Investors Scrutinizing the Regulators

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Securities Regulation In CanadA

Fox Guarding the Hen House




Ontario Standing Committee

on Finance and Economic Affairs

5 Year Review of the Ontario Securities Act



On October 18, 2004, the Standing Committee on Finance and Economic Affairs (the "Standing Committee") tabled in the Legislative Assembly of Ontario its "Report on the Five Year Review of the Securities Act." This report follows public hearings that the Standing Committee held in August 2004 as part of its review of the Five Year Review Committee Final Report: Reviewing the Securities Act, tabled in the Ontario legislature in May 2003. In this latter report, the Five Year Review Committee, chaired by Purdy Crawford, Q.C., made 95 recommendations dealing with many aspects of securities regulation in Ontario.

  The Standing Committee's unanimous report contains the following 14 recommendations.


The next review committee should be struck in May 2007. The committee should deliver an interim report by May 2008 and a final report by early 2009. Thereafter, a review committee should be appointed four years after the date of the establishment of the previous committee. This recommendation is in no way intended to discourage or preclude the Minister of Finance from initiating reviews of individual issues, as necessary.


The Standing Committee recognizes the critical need for a single securities regulator, and strongly recommends that the Ontario government continue to work with all stakeholders, including Ministers in other provinces, toward the development of a single securities regulator. The key elements of the new regulatory system should be one new regulator, one common body of securities law and one set of fees.


The government should introduce securities transfer legislation modelled on revised Article 8 of the Uniform Commercial Code in the United States.


The Standing Committee believes that the status quo is unacceptable, and recommends that the government initiate a review of the Legislature’s oversight of the Ontario Securities Commission. Any new oversight mechanism should include a requirement that the annual reports of the Commission be automatically referred to a Committee of the Legislature, and should ensure that the Committee has the ability to compel witnesses to appear before it, including the responsible minister, to answer questions regarding progress in implementing recommendations approved by the Legislature.


The adjudicative function of the Ontario Securities Commission should be separated from its other functions, based on the recommendations of the Fairness Committee.


The Ontario Securities Commission should not be given basket rulemaking authority.


The Ontario Securities Commission should not be given power to issue blanket rulings and orders; however, the Standing Committee recognizes that the Commission needs to be able to act in a timely manner and asks the government to study alternative mechanisms that would enhance efficiency, without sacrificing investor protection.


The government should closely monitor the implementation of Recommendation 28 of the Crawford Report (page 102), and should ask the Ontario Securities Commission to report on the progress in implementation in its annual report to the Legislature.


The government should establish a task force to review the role of SROs, including whether the trade association and regulatory functions of SROs should be separated.


The government should reintroduce the relevant provisions of the former Bill 41, and proclaim the civil liability provisions of Bill 198.


The Ontario Securities Commission should be given rulemaking authority over corporate governance matters generally, as recommended in Recommendation 61 of the Crawford Report (page 174).


The government should introduce legislation to amend the proxy solicitation rules in Ontario’s corporate and securities laws, as recommended in Recommendation 62 of the Crawford Report (page 180).


The Ontario Securities Commission and the CSA should require publicly offered mutual funds to establish and maintain an independent governance body that provides for substantial investor protection.


The Standing Committee recommends that the government work with the Ontario Securities Commission to establish a workable mechanism that would allow investors to pursue restitution in a timely and affordable manner and that the government report on its progress in this regard within 12 months. This work should take into account any measures to separate the adjudicative function of the Commission.

Separation of the OSC's adjudicative function from its other roles received support earlier this year from the "Osborne Committee."


18 February 2005

Ontario Panel to Advance Design of a  Single Regulator


Ontario Finance Committee Report

"The testimony received by the Standing Committee revealed a deep-seated scepticism on the part of the investing public. They simply are not confident that complaints will always be handled in an objective manner under a system of self-regulation.


We believe the question of whether SROs should be given more powers or, indeed, whether they should have any powers at all, should be the subject of further review by a task force established to examine this specific issue."

SCFEA 5 Year Review Report

page 21. para. 6

18 October 2004


Gerry Phillips

Minister of Government Services


Tuesday, 19 October 2004

page 3498

I want to begin by thanking the committee. It was a unanimous report supported by all three parties, and I think a very good piece of work. There are 14 recommendations in the report. I have had a chance to review them over the last 24 hours, and I would say that we’re supportive of all 14 of the recommendations, perhaps with some minor variations.

I also wanted to say that I have confidence in the Ontario Securities Commission, but as with any organization, we have to constantly challenge it to get better. I believe this report provides an opportunity for improvement of the Ontario Securities Commission. So I say to the member that I plan to provide a fairly comprehensive outlook of how we’re going to deal with the 14 recommendations, within the next few weeks.


Monday, November 1, 2004

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.


Thursday, February 24, 2005

page 5389

"The committee also recommended that the government establish a task force to review the role of self-regulatory organizations. We have begun the necessary background work and will be moving forward on this recommendation later this year."

Speech to the Canadian Club:

Modernizing business and securities law, and Crawford Panel Report

13 December 2005

Since the appointment of David Wilson as Chair of the OSC there has been no further mention of a government task force to review the role of self regulatory organizations.

The government has been successfully captured by the industry.


Ontario Government supports SROs,

ignores Investors and Finance Committee Recommendations

Letter to Hon. Gerry Phillips

re: Finance Committee recommendations and lack of government implementation


March 2006 - April 2008

The committee recommended the government establish a task force to review the role of self-regulatory organizations, or SROs, as they are commonly known.

Mr. Phillips it has now been more than 17 months since the recommendations were first tabled to the Ontario Legislative Assembly on October 18, 2004.

• Why have you apparently not acted on this all-party recommendation to date?

• When will you act?

• Who will comprise the task force if you proceed with your commitment?

• Will you include consumer/investors on that task force?

MPP Michael Prue tries to hold Ontario Government accountable

02 May 2006

03 December 2007

"We also talked during all of those days with the committee about the self-regulating organizations, or SROs. The committee believed that this was an absolutely pressing issue that needed to be dealt with. All three parties voted that something had to be done with the SROs."


Ontario to let investors sue over disclosure

23 November 2004

Long-awaited investor protection legislation unveiled

23 November 2004

Ontario introduces legislation to implement secondary market disclosure

22 November 2004

KAIROS calls for improved regulation of the securities industry

12 November 2004

Move to split off OSC arbitration role

02 November 2004

Province strongly backs national securities regulator, minister says

02 November 2004

OSC policing, judging roles to be split

01 November 2004

Ontario to recommend split OSC functions

01 November 2004

Regulators defend transparency policies

01 November 2004

OSC looks abroad in considering mutual fund fix

01 November 2004

Ontario to hold out for single securities regulator

01 November 2004

Ontario government to review SCFEA report

19 October 2004

Ontario to act on disclosure law

19 October 2004

Separate OSC roles: report

19 October 2004

Report urges more OSC accountability

19 October 2004

Ontario to look at splitting OSC while pushing for single national regulator

18 October 2004

Split OSC, protect consumer, committee says

18 October 2004

Ontario report calls for sweeping regulatory reform

18 October 2004


Ontario to act on disclosure law

19 October 2004

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 complaints.

(CARP 50 PLUS has over 400,000 members alone!)

"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."

(No Mr. Brown. Many are electing to go to court.  Unfortunately the greater majority of those seeking justice can neither afford this route, or the time, energy, costs and bias associated with your system.)

"In fact, the process may be working the way it is supposed to; it is just not producing the results they hoped to see." - David Brown, Chair, OSC

(Working the way it is supposed to for whom? Certainly not the public!!!)