|While the Osborne committee
acknowledges the partition between enforcement staff and commissioners, it
criticizes the role played by the OSC chairman, currently David Brown.
"The chair takes an active role in
overseeing enforcement and its major cases, both before and after the
issuance of a notice of hearing," the report states. "This structure has
led to a malfunctioning of the commission."
Mr. Brown does not sit on commission
panels during adjudicative hearings.
In coming to its recommendation to reform
the OSC structure, the committee interviewed some of the most prominent
corporate and securities lawyers in Canada as well as investment-industry
officials, academics and others.
The 104-page Osborne report goes as far
as recommending "hearing rooms, offices and meeting rooms should be
separate from the commission to avoid any lingering perception that the
commission and [the new tribunal] are in substance one entity."
The tribunal should also have no more
than 12 people and while independent from the OSC, it could receive some
of its funding from the regulator, the report suggests.
Its contents were part of a submission
made by Mr. Brown yesterday in government hearings on securities reform in
Ontario at Queen's Park. The hearings are to review OSC's adjudicative
role, consider the report of a Five-Year Review Committee, which examined
securities regulation in Ontario and to consider a single securities
regulator for all of Canada.
The Five-Year Review Committee noted in
its report last summer that the OSC's current structure could create
perceptions of conflict of interest.
Along with the Osborne report, Mr. Brown
yesterday tabled a pair of legal opinions on the report obtained by the
OSC earlier this month. The opinions -- by the law firms Torys LLP and
McCarthy Tetrault LLP -- do not share the Osborne committee's urgent call
for separating the OSC's judicial and prosecutorial roles.
The Torys opinion states that a
perception of bias doesn't affect the OSC's ability to "lawfully exercise
its adjudicative powers." The McCarthy Tetrault opinion concludes that the
OSC's structure doesn't conflict with the OSC board's responsibilities in
Mr. Brown, who said the legal opinions
were not an effort to undermine the Osborne committee's findings, told the
government hearings that he believes a stronger case for separating
enforcement and adjudication at the OSC could be made should a single
regulator be in place.
In that case, an independent tribunal
"would likely have a significant case load with national reach, enabling
it to attract and build a base of qualified experts," Mr. Brown said. "The
tribunal would also have the flexibility to conduct [its] hearings
wherever in Canada it is appropriate."
Later, Mr. Brown told reporters there is
no way to absolutely eliminate the perception of conflict of interest
without separation of the OSC's adjudicative duties.
However, a separation would come at a
sacrifice of the expertise gained by commissioners in adjudicating
hearings, he said. The knowledge gained there can be utilized in
policymaking -- yet another role of the OSC.
The debate over the separation of the
OSC's adjudicative role also promises to heat up.
Earlier yesterday, Gerry Phillips,
chairman of the government's management board and overseer of the OSC,
told the Queen's Park hearings the Osborne report contains "a fair bit of
argument to suggest some merit" in separation. This appeared contrary to
Mr. Brown's stance.
The OSC had been criticized for keeping
the Osborne report secret for months. It had responded that it was
planning to release the paper at the government hearings so that the
public could digest it in a proper context. Yesterday, it appeared none of
the MPPs on the committee had advance knowledge of the report's contents.
Further, Mr. Phillips said he saw the report for the first time a week
The government hearings continue tomorrow
with testimony from Purdy Crawford, who headed the Five-Year Review