Canada: Canadian Board Members And Cyber Expertise: New U.S. Bill Proposes Board Level Cybersecurity Expertise – Could Canada Move In The Same Direction?

Lawmakers south of the border are seeking to force public issuers to disclose cybersecurity expertise at the board level in an effort to improve cybergovernance as the number of reported cyber risk incidents continues to climb. While the Canadian approach to date has been different, Canadian regulators have made clear their expectations that board-level involvement and engagement is, in their view, critical.

Two U.S. Senators have proposed a bi-partisan bill that would require public issuers to disclose the cybersecurity expertise on the issuer's board of directors or explain why cybersecurity expertise on the board is not necessary.

The effects of a cyber threat can erase market capitalization and weaken a company's reputation amongst consumers. Mass data breaches are increasingly resulting in class action lawsuits against organizations as well as their officers and directors. For example, Target directors and officers are facing multiple shareholder derivative actions related to the retailer's highly public data breach claiming breach of fiduciary duty, waste of corporate assets and gross mismanagement.1 Shareholders of Wyndham Worldwide Corporation filed a similar D&O claim that in 2014 that was eventually dismissed.2

Cybersecurity is no longer a backroom topic. However, despite the ever-present risk of a cyberattack, it appears the topic is not regularly considered at the board level, in the U.S., Canada, elsewhere.3 It is against this background that the U.S. bill was introduced.


The Cybersecurity Disclosure Act of 2015 introduced last month seeks to encourage the prioritization of cybersecurity at reporting issuers by implementing a comply or disclose regime, with the goal of stemming the ever-increasing tide of cyber threats to publically listed companies.4

The bill is short and to the point. It seeks only to implement a comply or disclose regime by requiring the reporting issuer to disclose either (a) whether a member of its board (or other governing body) has cybersecurity expertise; or (b) if no member of the board has such expertise, to describe the cybersecurity measures that were taken into account by members responsible for identifying the qualifications of board nominees (i.e. explain why cybersecurity expertise is not needed at the board level).

Interestingly, the legislation does not define what qualifications would meet the threshold for cybersecurity expertise. Instead, if passed, the Securities Exchange Commission and U.S. National Institute of Standards and Technology will be tasked with determining a benchmark to determine cybersecurity expertise.

The bill is now before the U.S. Senate Committee on Banking, Housing and Urban Affairs.

Critical Reception

Opinions are divided on the usefulness of the proposed bill. Some academics from Harvard and Columbia believe that the bill represents a fair "light touch approach" and is merely a "regulatory nudge".5 On the other hand, other commentators have noted that the bill undermines board flexibility and is an attempt to provide a one-size fits all solution that may not be appropriate for a number of companies.6 Despite the differing viewpoints, the proposed bill has reinvigorated the cybersecurity discourse and specifically the role of boards of directors and is sure to pique the curiosity of Canadian regulators.

The Canadian Approach

Presently, no similar legislation exists or is proposed in Canada and, with the exception of financial literacy requirements, Canadian legislation does not mandate specific technical expertise on boards.7 However, various regulators have released guidance for their constituents on protecting against cybersecurity risks.

For example, the Canadian Securities Administrators ("CSA") released SN 11-326 – Cyber Security which suggests, among other things, that issuers should specifically review their cybercrime risk and regularly review their cybersecurity risk control measures. Similarly, as detailed in earlier posts here and here, the Investment Industry Regulatory Organization of Canada ("IIROC") and the Office of the Superintendent of Financial Institutions ("OSFI") have each released guidance on cybersecurity. The IIROC offering went so far as to provide a best practices guide with respect to cybersecurity risk oversight, which identifies the need for sound governance and board engagement as being "essential" to effective enterprise-wide cybersecurity and board-level and senior management-level engagement as being "critical".

Senior management at Canadian banks and insurance companies are expected to review cyber risk management policies to ensure effectiveness under a 2013 OSFI memorandum to Federally Regulated Financial Institutions. The memo outlined a self-assessment guidance template, which OSFI may require an institution to complete, that includes a section on "Senior Management & Board Oversight." The relevant questions include whether a Senior Management committee has been established dedicated to cyber risk, whether Senior Management provides funding to implement the cyber security framework, which processes escalate to Senior Management cyber incidents, and whether the Board or a committee of the Board is engaged in regularly reviewing the implementation of the framework.

In addition, it is becoming increasingly common for Canadian reporting issuers to reference cybersecurity risks in their annual securities disclosure documents or public offering documents. In its 2015 Best Practices for Proxy Circular Disclosure Guidance, the Canadian Coalition for Good Governance ("CCGG") suggests that boards should disclose the processes used which enable them to identify and monitor risk management efforts. With respect to cybersecurity, the CCGG made note of DH Corporation's efforts to provide specific disclosure with respect to cybersecurity risk, in which DH Corporation disclosed its practice of briefing the board on cyber risks on a quarterly basis.

Canadian issuers are not unfamiliar with how comply or disclose regimes operate. For instance, recent amendments to NI 58-101 – Disclosure of Corporate Governance Practices, require issuers, in certain provinces, to comply or disclose their practices with respect to the level of representation of women in senior executive positions and on boards. The most recent report from the CSA notes that nine months after the comply or disclose amendments to NI 58-101, 15% of affected issuers added one or more women to their board, and approximately 15% of the largest issuers affected (those with market capitalizations greater than $2 billion) revised or adopted specific policies regarding the representation of women in senior roles.8 Given the relative short period of time since implementation, it appears that Canadian issuers are, in theory, able to effectively respond to comply or disclose requirements.9

It remains to be decided whether legislation is required to mandate specific technical experience in order to combat cybersecurity risk at the board level or whether continued non-binding guidance and best practice guides are sufficient to ensure proper board engagement in Canada.

What is certain is that issuers are operating in an environment where cybersecurity risk is becoming an increasingly hot-button issue that requires real and substantial consideration at the board level. In 2014,thirty-six percent of Canadian companies reported one or more substantial cyberattacks in the past year alone, according to a think tank that tracks data breaches and their ensuing costs to organizations.10 Preliminary 2015 figures suggest even more cyber incidents involving sensitive information with increased frequency of cyberattacks and more expensive data breaches.11 Canadian companies should, at a minimum, ensure their boards are aware of the cybersecurity risks faced by the enterprise and that management has a proper policy in place to deal with a potential security breach.


1 Copies of two of the claims filed in Minnesota have been published online, available at: and .

2 Palkon v. Holmes, Case No. 2:14-cv-01234, decision to dismiss claim available at:

3 Ponemon Institute, 2015 Global Megatrends in Cybersecurity (February 2015). According to the study, approximately 22% of 1006 security professionals surveyed had provided a board briefing on cybersecurity in the preceding 12 months.

4 According to the press release issued by Senator Jack Reed, "Reed, Collins Seek to Prioritize Cybersecurity at Public Companies Through SEC Disclosures" (17 December 2015), available at:

5 According to the press release noted above.

6 Jones Day, "Proposed Cybersecurity Disclosure Act Shows Deep Misunderstanding of the Role of the Board of Directors" (December 2015), available at:

7 MI 52-110.

8 CSA Multilateral Staff Notice 58-307.

Ontario Securities Commission, "Staff Review of Women on Boards and in Executive Officer Positions – Compliance with NI 58-101 Disclosure of Corporate Governance Practices," (28 September 2015) available at:

9 It should be noted that there is an appreciable difference between seeking to broadly enhance diversity (as is the case with NI 58-101 amendments) and seeking to legislate the specific expertise needed at an organization.

10 Ponenom Institute, Exposing the Cybersecurity Cracks: Canada (June 2014) at p .2 online:

11 Ponemon Institute, 2015 Cost of Data Breach Study: Global Analysis (May 2015) at p. 2 online:>

To view original article, please click here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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.

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.