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Ex-OSC heads push to separate regulator's tribunal



Saturday, February 1, 2003

TORONTO -- A high-powered group of former Ontario Securities Commission chairmen is pushing for a radical overhaul of Canada's senior regulator that would create a separate tribunal for regulatory hearings, sources say.

Securities lawyers Edward Waitzer, Stanley Beck and James Baillie met OSC chairman David Brown to discuss the structure of the commission and whether the time has come to spin off the tribunal function from the rest of the Crown corporation, said sources familiar with the meeting.

The structure they proposed would be similar to that of the U.S. Securities and Exchange Commission, where administrative judges who do not work for the agency preside over regulatory hearings.

The trio of former OSC chairmen asked for a meeting with Mr. Brown shortly after the Ontario government tabled legislation last October giving Canada's largest securities regulator broader powers to pursue wrongdoers, the sources said. Under the new legislation, known as Bill 198, the OSC can impose fines and confiscate ill-gotten profits. It was passed in December but has not yet been officially proclaimed.

The former OSC chairmen approached Mr. Brown because they thought there were inherent conflicts in the commission's current structure, the sources said.

The OSC acts as adjudicator and prosecutor. A group of 11 commissioners headed by Mr. Brown preside over policy making, a function that also involves staff. Commissioners are also responsible for presiding over regulatory hearings and handing down penalties in cases prosecuted by the enforcement branch.

"The adjudicator arm is supposed to look at things objectively," said one of the sources. "But part-time commissioners spending 100 days a year sitting on hearings can't spend a lot of time on policy."

The source said Mr. Brown and the other commissioners are thinking about the proposal made by his predecessors.

OSC spokesman Eric Pelletier declined to comment. "He meets with industry leaders, whether they be a former chair or whoever, fairly regularly and we don't disclose the contents of any of those discussions," he said yesterday. He did say, however, that the topic of spinning off the hearing tribunal is one "we hear once in a while."

The three former OSC chairmen also declined to comment.

"That was really a private meeting," Mr. Beck said yesterday. "I wouldn't really feel comfortable discussing it."

Mr. Waitzer, now chairman of Toronto law firm Stikeman Elliott, served as OSC chairman from 1993 to 1996. Mr. Beck, a former dean of York University's Osgoode Hall Law School, was chairman from 1985 until 1989. And Mr. Baillie, a securities lawyer at Torys, headed the agency in the late 1970s.

The proposal from the three comes at a critical time for Mr. Brown. His five-year term as chairman comes to an end April 14. He is currently in the process of negotiating a new contract with the provincial government, said a regulatory source, adding that it could be for a two- to three-year term. Mr. Brown is 63.

Mr. Pelletier declined to comment. Scott Brownrigg, press secretary to Ontario Finance Minister Janet Ecker, said: "It's a process and that's ongoing. Mr. Brown has done an excellent job."

Mr. Brown is also in the process of looking at how Canadian regulators should respond to tough new anti-fraud measures introduced in the United States in the wake of several corporate scandals. On that front, he has encountered much resistance from several quarters, including publicly traded companies, the heads of both Canadian stock exchanges and regulators in other provinces.

The push to create a hearing tribunal separate from the OSC stems from discontent in the legal community about how the regulator is increasingly flexing its muscles on the enforcement front, sources say.

The irony is that the OSC was at one time criticized for being a toothless watchdog.

A source close to the OSC said there are checks and balances in place to separate investigations done by the enforcement branch from the commissioners. For instance, a vice-chairman who signs an investigation order does not get involved in a hearing.