Allocation and use of funds from sanctions and settlements

Amounts received by the Commission under disgorgement orders issued on or after September 1, 2025 are governed by section 128.1 of the Securities Act and section 60.2.1 of the Commodity Futures Act and OSC Rule 11-502 and OSC Rule 11-503 Distribution of Amounts Received by the OSC under Disgorgement Orders and Payment of Related Administrative Costs (Rules).

These provisions require the OSC to make amounts received under disgorgement orders available for distribution to harmed investors unless:

• the disgorgement was ordered in relation to a contravention of the “insider trading and tipping” prohibition in section 76 of the Securities Act, or
• the costs of administering the distribution would not justify making the distribution given the amount of money received and the number of potential harmed investors.

Distributions may be carried out by:

• a third-party administrator appointed by the Superior Court of Justice following a process established by the court, or
• the OSC following a process set out in the Rules.

As described below, the administrative costs of carrying out these distributions may be paid from other sanction and settlement money received by the Commission.

For information about this statutory distribution framework and any current distributions, please see Active Distributions.

Funds paid to the OSC as administrative penalties and settlements, along with disgorged amounts that are not part of the distribution framework, may be used by the Commission to pay for costs incurred in enforcing orders of the Tribunal and may be allocated by the Commission in accordance with subsection 19(2) of Ontario’s Securities Commission Act, 2021. Specifically, this provision allows the Commission to allocate these funds (i) to or for the benefit of third parties, (ii) for use by the Commission or third parties for the purpose of educating investors or promoting or otherwise enhancing knowledge and information of persons regarding the operation of the securities and financial markets, (iii) for use to pay administrative costs in relation to the distribution of disgorged amounts in accordance with subsection 128.1 (9) or (12) of the Securities Act or subsection 60.2.1 (9) or (12) of the Commodity Futures Act, or (iv) for any other purpose specified in the regulations.

The regulations specify that the Commission may allocate money under subsection 19(2) of the Securities Commission Act, 2021 for the following additional purposes:

1. For use by the Commission to enhance its capabilities in information technology, data acquisition and data analytics in order to address regulatory matters relating to investor protection, the reduction of systemic risk or the integrity of the capital markets. For example, the enhancements may consist of the development, purchase, installation or deployment of software or hardware or the implementation of special projects relating to data integration, risk modelling or cyber security.
   
   Ongoing operating costs of the Commission are not included in this purpose.
2. For use by the Commission to fund activities of the Commission’s Office of Economic Growth and Innovation that are aimed at fostering innovation, capital formation and competition in Ontario’s capital markets.

Decisions as to how to allocate or use these funds are made by OSC senior management and the Board of Directors, informed by recommendations from OSC staff.

OSC staff make recommendations regarding allocations of sanction and settlement funds that are not part of the statutory distribution framework in accordance with the mandate of the OSC.

The allocation of these funds is guided by the purposes set out in section 1.1 of Ontario’s Securities Act and Commodity Futures Act, including:

• to provide protection to investors from unfair, improper, or fraudulent practices
• to foster fair, efficient, and competitive capital markets and commodity futures markets and confidence in those markets
• to foster capital formation, and
• to contribute to the stability of the financial system and the reduction of systemic risk

For example, these funds may be allocated to third parties, including:

• investors who have suffered a financial loss as a direct result of misconduct that gave rise to the sanction or settlement payment
• whistleblowers who meet the requirements set out in OSC Policy 15-601 Whistleblower Program
• other third parties, for the purposes of undertaking initiatives that further the purposes of the Securities Act or Commodity Futures Act

Most distributions to harmed investors will be carried out under the statutory distribution framework for disgorged amounts described above. However, staff may recommend that other sanction and settlement funds be distributed to harmed investors if a distribution can be reasonably carried out in the circumstances.

Refer to Active Distributions to see information about any active distributions of sanction and settlement funds that are not part of the statutory distribution framework.

Sanction and settlement funds that are not allocated to harmed investors may be allocated to other third parties or used by the Commission for the purposes authorized under the Securities Commission Act, 2021 and regulations. At least once per year, OSC staff make recommendations to the Board, based on the existing balance of sanction and settlement money, regarding amounts that should be set aside for:

• Potential payments to whistleblowers who meet the requirements set out in OSC Policy 15-601 Whistleblower Program
• Payment of collection costs incurred by the Commission in enforcing orders of the Tribunal or costs incurred in distributing funds to investors.
• Educating investors or promoting or otherwise enhancing knowledge and information of persons regarding the operation of the securities and financial markets.
• Enhancing the Commission’s capabilities in information technology, data acquisition and data analytics in order to address regulatory matters relating to investor protection, the reduction of systemic risk or the integrity of the capital markets.
• Funding of activities of the Commission’s Office of Economic Growth and Innovation that are aimed at fostering innovation, capital formation and competition in Ontario’s capital markets.

Allocation to other third parties for the purposes of undertaking initiatives that further the purposes of the Securities Act or the Commodity Futures Act.

The Commission may periodically consider requests to make an allocation or allocations to fund third-party initiatives that further one or more of the purposes of Ontario’s Securities Act or Commodity Futures Act. Requests submitted for consideration should include:

• a thorough description of the proposed initiative
• information about the persons leading the proposed initiative
• how the initiative supports one or more of the purposes of Ontario’s Securities Act or Commodity Futures Act
• the intended outcomes of the initiative
• criteria for measuring the success of the proposed initiative
• a proposed budget for how any funding would be used
• how the results of the initiative, including the expenditure of any funds received, will be reported to the Board

Based on a sufficiently developed request containing this information, OSC staff make recommendations on whether the proposed initiative should be funded. Recommendations may be considered on an ad hoc basis, or if a number of requests are received, may be considered together to ensure that the strongest proposals are prioritized for potential funding. Staff generally won’t recommend funding initiatives that duplicate or significantly overlap with existing or planned initiatives of the OSC’s Investor Office or other branches.

In addition to considering ad hoc requests, the Commission may, from time to time, issue a general or specific call for proposals for initiatives to receive potential funding from sanction and settlement money.

The OSC is developing a call for proposals for fall 2025 and is pausing requests for funding at this time. Further information about the call for proposals will be published on the OSC’s website in the fall.

The OSC discloses how it has allocated or used sanction and settlement money in its annual report.