OSC drops court challenge
Releases 2000 audit critical of IDA 
Wednesday, January 12, 2005

By James Langton

The Ontario Securities Commission has dropped its court challenge and finally released its critical audit of the Investment Dealers Association of Canada, which was carried out in 2000.

The provincial Information and Privacy Commissioner ordered the report released last summer, in response to a request from an unnamed investor. The OSC initially resisted that order and took the matter to court for a review of the privacy commission's decision.

The OSC has now gone ahead and released the document. It is posted on investor advocate Rob Kyle's website at: http://www.investorvoice.ca/regulators/IDA_Scandal.htm

OSC manager media relations, Eric Pelletier, says that it decided to drop the judicial review because of the, “passage of time and the resources required to continue with this file.”

With the report remaining private for so long, the conclusions of the audit from the year 2000 are largely old news. The IDA has already dealt with many of the audit’s withering conclusions by bringing in Robert Chambers of Asset Risk Advisory Inc. to help make some significant changes. His report became known as the Chambers Report.

Notably, the IDA hired Paul Bourque as senior vice president member regulation. Bourque has overhauled the enforcement IDA department, which received some heavy criticism in the audit.

Bourque says that the IDA has implemented changes in all of the areas criticized in the audit, and it adopted all 48 of the recommendations that it received from the Chambers report.

“We have implemented significant changes to our policies and procedures in every area, and we are certainly prepared to be judged on our track record to date and on our current results,” Bourque says.

Nevertheless, the audit report’s findings are still disturbing. Among them:

a growing backlog of enforcement cases;

no screening process for complaints and a bloated case review process; and

a “significant number of changes to penalty recommendations” by the former SVP member regulation.

The report called for an emergency resource allocation to help clear up the backlog and an overhaul of the department's other processes.

The audit also suggests that the IDA did not have “sufficient resources allocated to its member regulation to ensure that it meets its obligations as an SRO”

The extent of the problems the OSC found during the audit was one of the key reasons it sought to keep the report private. The OSC suggested that releasing the report could harm its ability to carry out future audits with full candor, and it indicated that it was uncomfortable releasing a document that was written with the expectation that it would remain private.

However, other securities commissions have routinely released their own audit reports to the public.

Meanwhile, the OSC indicated at an industry conference last fall that it may start doing so too, although the reports will be written with the understanding that the will ultimately be publicly disclosed. IE