Canada: OSFI to Require Advance Notification Of Changes To Board Membership/Senior Management

Last Updated: January 23 2014
Article by Carol Lyons

On January 20, 2014, the Office of the Superintendent of Financial Institutions Canada (OSFI) issued a draft advisory entitled Changes to the Membership of the Board and Senior Management. The draft advisory applies to all federally regulated financial institutions (FRFIs)1 including insurers. Interested parties have until February 28, 2014 to provide comments for OSFI's consideration.

The draft advisory reportedly finds its genesis in statements contained in OSFI's revamped Corporate Governance Guideline to the effect that FRFIs should notify OSFI whenever changes to board membership or senior management are contemplated and if circumstances arise that could adversely affect the suitability of existing directors or senior management. The draft advisory is stated to be an effort to formalize the existing requirements with respect to board and senior management changes.

The Corporate Governance Guideline was finalized in early 2013 and was largely based on emerging international best practices in the regulation of financial institutions. The notification requirements contained in the draft advisory are consistent with the Insurance Core Principles, Standards, Guidance and Assessment Methodology of the International Association of Insurance Supervisors (IAIS Core Principles), in particular, ICP 5 "Suitability of Persons". Section 5.4 states:

"The supervisor [i.e. the regulator] requires to be notified by insurers of any changes in Board Members, Senior Management, Key persons in Control Functions and Significant Owners, and of any circumstances that may materially adversely affect the suitability of its Board Members, Senior Management, Key Persons in Control Functions and Significant Owners."

Similarly, Principle 14: Corporate Governance of the Core Principles for Effective Banking Supervision established by the Basel Committee on Banking Supervision (Basel Core Principles) states as an "Additional Criterion":

"Laws, regulations or the supervisor require banks to notify the supervisor as soon as they become aware of any material and bona fide information that may negatively affect the fitness and propriety of a bank's Board member or a member of the senior management."

OSFI's draft advisory concentrates on the pre-notification requirement and, except for a passing reference, does not stipulate any requirements, including for timing or form of notification, in circumstances where a board member's or senior manager's suitability may have been adversely affected. Both the draft advisory and the accompanying cover letter indicate that the purpose of the advisory is to outline the process for notifying OSFI of potential changes in board membership or senior management. It does not purport to mandate notification of an individual's loss of suitability.

In summary, the draft advisory requires FRFIs to:

  • pre-notify OSFI in writing as soon as a new nominee to the board of directors is identified
  • pre-notify OSFI in writing at least 30 days in advance of the appointment of a senior manager
  • in each case, as part of the written notification, provide OSFI with:
    • the candidate's curriculum vitae, demonstrating the candidate's overall suitability
    • the rationale for the candidate's selection
    • the proposed effective date of the appointment
  • when available, provide OSFI with:

OSFI acknowledges that the individuals that comprise "senior management" may vary depending on the institution. Generally, senior management will include the Chief Executive Officer and individuals reporting directly to him or her, and possibly heads of major business platforms or units. Senior management may also include the heads of all "oversight functions" namely, the Chief Financial Officer, Chief Risk Officer, Chief Compliance Officer, Chief Internal Auditor and Chief Actuary.

Essentially, existing Guideline E-17 requires FRFI's to adopt policies and procedures for assessing the suitability and integrity of "Responsible Persons", including verifying the individual's credentials and conducting criminal background and similar checks initially upon appointment and ongoing assessments to ensure continued suitability at intervals during the individual's tenure. For example, criminal background checks are required to be conducted at least once every seven years.

Although Guideline E-17 indicates that OSFI may review a FRFI's background assessments of directors and senior managers and possibly conduct its own independent review, that guidance left the obligation to assess suitability and integrity to the FRFI. The new draft advisory introduces a positive obligation upon FRFI's to inform OSFI of these matters (and will have the added effect of ensuring that FRFIs are strictly complying with the background assessment requirements of Guideline E-17).

The draft advisory states that "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." Although it does not go so far as to require OSFI's pre-approval to new board members and senior officers, the advisory essentially provides OSFI with a veto.

The draft advisory also introduces the concept of OSFI-initiated meetings between designated OSFI officials and the new director or senior manager within four to six months after the individual has been appointed. Whether or not such meetings will take place appears to be at OSFI's discretion but the meetings are stated to be applicable, by way of example, to domestic systemically important banks.2 In addition to a "meet and greet" the purpose of the meeting is to provide OSFI with an opportunity to drive home the individual's statutory duties as well as OSFI's expectations under the Corporate Governance Guideline, including "a Board's duty to inform OSFI of substantive issues affecting the FRFI".

The advisory clarifies that the pre-notification requirements are not to replace the FRFI's other statutory notification requirements, for example, filings that are required to be made within 15 days after changes occur in directors and senior officers (after the fact).

OSFI currently has the statutory right to receive pre-notification of the appointment of directors and senior officers, but only in circumstances where the institution is subject to some form of regulatory intervention.3 Some institutions may have an established practice of advising their OSFI relationship manager prior to a significant change or appointment, as a courtesy and in furtherance of cooperation and transparency. Regardless, the draft advisory purports to advance OSFI's regulatory reach beyond current statutory boundaries, just as other OSFI corporate governance initiatives have done for some time. By way of example, for banks and insurers, statutory committees include the Audit and Conduct Review committees. By means of guidance over the years, requirements for committees has increased to include Corporate Governance and Risk. In addition, the roles of Compliance Officer and Risk Officer are similarly creatures of guidance and not the statutes.

It is important to note that OSFI's existing statutory powers to obtain pre-notification are subject to a framework for due process. For example, the statutes establish criteria upon which a decision by OSFI to disqualify a candidate must be based, and affords the candidate and the FRFI an opportunity to be heard. By contrast, the draft advisory is silent on these matters.

The draft advisory ends on a somewhat ominous note, by reminding FRFI's of OSFI's broad statutory powers to collect information " such times and in such form as the Superintendent may require" and existing powers to disqualify or remove directors and senior officers.

Assuming the advisory is adopted without material amendment, as a practical matter, FRFI's should conduct important and potentially sensitive background assessments prior to initial submission of the candidate's name to OSFI and, of course, obtain prior consent to disclosure of personal information. In addition, offers of employment should be conditional upon OSFI's non-objection to the individual's appointment.


1Banks, Bank Holding Companies, Trust and Loan Companies, Cooperative Credit and Retail Associations, Life Insurance Companies, Fraternal Benefit Societies, Property and Casualty Insurance Companies and Insurance Holding Companies

2 In March, 2013, OSFI identified Bank of Montreal, Bank of Nova Scotia, Canadian Imperial Bank of Commerce, National Bank of Canada, Royal Bank of Canada, and Toronto-Dominion Bank (Canada's six largest banks) as domestic systemically important banks.

3 See, for example, section 678.1 of the Insurance Companies Act and section 647 of the Bank Act.

The foregoing provides only an overview. Readers are cautioned against making any decisions based on this material alone. Rather, a qualified lawyer should be consulted.

© Copyright 2014 McMillan LLP

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Carol Lyons
In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.