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Testimony of SEC Chair before the United States House of Representatives Committee on Financial Services covers AI risks

Apr 18, 2023

On April 18, 2023, SEC Chair Gary Gensler testified before the House Committee on Financial Services. His testimony included highlighting the regulatory, legal and business risks of Artificial Intelligence (AI) .

Here are some excerpts from Mr. Gensler’s testimony relating to the risks of AI:

“Artificial intelligence and predictive data analytics are transforming so much of our economy. Finance is no exception.”

“AI already is being used for call centers, account openings, compliance programs, trading algorithms, and sentiment analysis, among others. It’s also fueled a rapid change in the field of robo-advisers and brokerage apps. When the predictive data analytics and algorithms behind these apps are optimizing for investor interests, this can bring benefits in market access, efficiency, and returns. “

“As commenters to our request for comment on digital engagement practices noted, however, the use of predictive data analytics also can lead to potential conflicts. In particular, conflicts may arise to the extent that advisers or brokers are optimizing for their own interests as well as others.”

“Thus, I’ve asked staff to make recommendations for the Commission’s consideration for rule proposals regarding how best to address any of these potential conflicts.”

Re­view Mr. Gensler’s full testimony on SEC’s website.

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Report on the ethical, legal, and financial implications of artificial intelligence (AI)

Apr 17, 2023

On April 17, 2023, the Office of the Superintendent of Financial Institutions (OSFI) and the Global Risk Institute (GRI) jointly released a report on the ethical, legal, and financial implications of artificial intelligence (AI) on financial services institutions.

Data availability and accessibility have improved dramatically, modeling techniques have taken a large step forward, and models are being applied to an increasing number of businesses across regulated financial institutions in Canada. Capabilities and usage have evolved faster than regulation.

OSFI partnered with GRI to create a community of Artificial Intelligence (AI) thought-leaders from academia, regulators, banks, insurers, pension plans, fintechs, and research centres. This group, called the Financial Industry Forum on Artificial Intelligence (FIFAI), advanced the conversation around appropriate safeguards and risk management in the use of Artificial Intelligence (AI) at Financial Institutions.

Ideas discussed to support safe AI development are grouped into Explainability, Data, Governance, and Ethics - the “EDGE” principles.

Re­view the press re­lease on and the detailed report on OSFI’s website.

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PCAOB Announces 2023 Inspection Plans

Apr 17, 2023

On April 17, 2023, the PCAOB has issued a Spotlight report entitled “Staff Priorities for 2023 Inspections”.

The publication discusses selected areas of focus for the PCAOB’s 2023 inspections program, including:

  • Fraud risks.
  • Auditing and accounting risks.
  • Risk assessment and internal controls.
  • Considerations related to financial services.
  • Broker-dealer-specific considerations.
  • Mergers and acquisitions, including de-SPAC transactions.
  • Digital assets.
  • Use of the work of other auditors.
  • Quality control.
  • Other areas of inspection.

Re­view the Spotlight report on PCAOB’s website.

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Canadian securities regulators propose changes to corporate governance disclosure practices and guidelines

Apr 13, 2023

On April 13, 2023, the Canadian Securities Administrators (CSA) published proposed amendments to corporate governance disclosure rules and policy relating to the director nomination process, board renewal and diversity. They would require disclosure on aspects of diversity beyond the representation of women, while retaining the current disclosure requirements with respect to women. In addition, the CSA is proposing changes to the corporate governance policy that would enhance the existing corporate governance guidelines relating to the director nomination process and introduce guidelines regarding board renewal and diversity.

The CSA is seeking comment on two approaches to build upon the existing disclosure requirements in Form 58-101F1 regarding the representation of women on boards and in executive officer positions and board renewal adopted by most CSA jurisdictions in 2014. While each approach is premised on different concepts discussed further below, both approaches are intended to provide enhanced, decision-useful information to investors to assist with their investment and voting decisions.

  • Option A: This option would require an issuer to disclose its approach to diversity in respect of the board and executive officers but would not mandate disclosure in respect of any specific groups, other than women.
  • Option B: This option contemplates mandatory reporting on the representation of five designated groups, being women, Indigenous peoples, racialized persons, persons with disabilities and LGBTQ2SI+ persons, on boards and in executive officer positions.

There is a 90-day comment period, and stakeholders are invited to provide comments in writing on or before July 12, 2023.  

For further details, refer to the press release and the Notice on the CSA’s website.

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Charles-Antoine St-Jean named Chair of the Canadian Sustainability Standards Board; first members appointed

Apr 12, 2023

On April 12, 2023, the Canadian Sustainability Standards Board’s (CSSB) first-ever chair and initial members have been appointed, setting the stage for supporting the adoption of sustainability disclosure standards in Canada.

The CSSB will be led by Charles-Antoine St-Jean, FCPA, FCA, who is based in Quebec and most recently served as the IFRS Foundation regional director-Americas, where he assisted with the implementation of ISSB operations in Canada and the Americas.

The other initial members of the CSSB are:

  • Bindu Dhaliwal, Senior Vice-President, Corporate Governance & ESG, CIBC;
  • Alyson Slater, Managing Director and Head of Sustainable Investment in Canada, Public Markets, Manulife Investment Management; and
  • Raylene Whitford, Chair, Indigenous Advisory Council, TC Energy Ltd. and former Partner, Global Indigenous Community of Practice Lead, Deloitte Canada.

Re­view the press release  on the CSSB website.

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IESBA strengthens Global Ethics Standards to Respond to Transformative Effects of Technological Innovation

Apr 11, 2023

On April 11, 2023, the International Ethics Standards Board for Accountants (IESBA) released final revisions to the International Code of Ethics for Professional Accountants, including International Independence Standards (IIS), to further increase the Code’s robustness and expand its relevance in a world being fundamentally reshaped by rapid technological advancements and accelerating digitalization.

The revisions will guide the ethical mindset and behavior of professional accountants in both business and public practice as they take advantage of the opportunities created by technology and adapt to new technology. Developed to remain relevant and applicable in the ever-evolving landscape of technology transformation, the revisions apply to the use of any technology, including to the extent possible, future technologies.

The revisions to the IIS will be effective for audits and reviews of financial statements for periods beginning on or after December 15, 2024. The other revisions to the ethics provisions of the Code will be effective as of December 15, 2024. Early adoption is permitted.

Re­view the press release  on IESBA's website.


IASB confirms temporary relief from deferred tax accounting following OECD Pillar Two tax reform

Apr 11, 2023

On April 11, 2023, the International Accounting Standards Board (IASB) announced that it has finalized its amendments to IAS 12, Income Taxes, following the issue of the Pillar Two model rules published by the Organization for Economic Co-operation and Development (OECD).

The amendments, approved in a special supplementary meeting, will provide temporary relief for companies from having to account for deferred taxes arising from the implementation of the Pillar Two model rules.

The amendments will introduce:

  • a temporary exception to the accounting for deferred taxes arising from the jurisdictional implementation of the global tax rules; and
  • targeted disclosure requirements for affected companies to help users of the financial statements better understand a company’s exposure to Pillar Two income taxes arising from that legislation, particularly before its effective date.

The final amendments to IAS 12, Income Taxes, are expected to be issued by the end of May 2023.

Re­view the press release  on the IFRS website.

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NERA releases, "Trends in Canadian Securities Class Actions: 2022 Update"

Apr 11, 2023

Per an article in the D&O Diary, the NERA Economic Consulting 2022 annual report “Trends in Canadian Securities Class Actions: 2022 Update” confirms that the number of Canadian securities class action lawsuits declined in 2022 for the second year in a row, and the number of 2022 filings was also well below the long-term annual average number of filings in 2019 and 2020.

The article notes that there were eight new securities class action lawsuits filed in Canadian courts in 2022, two fewer than the ten new securities suits filed in 2021, and well below the 15 new cases filed in each of 2019 and 2020. The eight new lawsuits are also below the annual average number of new securities suit filings of approximately 10 for the period 2006-2021. Six of the eight new cases were filed in Ontario, two cases were filed in British Columbia. For the first time in 20 years, there were no new securities suits filed in Quebec.

Of note, three of the eight new 2022 Canadian securities suit filings involved companies in the cryptocurrency sector, an industry that also saw significant amounts of securities litigation activity in the U.S. in 2022.

Re­view the NERA press release and the NERA report on NERA's website.


AcSB In Brief in respect of its Exposure Draft, Contributions – Revenue Recognition and Related Matters

Apr 06, 2023

On April 6, 2023, the Accounting Standards Board (AcSB) issued an In Brief document which provides a plain and simple overview of the AcSB’s Exposure Draft, “Contributions – Revenue Recognition and Related Matters”.

The Exposure Draft proposals aim to improve financial reporting by not-for-profit organizations by creating guidance that will result in financial statements that are less complex and more comparable for financial statement users.

Re­view the In Brief document on the AcsB’s website.

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IESBA Meeting Highlights: March 2023 Meetings

Apr 04, 2023

In April 2023, the In­ter­na­tional Ethics Stan­dards Board for Ac­coun­tants (IESBA) re­leased the high­lights sum­mary of its meet­ings held on March 13-17, 2023 in Abu Dhabi.

The Agenda items in­cluded:

  • IESBA Strategy and Work Plan 2024-2027;
  • Sustainability;
  • Use of Experts;
  • Public Interest Entity (PIE) rollout update;
  • Abu Dhabi Accountability Authority (ADAA) - IESBA panel session;
  • Emerging Issues and Outreach Committee (EIOC);
  • IESBA/IAASB Coordination; and
  • IESBA communications

The next IESBA meeting is scheduled for June 12-16, 2023, and will be held in New York, USA.

Re­view the high­lights sum­mary on the IESBA's web­site.

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