Friday, August 13, 2004
Judging by the calls and e-mails, the
Ontario Securities Commission, the country's largest securities regulator,
has some problems with one of its core constituents: small retail
Those investors claim the OSC doesn't
look after their interests -- a surprising accusation, given investor
protection is a key objective of the OSC.
Those concerns may be front and centre
next week when a committee of the Ontario Parliament holds hearings into
the OSC -- hearings that are now mandated to be held every five years.
It's understood a number of
retail-oriented organizations have applied to address the politicians.
(For those wishing to get aboard, it's too late: Wednesday was the last
day to make application.)
Yesterday's column spoke about some of
the issues market participants would like addressed. They are concerned
about enforcement -- an area of high priority for the OSC under chairman
But despite that priority, investors
remain skeptical, given that the OSC seems to target the minor players.
They point to the case of Donald Parker,
a Toronto accountant who netted $900 from one illegal inside trade.
Parker was put through two years of hell
for his transgression.
In response to yesterday's column, one
retail investor indicated he had been dealing with the OSC for about four
years on a matter of disclosure by the banks. Only now are his concerns
The good news, at least, is that after
four years, they did agree that matters raised by the investor were indeed
legimate concerns and in need of correction.
While the retail investor was pleased
some progress is occurring, he was interested in two other matters: what
is the OSC going to do about other institutions making prohibited
statements; and what penalties will they extract from the institutions for
Adds another investor whose dealings with
the OSC have been less than satisfactory: "I wanted to know whether an
investment advisor could up the percentage of equities in the portfolio
for an elderly person without the client knowing? They refrained from
answering the question, which struck me as very odd."
Indeed, the lack of activity by the OSC
has meant some extra business for certain lawyers.
For instance, John Hollander, an Ottawa
lawyer with Doucet McBride who specializes in the area of unsuitable
trading, has been very busy of late.
And Hollander makes life easier for some
clients because he offers to act on a contingency basis. He is scheduled
to speak at next week's hearings.
Hollander has a web site (www.stockloss.ca)
that states the "aim is to educate people who suffered losses in stocks
and mutual funds as to their rights, and to encourage them to seek
professional advice as to their potential right to compensation."
Certainly the recent IPSOS Reid
stakeholder satisfaction study indicates some of the problems that the OSC
is up against -- most of the general public weren't aware of the OSC.
Maybe with good reason.
The OSC's web site lists 16 consultative
committees, most of which deal with technical matters such as bond market
transparency, commodity futures advisory board and institutional equity
Investors are largely absent.
For instance, there are 16-people on the
Continuous Disclosure Advisory Committee. Just two of the members list
their occupation as an investor.
At next week's hearings, attention may
also focus on the way the OSC releases information.
It's understood that at his presentation
next week, David Brown the OSC's Commissioner will speak about the
That report is a critique of the multiple
enforcement roles played by the OSC: it is the investigator, the
prosecutor and the judge.
Some believe that's too many. The talk is
that the report is critical of the multiple roles. Let's wait and see what
Brown says next week.
What's known is that the report was
finished in the spring and the OSC has been waiting for the right time to
talk about it. If a reporting issuer adopted a similar approach to what
can be regarded as a material event, then the OSC would go after them.
"They follow disclosure disclosure
standards that are of a substantially lower standard than what public
companies are supposed to be held to by them," noted one market
The parliamentary committee may also like
to press the OSC on one of its more bizarre non-disclosure practices in
recent years. A few years back, it conducted an audit of the Investment
Dealers Association, a body that is both a regulator and an industry
That report, which was understood to have
been negative, wasn't made public. So some interested parties approached
the province's privacy commission to see if that body could get the report
released. In due course, the privacy commission ordered the OSC to release
The OSC is resisting that order and we
now have the odd situation that one arm of the Ontario government is
challenging another in court.