Investors Scrutinizing the Regulators

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Fox Guarding the Hen House

Investors want more time at hearing on OSC

10 minutes not enough


Wojtek Dabrowski

Financial Post


August 16, 2004

Investor advocates are crying foul over how little time they have been allotted this week to make presentations to an Ontario government committee reviewing securities regulation in the province.

The investors say 10 minutes for individuals and 20 minutes for associations is too little time, particularly given that the review -- the first of its kind -- is planned to occur only once every five years.

The Standing Committee on Finance and Economic Affairs had originally set aside Wednesday and Thursday as well as Aug. 23 and 24 for hearings. The subject is a report by the so-called Five-Year Review Committee, headed by corporate lawyer Purdy Crawford, which examined the Ontario Securities Commission and the legislation that governs it. Mr. Crawford's report was delivered to legislators last summer.

However, in a letter to the standing committee's clerk last week, investor advocate Diane Urquhart wrote that no one is scheduled to speak on the last two days, even though the 10- and 20-minute presentation time limits remain in place.

She is one of those making a presentation to the standing committee and her letter requests more speaking time.

"The subject matter deserves the attention of the Ontario legislators for the original duration of the hearings," Ms. Urquhart wrote, adding the issues "are complex and widely affect the Ontario public."

Liberal MPP Pat Hoy, who chairs the committee, was not available for comment.

The hearings promise to feature loud criticism of the OSC. Al Rosen, the forensic accountant and commission critic, as well as Joe Killoran -- a vocal investor advocate -- are slated to speak.

Also, Whipple Steinkrauss, vice-president of the Consumer Council of Canada, will make a presentation.

The OSC's role as adjudicator, investigator and prosecutor of securities-law violators will be a key topic. Mr. Crawford's report noted the OSC's present structure could create perceptions of conflict of interest.

Philip Anisman, a veteran securities lawyer who will also make a presentation, said he believes the OSC has established sufficient safeguards to ensure its panelists are impartial by not having them participate in investigations or prosecutions.

"My view is that the commission has addressed the real issues ... through its internal practices and procedures," he said.

He also said keeping the OSC's policy-making and adjudicative roles separate would not be beneficial.

"Policy-making is one the commission's main functions," he said, adding "the involvement in policy making gives them a better understanding of the rules and the requirements and the goals when they adjudicate."

The hotly debated idea of replacing the country's patchwork of provincial and territorial securities regulators with a single national agency will also be discussed.

One Bay Street investment banker said this issue is paramount, adding the current system causes confusion and "decreases external investor trust, so foreign investors don't want to come in [to Canada] because of it."

However, various stakeholders will also use the hearings as an opportunity to scrutinize other aspects of securities regulation in the province.

For instance, Joe Oliver, the president of the Investment Dealers Association, said he hopes the hearings will bring out support for granting greater powers to self-regulatory groups like the IDA.

"We need the decisions of our panels to be filed as decisions of a court," Mr. Oliver said. This would help the IDA collect the fines it levies on brokers it disciplines even after they've left the securities industry.

"The other thing we need is the ability to subpoena witnesses and to produce documents from third parties."

Investor advocate Robert Kyle, who has been critical of the IDA investor-protection efforts, plans to raise the group's shortcomings during his presentation at the hearings.

He and others will also discuss what they perceive to be a lack of avenues to pursue financial redress for victims of dishonest brokers and the "myriad of agencies and associations that are set up to accept investors' complaints but have neither the authority or the power to do anything with them," Mr. Kyle said.

"Ultimately, I want to see a separate adjudicatory, legislatively empowered agency to deal strictly with investor-protection issues."

Like Ms. Urquhart, he also complained not enough time is being given to deliver presentations to the standing committee, pointing out his 30-page paper will have to be delivered in 10 minutes.

Finally, on the day on which OSC chairman David Brown testifies at the hearings, the regulator will also make public the findings of a separate report by a committee headed by Ontario integrity commissioner Coulter Osborne. The OSC created that committee to determine whether the commission should be reorganized to further separate its prosecutorial and adjudicative roles.

Wendy Dey, OSC spokeswoman, said the regulator welcomes the chance to hear stakeholders' opinions of its workings.

The hearings are "one of the great transparency tools that is enshrined in the Securities Act," she said. "We welcome the transparency associated with this process."