|Report urges more OSC
|Compensation for victims
of rogue advisers also recommended
By KAREN HOWLETT
Tuesday, October 19, 2004
The Ontario Securities Commission should be more accountable to the
public, while the victims of rogue advisers should be compensated for
their losses, says a report recommending sweeping changes to the
The report, tabled in the Ontario Legislature yesterday, also calls for
creation of a single regulator, echoing a recommendation made earlier this
year by the federal government but rejected by every province with the
exception of Ontario.
The single regulator would not only replace the country's 13 provincial
and territorial regulators, its adjudicative role would be separate from
its other functions, recommends the report, prepared by the standing
committee on finance and economic affairs.
"I was very happy to see the strong support for a single regulator,"
Ontario's Management Board chairman Gerry Phillips said yesterday in an
The report recommends that, failing substantial progress toward creating a
single regulator over the next year, the Ontario government should take
steps to separate its potentially conflicting roles as both prosecutor and
Even if there is no evidence of actual bias at the commission, the
perception of bias has damaged the agency's credibility, the report says.
"In our view, the issue of perception has become paramount," it says. "Any
new single securities regulator should include a separate adjudicative
The government should also initiate a legislative review of the OSC that
would make the agency more accountable to the public, the report says.
Mr. Phillips welcomed this. "I have confidence in the Ontario Securities
Commission, but every organization needs to constantly be challenged to
improve, and I think the report gives us some opportunities for
OSC chairman David Brown also welcomed the report. "I think their
recommendations will be very powerful, and should help to maintain
confidence in the capital markets," he said in an interview.
The report adopts many of the key recommendations made by the so-called
Five Year Review Committee headed by corporate lawyer Purdy Crawford. That
report, unveiled last year, also urged the provincial government to step
up its oversight of the OSC by doing more studies of its operations,
similar to reviews Congress in the United States undertakes of the
Securities and Exchange Commission.
The Ontario legislature's standing committee on government agencies has
not reviewed the OSC since 1988, yet during that time, the OSC has
acquired greater independence from government, notes the standing
committee's report. The standing committee also said in its report that
the government should work with the OSC to set up a mechanism to allow
investors to pursue restitution in a timely manner.
In other key areas, notably dealing with the country's self-regulatory
agencies, the standing committee goes further than the Crawford committee.
The standing committee recommends the government create a task force to
review the role of self-regulatory organizations, including whether their
trade function and regulatory function should be separated. The Crawford
committee initially made a similar proposal but backed down after the
Investment Dealers Association of Canada persuaded it that the agency
should continue wearing two hats.
The government committee made its recommendation after hearing from
ordinary investors and others at public hearings in August. "The testimony
received by the standing committee revealed a deep-seated skepticism on
the part of the investing public," the report says. "They simply are not
confident that complaints will always be handled in an objective manner
under a system of self-regulation."