By Glorianne Stromberg
It looks as though the Ontario Securities
Commission has successfully dodged another bullet.
The provincial legislature has given its
standing committee on finance and economic affairs (SCFEA) the narrow
mandate of conducting a review of the five-year review committee’s final
report on the Securities Act of Ontario. The preferred course is to
appoint a select committee to examine not only the final report but also
the OSC’s administration of its mandate under the act.
The final report was tabled in the
legislature about 18 months ago. The public only learned about the SCFEA’s
mandate in early August, when a notice was published in major newspapers
saying the SCFEA would hold hearings on the report in mid-August.
The SCFEA’s appointment fills the letter
of Securities Act requirements but avoids the spirit of the requirements.
And there are procedural and substantive problems with the SCFEA’s
The procedural ones include not
appointing the committee when the final report was tabled in the
legislature; no public announcement in June of the committee’s
appointment; short notice of hearing dates; setting hearing dates for
mid-August, when many people are on holidays; limiting persons wanting to
be heard to those the committee selects to hear; and limiting
presentations to 10 minutes.
The substantive element is the missed
opportunity to appoint a select committee. This committee would have
consisted of members of the legislature with significant knowledge of
securities and financial services matters. The committee’s mandate would
have been to consider the final report, and the effectiveness of the
Securities Act and the OSC’s administration of it.
It’s unfortunate government leaders
missed the opportunity to take a serious look at the adequacy of
securities and financial services regulation. In contrast to the
specialized mandate of a select committee, the SCFEA’s activities relate
mainly to pre-budget consultations, recommendations on budgetary matters
and consideration of proposed financial legislation. Its members may not
have sufficient knowledge of securities and financial services to review
the report meaningfully.
There are many problems with the current
regulatory regime. It isn’t working as well as it should to protect
investors, contributing to a loss of confidence in the capital markets and
concerns about fairness of their operations.
The last time the legislature took a
close look at the OSC was 1988, when the standing committee on government
agencies tabled its report. Since then, despite concerns about the OSC’s
oversight of self-regulatory organizations, the effectiveness of these
organizations and the overall efficiency of the OSC, the commission has
been given free rein with little oversight by the legislature. Yes,
statements of priorities and annual reports are tabled in the legislature,
but there is little discussion of them. And no attention is paid to what
is not contained in these documents.
The legislature has delegated the OSC a
lot of responsibility, including power to make rules with the same force
as if they were contained in a statute enacted by the legislature. Many
OSC rules supercede express provisions of the Securities Act.
The public interest requires that the
legislature exercise better oversight of the OSC and other financial
services regulators. Hopefully, the SCFEA will recognize this need and
recommend measures to enhance the legislature’s oversight of securities
and other financial services regulation in the province.
A standing committee to consider these
points would be a start. It would be charged with assessing the adequacy
of the statements of priorities and annual reports. Establishing an
independent government accountability agency similar to the U.S. General
Accounting Office would also be desirable.
The final report has many good
recommendations. But there are weaknesses, particularly recommendations
relating to SROs. The legislature’s reliance on SROs is out of step with
reality, and the OSC’s oversight of them is questionable.
The SCFEA has important work to do. The
people of Ontario can only hope it looks behind the glossy accountability
presentations, self-satisfaction surveys and pollsters’ assurances that
“the OSC continues to be seen as a strong, necessary organization by its
stakeholders.” The OSC not only has to be seen as a strong, necessary
organization but it also has to be one. IE