Bill 198 Canadian Response to US Sarbanes Oxley Act 2002 (Protecting the integrity of the Canadian capital markets)

A variety of complex factors created the conditions and culture in which a series of large corporate frauds occurred between year 2000 and 2002. The spectacular, highly-publicized frauds at Enron, WorldCom, and Tyco exposed significant problems with conflicts of interest and incentive compensation practices. The analysis of their complex and contentious root causes contributed to the passage of SOX in 2002. In the post-Enron environment of heighten public awareness of responsible corporate governance, regulators in the U.S. and Canada are adding new investor protection rights, expanding existing resources and creating new enforcement and regulatory remedies to regain the confidence of the public in the capital markets. Both these acts aim to strengthen corporate governance and internal controls in publicly traded corporations in the wake of large accounting scandals. In 2002 Canadian securities regulators found themselves under considerable pressure to adopt similar reforms in order to maintain investor confidence in the Canadian regulatory system and protect the integrity of the Canadian capital markets. However there was less sense of urgency in Canada since at the time Canada had yet to experience corporate fraud on the same scale as in the United States. Nonetheless Canadian regulators seized the opportunity provided by Sarbanes Oxley to introduce desired and long delayed corporate and securities law reform.
The Sarbanes Oxley Act and Bill 198 has promoted investor confidence, improved transparency and increased corporate accountability. Bill 198 and its instruments place the ultimate responsibility of compliance on the shoulders of the executives. Under Bill 198, CEOs and CFOs are required to regularly provide signed certifications that address the establishment and maintenance of internal controls, the design of the controls and their own evaluations of the effectiveness of those controls. These documents are filed with Canadas securities regulators. Any misrepresentation or falsehood in these documents can result in serious penalties under Canadas securities laws, including fines up to 5 million dollars. The intention of Bill 198 is to improve the quality of public disclosure among Canadian corporations. The bill gives investors incentive to sue reporting issuers and other responsible individuals for misrepresentations or the failure to disclose material changes