Fairfax Financial disclosed the information in filings for its latest financial results.
The investigation involves Watsa, who owns the investment firm, and the company's president Paul Rivett.
Insider trading happens when an individual has access to confidential information and then uses it to trade on a stock exchange. Tipping involves passing on insider information to a second party who then trades on the knowledge.
Further details were not revealed as the investigation is ongoing.
Watsa briefly addressed the disclosure on Fairfax's conference call Friday morning.
"While we are not permitted to give you any further details at this time, I can say there is no personal trading involved," he said.
"We are confident that we did nothing wrong."
His office declined requests for further comment, while a call to the Quebec regulator, Autorite des marches financiers, was not immediately returned.
Fairfax is an insurance and investment company that is involved in a variety of areas, including property and casualty insurance. It also has a stake in smartphone company BlackBerry.
On Thursday, the firm reported that net earnings grew to US$363.7 million from a loss of $157.8 million a year earlier when it booked losses in its bond portfolio.
The profit was worth $16.15 per diluted share compared with $8.55 per share a year ago.
Gains on investments were $409 million versus a loss on investments of $415.7 million.
Revenue grew to $2.41 billion from $1.36 billion.