Investors Scrutinizing the Regulators

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Fox Guarding the Hen House

   

Long-awaited investor protection legislation unveiled

By KAREN HOWLETT AND ELIZABETH CHURCH
With files from reporter Janet McFarland

Tuesday, Nov 23, 2004

The Ontario government unveiled long-awaited legislation yesterday that will give investors more power to sue public companies and their directors for disclosing false or misleading information.

"The people of Ontario have a vested interest in improved investor protection," Gerry Phillips, management board chairman, said yesterday.

Current securities laws give investors the right to sue over misleading statements in prospectuses, but information that drives most stock market trading, such as quarterly earnings reports and news releases, is not covered.

The new legislation would give investors the right to sue public companies and key figures such as officers, directors and experts when false or misleading information is included in materials such as annual or quarterly statements. It would also cover information that is not disclosed in a timely manner.

A group comprising some of Canada's largest pension funds has been urging the government for some time to overhaul the province's securities laws by arming investors with broader powers to sue companies.

The powerful Canadian Coalition for Good Governance has twice written to government officials, urging the province to introduce such reforms. The coalition includes major investors, such as the Ontario Teachers Pension Plan and Jarislowsky Fraser Ltd.

Bob Bertram, executive vice-president of Teachers, said the new legislation is welcome news for investors.

"I think the government is to be congratulated for moving ahead on this issue. I think it's a very positive step for us," he said.

He added that it will be critical to review the details of the legislation to see the proposed penalties and the kinds of defences available to companies being sued to ensure the legislation is "fair and equitable" for those who try to use it to seek redress.