The House met at 1330.
Hon Gerry Phillips (Chair
of the Management Board of Cabinet): I rise today to respond to the
Standing committee on finance and economic affairs and its review of the
Five-Year Review Committee's report on the Ontario Securities Act. I thank
the members of this committee for their unanimous support that they
presented here on October 18.
This is a very solid report. It
recognizes the need for investors to have confidence that their
investments and interests are being well protected.
The committee made 14 specific
recommendations. I have no major concerns with the direction of any of
them. We will move on half of these now, or in the very near future. The
others will require further input from stakeholders and the public.
The committee strongly
recommends that the Ontario government continue to pursue a single
securities regulator for Canada. Canada is the only developed country
without some form of common regulator, and this is Ontario's number one
securities reform priority. We are following this recommendation by
persistently working toward this goal with stakeholders and the
responsible ministers in other provinces and territories.
The committee recommends
ensuring that there are strong incentives for public companies and other
participants in our capital markets to do the right thing, and that when
there are problems, all of our investors should have timely and affordable
means to seek redress.
This bring us to a second major
recommendation of the committee; that is, civil liability for secondary
markets. Civil liability gives investors the right to sue companies for
misleading disclosures or fraudulent actions. Similar rights already exist
in the primary market. This means that investors can sue now, if, for
example, there are false or misleading statements in a prospectus on an
initial public offering. But currently, investors do not have the same
rights, after the initial public offering, in the trading that occurs
every day in our markets, and that is where the vast majority of trades
occur. We will be proposing legislation very soon to strengthen investor
protection by implementing civil liability for secondary markets.
The committee also recommended a
change in the timing of the five-year reviews of Ontario's Securities Act
-- and we will propose legislation to do that this fall as well. Without a
change, we would have to begin the next Securities Act review within a
matter of months, before we have had a chance to fully respond to the
Other recommendations we accept
relate to basket rule-making, blanket rulings and orders, and the
regulation of market participants.
We are acting immediately on
seven of the recommendations. For the other half, we will be seeking input
from investors and the financial community in the coming months.
The committee recommended the
government establish a task force to review the role of self-regulatory
organizations, or SROs, as they are commonly known. That would give us an
opportunity to respond to those who appeared before the committee and
expressed their concerns with the current SRO system. The task force would
work toward improving the current system, and in doing so would instill
greater investor protection and confidence in our capital market.
The committee also recommended
that the adjudicative function of the Ontario Securities Commission be
separated from the other functions.
The Five-Year Review Committee
and the Fairness -- or Osborne -- Committee confirmed that there is no
evidence of bias currently in OSC proceedings. The government has
confidence in the OSC, but even the best organizations must strive to
improve and be better. We will address these issues in a way that does not
compromise the effectiveness of our regulatory system.
The committee has also
recommended more formal and regular reporting to the Legislature by the
Ontario Securities Commission and by the minister responsible for the OSC.
We will be looking hard at ways to develop improved OSC oversight
mechanisms that are in line with this recommendation.
To sum up, there will be a
staged response to the 14 recommendations put forward by the committee.
For phase one, now or in the
very near future we'll move on seven of the recommendations, including the
civil liability for secondary market disclosure and on changing the timing
of the five-year reviews.
Phase two involves near-term
actions such as proceeding with a number of consultations the committee
has called for, including a task force to review the role of SROs,
Phase three -- we'll deal with
items where progress is required in the next 12 months, including the OSC
accountability mechanism, restitution, and beginning to look in earnest at
a separate adjudicative tribunal for the OSC.
Phase four is the ongoing work
on new laws to be developed and implemented.
We will continue to improve the
structure and substance of our securities regulation system, with a focus
on investor protection and maintaining confidence in our capital markets.
The Speaker (Hon Alvin
Mr Jim Flaherty (Whitby-Ajax):
May I respond to the Chair of Management Board and his comments about the
Purdy Crawford is an eminent
person in the province of Ontario. He worked for five years on this review
and presented it to the standing committee on finance and economic
affairs. All parties represented in this House presented a unanimous
report, and what they get from the government today is a mealy-mouthed
lack of commitment and no courage.
The two major recommendations in
the report are the national securities regulator -- they didn't even sign
the MOU when they had the opportunity to with four other provinces
recently. Their commitment -- and here's the big commitment now; after
five years of work by Purdy Crawford, here's the government's commitment:
They're going to work toward the goal. That's the commitment. They should
be ashamed of themselves.
Investors in Ontario expect more
of a government that purports to have some familiarity with the importance
of securities regulation and investment in this province. We are the only
jurisdiction around that has multiple regulators, and we are only a
population of 32 million or so in Canada. This is urgent. The issue of
capital and raising capital on investment for small and large investors is
The other important point is
about separating the adjudicative function and the regulatory function at
the Ontario Securities Commission. The minister says that Osborne, in his
report, confirmed that there's no evidence of bias in the OSC. He also
recommended that the functions be separated. Why don't you say that to the
people of Ontario and then why don't you do it? This work has gone on over
five years. We may get to the point that you'll have to give it back to
the minister -- no, you can't do that; that's the Royal Group Technologies
thing. But you've got that responsibility for the Ontario Securities
Commission. You know that there are issues there about the adjudicative
regulatory function. You know that it has to be dealt with urgently if you
want small and larger investors to have confidence in the Ontario
I say, move forward on those two
vitally important points, as recommended by Mr Crawford and his committee
and by the unanimous committee of this House.
Mr Michael Prue
(Beaches-East York): It was indeed a privilege for me and an honour to
serve on the finance committee. As has already been stated, the finance
committee unanimously recommended the 14 recommendations which are the
subject of the minister's statement here today.
On that finance committee, from
dozens of ordinary citizens -- people in this province who were
dissatisfied with how the Ontario Securities Commission is regulated, how
it works and what has happened to them -- we heard in evidence that this
past year there were 262 files opened on alleged transgressions. These
were not small transgressions; these were large transgressions where
people were able to take advantage because of insider trading and other, I
think, nefarious and uncalled-for actions in order to try and rip ordinary
The committee has made two key
recommendations taken from the body of evidence before it; the first was
for a single regulator. There's no question that Canada needs a single
regulator. The problem is, how are we going to get there? Canada is not
unique in the world, in spite of what some others have said. There is one
other country that has many regulators, and that's Bosnia-Herzegovina. But
I'm not sure that we want to go there as well. Canada is alone among about
100 industrialized countries that do not have a single regulator.
The second recommendation we
made that needs to be acted on sooner rather than later is to separate the
adjudicative function. The Fairness Committee under Coulter Osborne spoke
quite eloquently in its report on why that needed to be done. It needed to
be done not only because must justice be done, but it must also be seen to
be done. People have to have confidence that they are getting a fair
hearing. When you have it all rolled together, where the prosecutor and
adjudicator are one and the same group or one and the same people, it is
impossible to say that justice is being done.
I'd just like to conclude by
stating that the Ontario Securities Commission is doing, I think, somewhat
of the job that they've been hired to do, but we need them to do much
more. If you just look at the names this year of the people who have been
fined and the amounts of money involved, you'll see that it's enormous.
That would include Michael Cowpland, who has been fined $500,000; Glen
Harvey Harper, who has been prohibited from acting in the stock exchange
for 15 years; Daniel Duic, who was fined $1.9 million plus costs; Andrew
Rankin, who has been found to be tipping the scales; and Jonathan Carley,
who has been fined about $90,000 for his actions. These are the kinds of
things we need to stamp out, and I would tell the minister that we need to
do it sooner rather than later.