Governance Canada

Discussion + Information on Governance in Canada
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IN DEFENCE OF THE OSC

Criticism of the Ontario Securities Commission’s intervention in the Home Capital affair is misguided and misinformed.

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OSC PROPOSALS FOR NO-CONTEST SETTLEMENTS

The OSC requested comments on its proposals to introduce a new No-Contest Settlement program whereby those accused of breaching securities law could consent to a settlement of the allegations “without admitting or denying” any wrongdoing. The Emerson Advisory comment letter acknowledged the benefits of additional remedies for the OSC’s enforcement arsenal to protect investors and to foster fair and efficient capital markets. Concerns to be addressed included: (1) what are the principles and standards to be applied in approving No-Contest Settlements negotiated by the OSC staff?; (2) should it be required that, in addition to being “in the public interest”, the settlement should be objectively fair, reasonable and adequate to the public?; (3) should No-Contest Settlements be approved where there is a reasonable expectation that the settlement would adversely affect the rights of investors who have suffered loss to seek redress in civil actions?; (4) as the OSC is a multi-functional integrated agency that investigates, prosecutes and judges securities violations, should No-Contest Settlements be approved by an independent administrative authority?; and (5) are the policies, processes and procedures of the OSC concerning the administration of No-Contest Settlements clear, open, public and transparent?

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RESEARCH IN MOTION – THE 10 YEAR OPTION GRANTING SCANDAL

From December 1996 to July 2006, Jim Balsillie, Dennis Kavelman (then CFO), Mike Lazaridis and certain other RIM officers and directors engaged in improper stock option granting practices, including backdating and repricing of executive, director and employee stock option awards.  Following an internal investigation, in May 2007, RIM restated its historical financial statements with a cumulative, non-cash, stock-based compensation expense of U.S. $248.2 million.  In the February 2009 settlement of the Ontario Securities Commission’s enforcement action, Balsillie, Lazaridis and Kavelman agreed that they engaged in option backdating and repricing and that the total “in-the-money” undisclosed benefit from the incorrect option dating practices was approximately $66 million.  They confirmed that they returned the improper financial benefits they received from the incorrectly priced options and undertook to contribute, in aggregate, $83.1 million to RIM and to pay administrative penalties and OSC costs totalling $9 million.

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