appointment or election process.

FRFIs are encouraged to discuss expectations for early notification with their OSFI Relationship Manager.

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

  • The curriculum vitae, or equivalent document (e.g., talent profile), 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 anticipated appointment or election.

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

Under exceptional circumstances, such as unexpected departures, where a timely appointment is deemed necessary for the purpose of a FRFI’s operational requirements, early notification to OSFI may occur in an unusually shorter timeframe, or in some cases may not be possible. FRFIs are expected to notify their OSFI Relationship Manager if they encounter exceptional circumstances.

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 3 OSFI may request an introductory meeting with the Board or Senior Management member following his or her appointment or election.  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 occur as early as possible following the appointment or election of a candidate.

The meetings will be conducted with the Deputy Superintendent of Financial Institutions (Supervision Sector), the Managing Director (Corporate Governance Division), and the FRFI’s Relationship Manager, or appropriate alternates. 

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

  • Become acquainted with the new Director or member of Senior Management;
  • Generally apprise the appointee of his/her duties under applicable FRFI statutesFootnote 4 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.

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 5  Further, under certain prescribed circumstances, the Superintendent may order the disqualification or removal of Directors or Senior Officers of a FRFI.Footnote 6

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

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 3

This includes, but is not limited to, domestic systemically-important banks (“D-SIBs”). OSFI reserves discretion to include other FRFIs as supervisory judgement may warrant.

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Footnote 4

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 5

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 6

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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