UPDATE: Ethics commissioner to further examine federal finance minister's bill sponsorship

OTTAWA -- Federal ethics watchdog Mary Dawson is launching an examination of Finance Minister Bill Morneau's involvement in a pension bill that could have benefited a company in which he owned some $21 million worth of shares.

In a letter to NDP ethics critic Nathan Cullen, Dawson says she believes she has "reasonable grounds" to commence an examination of Morneau's conduct.

The letter points to a section of the Conflict of Interest Act that empowers the ethics commissioner to examine a matter if she has reason to believe a public office holder has contravened the act.

Cullen had asked Dawson to investigate whether Morneau was in a conflict of interest when he sponsored Bill C-27.

Dawson had initially said she'd look into the matter and follow up with Morneau; she's now upgraded that to a full-blown examination.

Bill C-27 would allow pension administrators to convert direct benefit pension plans to targeted benefit plans -- a change for which Morneau had lobbied when he was the head of Morneau Shepell, a pension administration and human resources company founded by his father.

When Morneau introduced the bill a year ago, he still held millions worth of shares in the company.

It emerged last month that, based on Dawson's advice, Morneau had not divested or placed those shares in a blind trust. Rather, he followed her recommendation that the "best measure of compliance" would be to set up a conflict of interest screen that was supposed to prevent him from being involved in discussions or decisions that could benefit him through his stake in Morneau Shepell.

Morneau has said he didn't need to recuse himself from C-27 because the bill is of general application and not specific to Morneau Shepell.

Conservative finance critic Pierre Poilievre, who has also asked Dawson to investigate, scoffed at the notion.

It was meant to apply in situations where, for instance, the health minister improves the health care system and consequently gets better treatment in hospital, as would any Canadian. That could not be considered a conflict of interest, Poilievre said in an interview on Friday.

By contrast, he said a targeted pension plan is a "highly specialized product" that Morneau Shepell was instrumental in helping the province of New Brunswick to set up. Having a finance minister who holds shares in Morneau Shepell sponsor a bill that would allow for similar plans nationwide is "fairly specific as opposed to general."

Cullen argues that the value of Morneau Shepell shares rose in the days immediately following the introduction of C-27, earning the minister some $2 million in just five days.

In a bid to snuff out the uproar over his handling of his personal finances, Morneau is now in the process of selling off his shares and placing his other considerable assets in a blind trust. He has promised to donate to charity any gains in the value of his shares since taking office in 2015.

A spokesperson for the minister said he has always worked with Dawson and followed her advice and, in the same spirit, "will answer any questions" she has about his involvement in C-27.

The bill has languished on the order paper since it was introduced and does not appear to be a high priority for the Trudeau government. Nevertheless, the Liberals earlier this month rejected an NDP motion to withdraw the bill.

Cullen said Friday that the noose seems to be getting tighter and tighter around Morneau. While the NDP has not yet called for the minister's resignation, Cullen said: "If you ask the question, 'Can he still do his job?' my answer is that I'm not sure he can."