||(June 3, 2004) Two
Ontario government commissions are at odds over the public release
of a controversial report on operations at the IDA. The province's
Information and Privacy Commission has ordered the Ontario
Securities Commission (OSC) to make the document public, but the OSC has
appealed and the matter is now headed for the courts.
At issue is a 25-page audit conducted by
the OSC and delivered to the IDA in 2000. Never released, it's been
described as a critical performance appraisal of the brokerage industry
association, containing 18 specific recommendations regarding the
structure and governance of the IDA, focusing on its enforcement division.
Following the audit, the IDA hired an
outside firm to conduct an independent review, culminating in a number of
high-level changes, including the departure of senior IDA staffers Greg
Clarke, vice-president of member regulation, and enforcement director Fred
A number of requests have been submitted
under the Freedom of Information Act to release the audit, but the OSC has
refused to comply, arguing that its staff would not feel comfortable in
making "frank and candid" assessments if their recommendations were
subject to public scrutiny.
"If that is true, the OSC is openly
confessing an inability to endure public scrutiny," one unnamed appellant
wrote in a submission to the privacy commission. "Why would that be?"
"I submit that the repeated refusal to
release the audit flies directly in the face of professional priorities
and in fact erodes public confidence in Ontario's investment industry,"
the submission continues.
But the OSC defends its right to keep the
audit confidential. "It's actually common practice for some regulators not
to make public audits of self-regulatory organizations (SROs)," says OSC
spokesperson Eric Pelletier. "We think it would affect the quality of the
audit and could have a chilling effect on the depth of the information
that is shared between the regulator and the SRO. The important issue here
is that the regulator follows through with any changes that are required
as an outcome of the audit."
In his initial report on the case,
assistant commissioner Tom Mitchinson rejected the OSC's arguments,
stating, "I am not persuaded that any of the audit report's content would
reveal information received from the IDA."
After the first OSC appeal, the privacy
commission produced a second report, authored by senior adjudicator David
Goodis, who reached the same conclusion.
"In essence, the position of the OSC and
the IDA is that if the record is disclosed, the IDA will be reluctant to
co-operate with the OSC in its reviews. This submission lacks
credibility," Goodis wrote.
Goodis ordered the OSC to disclose the
record to the appellant last November. However, the OSC is exercising its
right to seek a judicial review of the decision in Ontario's Divisional
Court, Pelletier says.
No date for the appeal has been set, says
privacy commission communications coordinator Bob Spence, adding it could
be a "number of months" before the case is heard.
The odds appear to be stacked against the
OSC. In the majority of cases over the last several years, the privacy
commission's orders have been upheld by the courts, according to the
commission's Web site.
Given that the audit is several years
old, it's reasonable to ask how releasing it now would serve the public
interest. Investor advocates say it's a matter of principle.
"Transparency — better late than never,"
says Jim Roache, who also submitted a request for the audit. "It can be
reasonably assumed that many of the findings and recommendations contained
in the report are as valid today as they were then and that action — in
full public view — is still required to improve IDA performance to
anything approaching levels acceptable to investors."
Robert Kyle, executive director at the
Small Investor Protection Association, suggests the OSC, which demands
transparency and accountability for those it regulates, should lead by
"Investors as well as brokers have an
absolute right to know if they have been subjected to improper or
negligent regulation," Kyle says. "After all, we recognize that regulators
are not perfect — and with immunity, what have they got to worry about?"