Here's the answer from the Ontario Landlord and Tenant Board website.

Follow up:

Yes, a landlord can collect a rent deposit if it is requested on or before the day that the landlord and tenant enter into the tenancy agreement. The rent deposit cannot be more than one month's rent or the rent for one rental period, whichever is less. For example, if rent payments are made weekly, the deposit cannot be more than one week’s rent; if rent payments are made monthly or bi-monthly, the deposit cannot be more than one month’s rent.

The rent deposit must be used for the rent for the last month before the tenancy ends.

It cannot be used for anything else, such as to pay for damages.

For more information on this topic and other rental questions view the Landlord Tenant Board Website.