Oct. 19, 2004. 01:00 AM
|Ontario to act on disclosure law
Companies will be held liable for misleading
|Offending firms, executives, could face civil suits by investors
Ontario plans to finally make companies and insiders liable to be sued for
issuing false or misleading press releases and financial statements.
Gerry Phillips, the minister responsible for securities regulation, said
that is among the first of 14 recommendations released yesterday by an
all-party committee that the government will act upon.
This has been a hot button with major pension funds who have had to go to
the United States to sue some Canadian companies. But legislation and
regulations initiated by the former Tory government were delayed by the
election a year ago. Phillips vowed to develop legislation to deal with
At the moment, investors can only sue companies and insiders for
misrepresentations made when a prospectus for the sale of shares in
"The civil liability issue ... is one I hope to move on very quickly,"
said Phillips, who is chairman of Management Board of Cabinet. He also
welcomed the committee's support for a national securities regulator and a
revamped Ontario Securities Commission.
As the Toronto
Star reported last Friday, the Standing Committee on
Finance and Economic Affairs has made several recommendations to
strengthen protection for investors. But Phillips said several of these
recommendations will require further consultation and study.
Backbenchers on the committee want the OSC to establish a workable
mechanism for investors to seek restitution in a timely and affordable
manner, independent boards with substantial investor protection for mutual
funds, and a review of the structure of self-regulatory organizations,
like the Investment Dealers Association of Canada, over the next year.
Phillips said while he has confidence in the OSC, he thinks a proposal to
split off the commission's adjudication function from its other roles of
rule-making and prosecution is sound.
"My instincts are that we will proceed with that," he said.
"A single national regulator ... is obviously the Number 1 issue in
securities regulations in the country," said Phillips. "Almost without
exception the business community, and I think the investment community,
"So I am going to continue to work on it. I think the next step will be to
round out the proposal we put forward in June."
Phillips noted in a news release that the province has "stated its view
that a single regulator would help improve the competitive position of
Canada's capital markets and strengthen the foundation for economic growth
in Ontario and across Canada.
"The Ontario Legislature is signalling that the Ontario government is
right to be taking a leadership role on a move to a common regulator for
Canada," Phillips added.
The committee report was part of the first five-year review of the Ontario
Securities Commission required by a decade-old change of law. Now,
however, the committee thinks annual legislative reviews are necessary.
"It is important that we have yearly reviews as opposed to five-year
reviews," said New Democrat Michael Prue.
"I think five years is just too long. Times are moving very quickly now."
Tory MPP John O'Toole said splitting off the adjudication of the OSC,
along with the structure in other provinces, could help Ontario advance
the cause of a single national regulator, an idea opposed by some
provinces, notably Quebec.
David Brown, chairman of the OSC, said he could live with all of the
recommendations of the committee, even though there is no legal imperative
for a separate adjudicative function.
He said the OSC would work with the government to establish a separate
adjudicative function that protects the interests of investors if no
progress is made in the next year on a national securities regulator.
Brown said the OSC's goal is to "ensure that investors have access to an
effective restitution process that is easily accessible and affordable."
But he said there should be further consultation about the effectiveness
of what's already in place.
Brown said that several investor advocates who caught the ear of the
committee had bad experiences before the Investment Dealers Association
established its mediation service for claims under $100,000 and before the
national Banking Ombudsman's role was expanded to cover securities
"We need to get out there and talk to many more investors who have had
experience," he said. "I think that you hear from a small handful who have
been dissatisfied with the result and, in some cases, who have exhausted
appeal channels and are still dissatisfied.
"In fact, the process may be working the way it is supposed to; it is just
not producing the results they hoped to see."