||(October 18, 2004) The
Ontario Legislature's Standing Committee on Finance and Economic
Affairs has tabled its review of the Securities Act, calling on the
provincial parliament to restructure the OSC and work toward a single
But on top of the regulatory reform, the committee is calling for
stricter oversight of investment advisors and proposing a review of
the role of the IDA and MFDA in handling investor complaints.
"The government should establish a task
force to review the role of SROs including whether the trade association
and regulatory functions of SROs should be separated," the committee
report said, due to "deep-seated skepticism on the part of the investing
To help soothe such skepticism, the committee also recommended that mutual
fund companies "establish and maintain an independent governance body that
provides for substantial investor protection." These boards would have the
authority to dismiss fund managers.
Traditionally, the OSC has not had the power to order restitution for
investors who have been subject to abuses, but the committee has called
for the government to work with the OSC to establish a workable mechanism
that would allow investors to pursue restitution in a timely and
But while the committee was in favour of giving the OSC more power to
protect consumers, it called for a limitation of some of its powers.
The report recommends the OSC be split into two separate units, dividing
the enforcement arm from the rule-making process. The fusion of the two
functions has led to criticism that the OSC acts as both prosecutor and
judge in enforcement proceedings. In making this recommendation, the
committee pointed to the Report of the Fairness Committee to the Ontario
Securities Commission, headed by Coulter A.
Osborne, Q.C., and published
in March 2004.
"The nature of the apprehension of bias has become sufficiently acute as
to not only undermine the Commission's adjudicative process, but also the
integrity of the Commission as a whole among the many constituencies that
we interviewed," read the report. "Matters of institutional loyalty, the
involvement of the Chair in the major cases, the increased penalties, the
sense that 'the cards are stacked against them,' the home court advantage,
the lengthy criminal law-like trials, and the Commission's aggressive
enforcement stance, which will likely only increase over time, all combine
to make a compelling case for a separate adjudicative body."
The committee called for closer governmental oversight for the OSC,
calling the current system "unacceptable." Over the years, the OSC has
evolved from a government agency to a Crown corporation to a self-funding
"Any new oversight mechanism should include a requirement that the annual
reports of the Commission be automatically referred to a Committee of the
Legislature, and should ensure that the Committee has the ability to
compel witnesses to appear before it, including the responsible minister,
to answer questions regarding progress in implementing recommendations
approved by the Legislature."
But while the committee called for closer oversight and limitations on
some OSC powers, it agreed with the Crawford report, which recommended
that the OSC should be given rule-making authority over corporate
governance matters in general terms.
Filed by Steven Lamb, Advisor.ca,