There are too many unanswered questions and inconsistent statements for anything less than a formal investigation by the U.S. regulator. It is another example of how Canada’s OSC has dropped the ball.
There is a lesson for companies conducting internal investigations that are to be reviewed by securities regulators. When writing the report, don’t do it on Swiss cheese. We set out our misgivings about Research In Motion’s board probe some time ago. Now it seems the SEC is having a problem with some of the rather flimsy and self-serving findings of RIM’s directors, who discovered backdating had occurred at the company. Quite a lot of it, actually. The U.S. securities regulator has launced a formal investigation into RIM’s practices. The fact that directors overseeing RIM also received stock options that were backdated, with no explanation as to who approved the move, and RIM co-CEO Jim Balsillie’s assertion that, even though he is a chartered accountant who holds that profession’s highest designation and is both founder and chair of an institute specializing in financial governance, he had no idea that backdating was wrong, may leave too many holes to ignore. The inconsistencies between what RIM’s directors and top officers were saying in their securities filings about the company’s stock options practices —including important certifications by RIM’s CEO and CFO made under U.S. Sarbanes-Oxley legislation, which we talked about here— are matters that need to be taken seriously. Apparently, Canadian regulators have not seen it that way. They need to get another pair of glasses.
Fortunately, the SEC may not entirely be buying what it has been handed by RIM, and as a result, investors seem to be selling. The stock was down substantially overnight. As for the OSC, which we noted here has often been little more than a delayed echo of the SEC, it seems once again to have been outpaced by its American counterpart. The OSC appears quite happy to dine on Swiss cheese, even though, in news The Centre for Corporate & Public Governance broke earlier this week, it has 90 employees who earn more than SEC chairman Christopher Cox. I have a suspicion, based on the volume of emails received at Finlay ON Governance, that a large number of Canadian investors and policy makers are beginning to ask if they are really getting value for their money.